ISLAMABAD: With the Farooq Naek committee unclear about resolution of crisis over price of compressed natural gas (CNG), the Oil and Gas Regulatory Authority (Ogra) on Wednesday came up with three options that could increase consumer-end price of the fuel by up to Rs59 per kg (96 per cent) to maintain the 80 per cent parity with petrol proposed by petroleum ministry.
After the second meeting of the committee appointed by the Economic Coordination Committee (ECC) of the cabinet and led by Law Minister Naek, CNG sector’s representative Ghiyas Abdullah Paracha said the CNG station owners would be ‘constrained’ to involve the consumers and launch a protest if the dispute was not resolved by Dec 31.
The meeting was also attended by members of the committee, including Prime Minister’s Adviser on Petroleum Dr Asim Hussain, Ogra chairman Saeed Ahmad Khan and cabinet secretary Nargis Sethi, besides seven other stakeholders, including representatives of three business and trade bodies and a non-governmental organisation representing the consumers.
The law minister said the committee had listened to the viewpoints of all the stakeholders and would now discuss their recommendations so that fair policy guidelines could be issued to the Ogra over the matter.
He said the difficulties being faced by the public and the ‘genuine’ reservations of the CNG associations would be given due consideration while finalising the policy guidelines to be issued to the regulator.
Mr Naek said the committee would take into account the operating expenses of the CNG stations and hoped to resolve the matter by Jan 1.
An official said the government would like to include CNG price in the overall consumer-end gas tariff that was due to be increased by an average of 6.15 per cent with effect from Jan 1 for all consumers, to provide it a legal cover.
Sources said a representative of the finance ministry ruled out reduction in the rate of sales tax or gas infrastructure development cess (GIDC) because these rates were based on budgetary projections for construction of gas pipeline projects. The petroleum ministry also expressed its inability to reduce the cost of gas for the CNG sector.
With these factors in mind, the Ogra presented three options — with CNG-petrol price parity of 60 per cent, 65 per cent and 80 per cent. The regulator told the committee that if the government wanted to maintain a parity of 60 per cent, the CNG price would increase by Rs30 per kg to Rs92.48 per kg from the existing rate of Rs61.64 per kg.
At 65 per cent parity, the CNG rate was worked out at Rs108 per kg, or Rs44 per kg higher.
The regulator said that if the 80 per cent parity proposed by the petroleum ministry was accepted, the CNG rate would increase by Rs59 per kg to Rs121, but this could lead to intervention by the apex court which had earlier taken notice of the linking of price of domestically produced CNG with that of imported petroleum products.
A representative of the Consumer Rights Commission of Pakistan (CRCP) disputed almost all the recommendations made by the CNG industry and Ogra and insisted that CNG rates should not go beyond the existing prices. It said the starting point for price determination should be the consumer's propensity and willingness to pay because the product was produced with the taxpayers’ money.
The CRCP rejected the auditor’s report because of the inability of the audited CNG stations to provide verifiable and complete set of accounts and evidence of expenditures. The invoices and receipts provided by the CNG dispensing stations were not supported by third-party validation and hence the report lacked credibility.
The CRCP also objected to the three major components of the pricing formula — the cost of compression, the cost of operations over and above the ‘high prescribed profits’, and the heavy taxation on the fuel. It said the stations could not be allowed to simultaneously charge the cost of electricity and diesel because running the stations during loadshedding should be a ‘competitive decision’ taken by the seller for which the consumers should not be penalised.
It termed a fixed marginal profit of 20 per cent ‘preposterously high’ and demanded that minimum standards for various facilities at the CNG stations be fixed by the regulator to inculcate competition instead of promoting inefficiencies. The CRCP also sought reduction in the sales tax for the sector to 16 per cent, applicable to all other sectors.
Mr Paracha demanded of the government to include production cost in the retail price as per international accounting laws. He said the fertiliser sector was getting gas Rs44.04 per kg cheaper, the Independent Power Producers Rs23.42 per kg cheaper and general industry Rs26.42 cheaper than the CNG filling stations.