Ban on CNG kits

The Cabinet has decided to disallow new cars or old cars without CNG kits to be fitted with new kits. In other words, over a period of time the number of cars with CNG kits will decrease and an increasing number of CNG stations would become non-functional due to a steady decline in the numbers requiring this fuel. Today Pakistan has the highest CNG consumption in the world - 11 percent - even more than countries where this fuel is in abundance. It is therefore little wonder that protests are being launched against this policy decision. However, one obvious question that presents itself is if gas is in very short supply in any case - a reflection being the one day a week closure of CNG stations in Karachi with 3 days a week closure in Punjab (the difference based on the high court decision that gas must be made available first to the province where the field is located) - then is there a better option available to the government? CNG was encouraged as a form of fuel in the past for two major reasons. First and foremost, at the time Pakistan had sufficient reserves that allowed the government of the day to make it available to the general public at a price lower than imported petrol and secondly, it is a much cleaner fuel than motor gasoline. It was a measure designed to benefit the Pakistani consumers. Thus the decision to disallow any CNG kits to be fitted in future is a policy that would have direct ramification on the transport costs of the common man as well as those who own their vehicles. Be that as it may, it is critical to reiterate the obvious: if there is no gas then no government, present or in future, would have the option to meet the demand of CNG gas stations in any case. Those who argue that the government should import the shortfall need to be made aware that Pakistan has neither the special LNG carriers, which may be chartered that would automatically raise the price, nor the special berths necessary to unload LNG from ships. Additionally, the import gas price would be linked to the international price of other more expensive fuels. In short, import at this stage does not appear to be a viable financial option. And secondly, CNG was also encouraged in the past as it is one of the cleanest forms of existing fuel. Be that as it may, merely by disallowing CNG kits to be fitted in new and old cars is not likely to resolve the crisis in the short-term because this policy decision envisages withdrawal of the option for car/vehicle owners who do not, at present, have a CNG kit. Thus existing demand is not likely to decline in the near future. Additionally, analysts argue that this measure would also not resolve the issue of severe gas shortages in the long run given the anticipated rise in demand partly attributable to providing gas to the rental power projects that continue to operate at well below capacity because of the failure of the government to supply gas. There is evidence to suggest that the government has yet to begin implementing a roadmap identified by the third party auditors undertaken for the RPPs that specified that the government must (i) optimize existing generational capacity as a short to medium-term measure (likely to generate over 2000 MW) and (ii) revisit heavy reliance on fast depleting gas reserves. To date, the government has brought gas prices to around 60 percent of other fuels and it is committed to equalising the price of all fuels with respect to their energy output, a financially necessary decision. However these measures would not be sufficient to meet domestic demand. The government also needs to proactively seek the implementation of the Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipelines. While several agreements have been signed by the parties concerned yet severe US reservations remain a major impediment to the IP pipeline while the ongoing civil war in Afghanistan remains a continuing obstacle to the realisation of TAPI. The government also needs to actively encourage the exploration activities which in turn would require the government to make serious efforts to control the law and order situation especially in gas-rich Balochistan province. Copyright Business Recorder, 2011