Another hike in CNG price on the cards

ABDUL RASHEED AZAD

ISLAMABAD: The Ministry of Petroleum and Natural Resources is again mulling increasing the price of Compressed Natural Gas (CNG) by Rs 1.5 per kg, Business Recorder has learnt.

Official documents available with Business Recorder reveal that “the Petroleum Ministry in consultation with OGRA and All Pakistan CNG Association (APCNGA) while deliberating the issue of impact of Gross Calorific Value (GCV) has observed that major affected areas are Chakwal, Jhelum, Sargodha, Bhera, Mandi Bahauddin and Pindi Bhattain where GCV during March to November increases due to diversion of gas from north towards south. However, the same is reversed during the December to February. The KPK and Islamabad were also the affected areas due to increase in GCV.

“In order to resolve this very issue, while following the already ECC approved pricing mechanism, the Ministry of Petroleum and Natural Resources proposes that OGRA may be allowed to determine & notify the sale price of CNG by adjusted the upper slab of GCV i.e. 1040 Btu/Scf to 1065 Btu/Scf for the affected areas for the periods March to November and December to February.

The above adjustment of GCV from 1040 Btu/Scf to 1065 Btu/Scf will increase the CNG sale price in various areas by Rs 1 to 1.5 per kg during summer and winter seasons” the document adds.

If the ECC is approving the Petroleum Ministry’s approval CNG price in Zone-1 which consists of Khyber Pakhtunkhwa, Balochistsan and Potohar Region (Rawalpindi, Islamabad and Gujarkhan) would cross Rs 90 per kg, where it currently is being sold at Rs 88.70 per kg, while in zone-ii Sindh and Punjab (excluding Potohar Region) it would be available at Rs 82 per kg against current price of Rs 80.98 per kg.”

The minister for Petroleum and Natural Resources has authorised submission of the summary to the ECC of the Cabinet.

The summary has been circulated to Finance Division, Planning & Development Division, FBR and OGRA for their comments.

While opposing the Petroleum Ministry’s proposal to further hike CNG price OGRA has stated that increasing the CNG prices further would put an additional burden on the poor masses as over 90 per cent of the public sector vehicles are using CNG as fuel.

In this regard, it is submitted that OGRA agrees that Gross Calorific Value (GCV) of some of the areas has increased beyond the earlier approved level of 1040 BTU, which may have slightly reduced the profitability of the CNG stations operating in those areas.

However, it is highlighted that profit margin of CNG stations have doubled in a very short span of 3.5 years (Rs. 6.42/Kg & Rs. 6.76/Kg for Region-I & II in 2008 to Rs. 11.68/Kg & 11.01/Kg respectively). This increase in profit level is unprecedented and much higher than the profit margins being allowed to Oil Marketing Companies & their dealers.

OGRA also pointed out that the said profit margins will further increase in future owing to increase in cost of gas after injection of rather expensive LPG Air-mix and LNG in the natural gas T&D network. Unlike other businesses in the country, the profit margins of CNG stations automatically increase with any increase in their cost of gas or operating expenses, without any effort on part of station owners. Therefore, there is a need to rationalise/cap the profit margins of CNG station owners and the existing mechanism should not be revised for the benefit of few CNG stations only. The proposal may result in further increase in CNG price for consumers, therefore in the best national/consumer interest, the existing mechanism earlier approved by ECC of the Cabinet should remain intact with some capping on the return to CNG stations, OGRA further advised.