Sui Northern's proposal to OGRA to suspend gas supply to CNG stations all over the country for three months has raised some serious concerns. SNGPL has cited 850 mmcfd of gas shortage during winters as the major reason behind its proposal for gas load shedding. Others, however, term this figure 'an exaggeration', putting the shortage number at 600 mmcfd.
The winter deficit, which primarily stems from high household demand in Punjab and NWFP province, is not a new phenomenon and has previously been plugged by load management with a priority given to domestic consumers and the fertiliser industry.
Industrial consumers such as cement and textile factories and CNG stations have historically faced load shedding for a limited period of 15 to 30 days. But never before, has any industry faced complete suspension of gas supply for the entire winter season.
SNGPL's proposal, if implemented, can have catastrophic implications for the sector where huge investments of $2 billion have been made over the past five years and cater to an estimated number of 2.4 million domestic and commercial vehicles through over 3000 CNG stations.
Shutting down CNG stations during winter does not only threaten to halt distribution businesses - the key in any business activity - but it may also lead to wide spread protests by CNG station owners and motorists alike, creating unwanted social unrest.
The other side of the picture is ugly as well: higher petrol demand owing to the substitution effect, which can potentially inflate the import bill by around $2 billion.
Gas distribution firms are also calling for an increase in CNG prices to Rs 490/mmbtu from the current rate of Rs 427/mmbtu. But being on the higher side of the spectrum already- almost 40 percent higher than gas used for industrial and power production purposes - any further hike in CNG's consumer tariffs will bring it at par with petrol prices.
This will not just put the businesses of CNG stations in a slump, but also shift demand towards petrol - being a less damaging fuel for engines compared to gas - thereby creating more pressure on the country's import bill.
Some argue that the upcoming rental power plants would consume more gas - but the argument seems flawed as there is no power shortage in the winter season any way and therefore RPP's will no not require a huge quantum of gas. Therefore, it is entirely a matter of effective load management strategy rather than axing a sector, which consumes merely 5.5 percent of country's total gas.
This is not to advocate CNG consumption for transportation purposes; perhaps the usage of CNG as car fuel shouldn't have been promoted in the first place, given the supply side constraints. But now that we have a sizeable industry, there is no need to clamp the sector and about 200,000 people involved in it. What the government should do instead is gradually formulate a policy to discourage CNG-run vehicles so that the resource could be applied to better avenues in the long run.
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