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As a recent Recorder Report has indicated, the unabated increasing trend in prices of conversion kits of compressed natural gas (CNG) during the last eight months has lately accelerated, scaling new highs, thereby, depicting further increase of 30 percent in the wake of depreciation of the rupee, on the one hand, and the resulting drop of approximately 25 percent in their demand, on the other.
The earlier phase of eight months had witnessed increase in the price of CNG kits thrice and somewhat proportionately in relation to the hikes in petrol prices. Moreover, as it should have been, the demand for CNG-driven cars has continued rising primarily due to rising petrol prices, hence progressively leading to considerable conversion of petrol fuelled cars to CNG during the last three years.
Small wonder, Pakistan has been identified as a leading CNG fuel consuming country with over 1.6 million cars entertained by over 1700 CNG stations and around 4000 CNG approved stations awaiting installation across the country. All this is quite understandable, except for the undiminished irritant of abnormal increases in the cost of conversion of petrol fuelling to CNG. A new business opportunity with a strong potential, it should have generated a rising level of competition to increasing advantage of motorists too.
Unfortunately, this has not happened, thereby, culminating in an earlier unforeseen trend. This has reference to the prevailing predicament over the constantly increasing prices of imported conversion kits. Some idea of the factors at work behind the situation now developing may be had from the above quoted news report.
According to it, certain retailers have alleged that importers of the CNG conversion kits are using illegal means to increase their prices and openly marketing them at 30 percent excess rates, hence urging the government to take stern action and to tighten the noose around CNG kits importers to facilitate consumers. Some of them are allegedly using delaying supplies with the intention to increase demand and prices, as also pointing out that CNG kits and cylinders are purposely hoarded as well. Their contention is that CNG kits could be available at affordable prices their rates were fairly fixed by importers.
They said that Landirenzo CNG kits for manually driven cars are being sold at Rs 17,500, compared to their earlier price of Rs 14,000. However, CNG cylinders with the capacity of 50 and 55 litres are being sold at Rs 20,000 and Rs 25,000, compared to earlier prices respectively of Rs 17,000 and Rs 19,000. More or less similar is stated to be the case with CNG kits and cylinders for automatic cars too.
As against such allegations, some prominent CNG conversion kits importers denied artificial increase in the prices of CNG kits to earn more profit, saying that importers are paying 30 percent extra on its imports because of recurring currency devaluation identifying it as a major factor in its price hike. They also argued that since Landirenzo has set up its own manufacturing unit in Pakistan, there has already been a cut of 30 percent in CNG kits imports.
However, notwithstanding all this, stern action has been urged also against CNG kits counterfeiters, as substantial CNG kits are being produced in Gujranwala. And this certainly adds a whole new dimension to the disarray in the CNG kits business. It was in March, this year, that Stefano Landi, CEO of the Landirenzo Group, said that Landirenzo planned to increase its production in Pakistan, from LR Pak, the Pakistani subsidiary of the group, in the next few years from the current 10,000 per month.
As for the performance of their Pakistan unit, it was revealed that the company had already exported 1,200 CNG kits to China from its assembling plant in Pakistan and that more orders were in the pipeline. It sold most of the kits to auto-assemblers. All in all, it will be noted that what now ails the CNG conversion kits business is a glaring lack of attention on sound development of the industry.

Copyright Business Recorder, 2008

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