CNG 1: Rationale 0

The three-day strike at the beginning of the month did the job for the CNG Association as it has got what it wanted from the government. The government has backed off yet again, from its prior commitment to discourage the use of natural gas in transport sector. The idea was noble, but political will was lacking as is apparent from the recently announced decision to lower CNG rates and to maintain the same at 40 percent discount to petrol prices. It is ironic that the Petroleum Minister urges the nation to use gas rationally and vociferously advocates the rationalisation of gas prices to international levels, while the Information Minister akes great pride in announcing reductions in the same prices. The decision to maintain CNG rates at a 40 percent differential to petroleum effectively means the government will not be able to collect Gas Infrastructure Development Cess on the consumption of CNG. It is worth mentioning here that the cess amounting to Rs200/mmbtu and Rs300/mmbtu in the two regions, would not have eradicated the differential between petroleum and CNG prices. The use of CNG has steadily increased in the past five years and its share in the countrys gas demand currently stands over 10 percent. It is well established now that the use of gas as a transport fuel is highly inefficient, yet contrary to the tall claims of the Petroleum Minster this sector continues to expand. Although it would be highly imprudent to hit the halt switch on natural gas usage for vehicles, it is imperative that CNG usage be discouraged through pricing mechanism. The industrial sector, particularly fertiliser and textile industries have suffered gravely in the recent past due to gas curtailment. This impact on industry outweighs any benefit to the pockets of commuters relying on the cheaper fuel, especially considering the fact that CNG is used in private cars while public transporters relying on CNG continue to charge fares based on the prices of diesel. The government should come clean with the public on the use of CNG. An awareness campaign that highlights the inflationary impact of use of CNG, in the form of higher electricity tariffs as well as higher prices of food and textile, is the order of the day. In his budget speech, the Finance Minister had expressed governments resolve to replace blanket subsidies with targeted support to vulnerable groups. Now the government must practice what it has been preaching and do away with the blanket subsidy on CNG, which has unfortunately been misconstrued as a poor mans fuel. Without such initiatives, plans to import natural gas via the TAPI or IP pipelines shall remain pipe dreams.