Islamabad may soon be witnessing another round of sit-ins and protests, which could also spread all over the country. The sit-ins are not going to be against drone attacks, corruption or any such matter but over the CNG load management and the proposed price increase. CNG associations believe they are being treated unfairly and should rather be assured uninterrupted gas supply throughout the year.
It is indeed a worrying sign that the government, so far, has been unable to take actions it suggested it would regarding the CNG pricing and consumption. The rumour mill is grinding stories that the government might eventually back out of the proposal to gradually reduce the parity between petrol and CNG prices.
The governments silence over the issue lends credence to these fears that the idea of gas tariff rationalisation, especially for the transport sector, might be overtaken by political motives. Bear in mind, CNGs share in overall gas consumption is ever increasing and is believed to have touched 10 percent for FY11 - up from just one percent in FY03.
It does not take a rocket scientist to fathom the inefficiency of using the precious and scarce source of energy for the transport sector, that too, at unbelievably cheap rates and more importantly mostly catering to people who need it least.
It has been said time and again that the use of CNG for private transport is an abuse of natural gas that could instead be used for better productivity purposes in industries and power generation.
CNG players claim that an upward revision in CNG prices will make it difficult for them to sustain their profits as they operate on very thin margins. Contrary to this assertion, the difference between CNG prices and petroleum rates is still significant, so a phased increase would not do much harm to their margins.
Secondly, the price at which Ogra sells CNG currently stands at Rs25.6/kg, whereas it is sold at Rs53-55/kg at retail level. It is hard to imagine that a room of Rs30/kg gives so little margin to the CNG sellers, especially when one can see CNG being sold at even cheaper rates (Rs48-49/kg) in some areas where competition is stiff.
This rationale suggests that there are ample margins in the business, which must have only increased in the past three years as the Ogra prescribed price has just gone up from Rs20.7/kg to Rs25.6/kg - whereas the retail price has jumped from Rs38/kg to nearly Rs55/kg.
The government should need no second invitation to disincentivise CNG usage. Agreed that bringing the CNG prices at par with petrol will not be an easy task, but there still is enough room to charge higher prices to CNG stations, and the additional revenue could help in eliminating the cross subsidy in the industrial sector.
The sooner they act, the better it is, because without rationalising gas tariffs, especially for CNG, import of gas will not be an easy option for Pakistan.
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