Price hike hits CNG

The government’s proposal for increasing CNG prices up to the level of petrol will decrease gas usage in the country but at the same time it would result in heavy imports of petrol and play havoc with public mobility, economists told Pakistan Today.
It will also deter heavy investment in the CNG sector and people related to the sector could go to court, further aggravating the government’s problems. The decision would also have a strong public reaction and it can also damage the government politically.
They said the decision could stop the misuse of gas by the public through CNG but it will also open a new Pandora ’s Box.
According to Economic Survey of Pakistan, out of the total available gas by SNGPL in the country, CNG sector consumes 10 per cent, domestic consumers have a 40 per cent share, power sector takes 19 per cent, fertiliser industry uses seven per cent of it, general industry e.g. textile takes 20 per cent and commercial users consumer four per cent.
CNG was introduced under the CNG policy of 1994 as an environment friendly fuel and at that time the government gave many incentives to the sector for promoting the green fuel. The policy also promised to maintain a difference between petrol and CNG prices to encourage the use of this fuel.
As many as 2.5 million CNG fitted vehicles on the roads in Pakistan have helped reduce pollution in big cities of the country. Pakistan used to save $1.6 million in foreign exchange annually on petroleum imports. Pakistan is the biggest CNG user in the world and investment in the sector crosses Rs30 billion.
Pakistan’s total energy consumption stood at 63.1 million tonnes of oil equivalent in 2009-10. The share of gas consumption stood at 43.9 per cent in total energy mix of the country followed by oil (27.9 per cent), electricity (15.6 per cent) and LPG (1.5 per cent). Furthermore, this energy consumption mix has witnessed significant transformation since 2004-05. The import of petrol also decreased after an increase in CNG.
Economists believe that though it will reduce CNG consumption but similarly our import bill for petroleum products would rise. Former Finance Minister Dr Salman Shah said that the CNG demand would reduce if petrol prices are equalised with those of CNG. He said that import of petrol is expected to increase by 30 per cent.
He said the government should develop an efficient public transport system if it wished to raise CNG prices. He said the industry would benefit from the decision but at the same time the government could face problems from the CNG sector, which could go to court against the decision. He said there will be no significant foreign investment if the decision is made. “International investors are already given contracts according to international rates,” he said adding that CNG stations in the country would close as a result of this decision.
Sayem Ali, an economist at Standard Chartered Bank said that the government should take a look at the poor conditions of public transport. He said that the government should not quote examples of foreign countries while it raises the prices, as in other countries, public transport systems are far better than ours. He said it would also cause problems for the government in the import bill. “We will have to import at least 25 per cent more petrol after this decision has been taken,” he added.