Ministry moves summary in favour of CNG equipment import: bulletin

Following strong reactions from Japan, Italy and Argentina diplomatic missions, Ministry of Industries has moved a summary in favour of CNG equipment import and use in vehicles.
The Industrial Bulletin, in-house journal of Engineering Development Board, quoting an official of Ministry of Industries said that the ministry has urged the federal government to lift the ban on import of CNG kits and cylinders and allow automobile assemblers to use these in their vehicles for a period of at-least three years.
The government will, however, continue with its plans to discourage the use of Compressed Natural Gas (CNG) in vehicles by increasing its price and bring it close to petrol and diesel rates. The Economic Co-ordination Committee (ECC) of the cabinet had imposed ban on the import of CNG conversion kits and cylinders on December 15, 2011 on the move of the Ministry of Petroleum and Natural Resources.
Japan, Italy and Argentina had expressed concern with regard to the decision taken by the ECC which put their huge investments at risk. According to the summary moved by the Ministry of Industries after the approval of the Minister for the ECC of the cabinet: "Diplomatic missions from Japan, Italy and Argentina have approached this ministry and voiced concern with regard to the decision taken by the ECC meeting held on December 15, 2011 on the summary moved by the Ministry of Petroleum & Natural Resources, suggesting complete ban on company fitted CNG cylinders kits in locally manufactured vehicles besides moratorium on the import of CNG cylinders, conversion kits and parts thereof."
The summary said it was highlighted by the missions that huge investments made by the companies manufacturing CNG kits Landi Renzo, Lovato, BRC, and Tesla, as well as vehicle assemblers like Indus Motors (Toyota), and Pak Suzuki are at stake and the decision will not only result in huge financial losses to these companies but may also send wrong signal to prospective investors.
The issue had been examined in detail. Briefly recalling, the use of CNG was encouraged as a conscious policy decision of the government for being an environment friendly fuel. As a result, huge investment in infra-structure development has been made by the above companies as well as by local investors and the consumers, the summary said. According to official figures around 3.1 million vehicles (including public transport) are plying on roads, out of which around 1.6 million are private cars. Out of these, around 630,000 cars have factory fitted CNG Cylinders and kits.
According to Pakistan Energy Book 2010 published by the Ministry of Petroleum & Natural Resources, total consumption of CNG by the transport sector is only 7.7 percent of the entire consumption of natural gas in the country, whereas private cars and auto rickshaws consume roughly 3.5 percent, while the vehicles with factory fitted CNG kits consume less than 1.3 percent of the total natural gas consumption of the country, the summary said.
Majority of vehicles does not have factory fitted CNG cylinders kits but they are using CNG fuel. They are fitted with smuggled and sub-standard CNG equipment that is prone to explosion, resulting in loss of precious lives, as has been observed during recent incidents, it said.
Hence, a complete ban on factory fitted CNG cars will encourage the use of such sub-standard CNG cylinders and kits, thereby increasing threat to lives and jeopardising the government revenues due to increase in smuggling. The government will also lose foreign exchange earnings as CNG kit manufacturing companies are exporting approximately $6.0 million per annum worth of kits.
Moreover, as roughly 50 percent of the components of CNG kit are being manufactured locally, the vendor industry will also have adverse impact on employment and fiscal loses. Moreover, a complete ban on installation of CNG cylinders & kits in private cars, including cabs and auto-rickshaws will severely affect people from lower income strata of society, who will be compelled to abandon the use of their vehicles due to relatively higher cost of primary fuels like petrol and diesel. Hence, a paradigm shift in the policy may result in reaction from masses, besides discouraging potential foreign investment.
It has also been observed that acute shortage of natural gas occurs only during the peak consumption season during December to February, which can be easily addressed through an effective load management plan and rationalising prices of natural gas and its inter-sectoral use, as also suggested by the Planning Commission in its report on "Energy crisis and solution." The import of LNG from Qatar and natural gas from Iran would further offset the supply side gap.
In view of the above, it was proposed that ban on company fitted CNG cylinders/kits in locally manufactured cars and on the import of CNG cylinders conversion kits and parts thereof may be lifted for a period of at least 2-3 years, so as to enable the companies, which have made investments in this sector to switch over to alternate fuels like LPG.
The price of CNG may be increased incrementally to bring it at par with that of petrol/diesel to encourage the use of alternate fuels like LPG; and Ministry of Industries may explore other CNG conservation measures in consultation with automobile sector for introduction of more fuel efficient and hybrid fuel vehicles in the domestic market, the summary said.