The Competition Commission of Pakistan (CCP) on Monday conducted raids on the premises of All Pakistan CNG Association in Islamabad and CNG Dealers Association and CNG Station Owner Association of Pakistan in Karachi and impounded documents to check whether associations are involved in anti-competitive practices. Sources said that the CCP officials collected ample record, computers, minutes of meetings and other relevant documents during the raids.
According to a CCP announcement on Tuesday, the CCP in its emergent meeting held on Monday appointed an inquiry committee with the mandate to conduct an inquiry whether CNG associations and/or their members were engaged in anticompetitive practices in violation of Section 4 of the Competition Act of 2010. The commission also authorised a team of officers to conduct search and inspection of the premises of the associations ie All Pakistan CNG Association (Islamabad), CNG Dealers Association and CNG Station Owner Association of Pakistan (Karachi) under Section 34 of the Act.
The search and inspection was duly conducted by the authorised officers both in Islamabad and in Karachi. The Commission has expressed appreciation for the cooperation extended by the staff of the association in conducting the lawful search and inspection. The documents have been impounded from the premises of the associations and will be duly scrutinised by the enquiry committee in order to submit its findings before the Commission.
Section 4 of the Act prohibits trade associations from taking decisions on commercial matters such as production, pricing and provision of goods and services. The enquiry committee has further been entrusted to review the policy framework in the CNG sector to identify policy distortions (if any) that are preventing, restricting or reducing competition in the market. The enquiry officers are required to submit their findings for consideration of the Commission within 8 weeks, CCP said.
While the prices were being fixed by OGRA with the approval of Federal Government, it needs to be verified as to what is the role of CNG associations in negotiating a price with the Federal Government and OGRA on behalf of CNG stations. Furthermore, CCP needs to verify whether the boycott is an individual decision of member undertakings or a collective withdrawal of services through associations to get their demands fulfilled; leading to the suspension of services from CNG stations. Closure of these stations has been witnessed across the country, causing immense hardship for the consumers.
The CCP said that in the light of negotiations on price fixing and withdrawal/suspension of services by various gas stations, leading to the current crises ie non-availability of CNG to the general public, it is proved that the crises is an outcome of collective boycott organised by CNG associations or by competing undertakings (CNG licensees) for getting an economic advantage; which has resulted in output limitation placing pressure on other competitors, suppliers as well as buyers. Such conduct may fall within the purview of Section 4 of the Act.
The sector provides fuel to more than 2.85 million vehicles using CNG. Nearly 35% of all vehicles in Pakistan are being run on CNG. The 'Natural Gas Allocation and Management Policy' places CNG fifth in the priority order for supply of natural gas and CNG sector takes approximately 9% of the total natural gas resource. The total investment made in the CNG sector is around Rs 80 billion and according to an estimate, it has created 50,000 jobs.
These factors do highlight the economic significance and importance of the sector for the public at large. The enquiry has been initiated after several sources raised suspicion as to the collusive role of CNG associations in the industry. While Ogra, pursuant to the Ordinance 2002, has been setting CNG prices with the approval of the federal government, it appears that CNG associations had been actively negotiating with the federal government and Ogra on behalf of CNG station owners to set a price of their choice. In this regard, CCP deemed it appropriate under the circumstances to conduct an inquiry to clarify various aspects of possible contravention, the CCP said.