The decade which could have begun with two strikes, thankfully began with only one as the All Pakistan CNG Association withdrew its strike call on New Years dawn. Nothing wrong with the decision as it was presumably made in better interests of the public; despite the fact that CNG players concerns were not addressed. However, Ogras notification and the withdrawal of strike by CNG association demand a deeper look into the matter.
The 18 percent increase in gas tariffs notified by Ogra clearly violates the pricing agreement signed with the CNG players in August 2008. The agreement requires the government to maintain at least a 50 percent pricing differential between CNG and petrol prices throughout the year. Industry sources say, the differential prior to Ogras notification was 54 percent, which they now believe has come down to 50 percent.
So where is the violation? Clearly somebody is not telling the whole truth. It was just two days back that the CNG Owners Association hinted at shutting down their business for an indefinite period if the pricing agreement is violated.
And it certainly has been violated, as the differential now has reduced to a mere 23 percent, way below the discount claimed by the association. What makes them say this is perhaps anybodys guess - speculate if you would like to.
The Petroleum Minister also tried his best to send the message across that the government will end gas load shedding in February instead of March. But the fact of the matter is that the load shedding was never supposed to go beyond January and in the worst case, first ten days of February. So, what Naved Qamar thinks is good news is actually a bad one - as going by his statement gas load management will extend beyond the times of normalcy.
Then there was another unrealistic piece of hope offered to the CNG players that their tariffs will be reduced to match the industrial slab. The ministry has asked for a presentation from the CNG representatives, but it is as highly unlikely as impossible for this to happen, and thankfully the CNG association also acknowledges it.
But, what could have made the case strong for the CNG players was not even touched upon, i.e. the fertilizer feedstock tariffs. It was in July 2008, when on IMF directives, the government decided to eliminate the subsidy on fertilizer feedstock tariffs in a phased manner. The practice continued for three consecutive price revisions till July 2009 as the Fertilizer Policy had lapsed back in 2006 - leaving the government under no obligation to subsidize the fertilizer sector.
Surprisingly, feedstock tariffs in Ogras latest notification have not been touched upon - which is a clear case of violating the terms agreed with the IMF. The point here is not about whether the subsidy to the fertilizer sector is vital or not - it is plain violation of the agreements. Had the government decided to revise the feedstock tariffs as well, all other sectors would have also benefited by an increase much less than 18 percent.
Interestingly enough, the notification has no mention of the tariffs of Mari gas field, which is a completely devoted fertilizer field. However, Ogra officials do state that the previous tariffs prevail in this case, although, ambiguity still remains whether the leverage is provided to the fuel gas as well. If that is the case, it would certainly raise serious concerns among the industrial sector, which is already critical of the heavily subsidized fertilizer sector.
So in essence, this latest notification violates two agreements with completely biased view of two industries. Surely, the IMF will have a word to say in the days to come.