CNG price slashed by Rs 30

The Oil and Gas Regulatory Authority (OGRA) on Thursday ordered a reduction in the price of Compressed Natural Gas (CNG) by Rs 30.90 and issued a notification in this regard following directions by the Supreme Court. For Region I (Potohar, Khyber Pakhtunkhwa, and Balochistan), the CNG price has been slashed by Rs 30.90 to Rs 61.64 per kilogramme, while for Region II (Sindh, Punjab and areas excluding Potohar), the new price of CNG now stands at Rs 54.16 with a decrease of Rs 30.38 per kilogramme.
However, All Pakistan CNG Association has rejected the price reduction and has written to the regulatory body in protest. APCNGA Central Chairman Ghiyas Paracha refused to accept the decision, however, chief of CNG Station Owners Association, Malik Khuda Bux, has accepted it. Paracha said the decision would force CNG businessmen out of work.
In its interim order on Thursday, the Supreme Court declared the mechanism of linking CNG price with that of petrol illegal and ordered OGRA to revise prices by November 1. The SC also ruled that the profit rate and operating costs charged on CNG price was illegal.
The order said since CNG was produced locally and had no connection with the international market, operating costs and present profit on CNG prices was against the law. The court said CNG price would not be revised on a weekly basis and there would be no linkage of CNG price with that of petrol.
A two-member bench of the apex court headed by Chief Justice Iftikhar Muhammad Chaudhry declared that both the profit of Rs 10 per kilogramme on the price CNG and the linkage of CNG price with that of petrol were illegal. During the proceedings, Petroleum and Natural Resources Secretary Waqar Masood told the court that the weekly pricing mechanism for petroleum products had been suspended until the Economic Coordination Committee (ECC) of the cabinet gave further directions. The chief justice said CNG stations earned a per kilogramme profit of Rs 11.91, adding that the price of CNG should not be linked with that of petrol and that the 50 percent profit margin on CNG was strangulating consumers.
OGRA Chairman Saeed Ahmed Khan submitted a report on the details of petrol and CNG pricing. After reviewing the report, the chief justice remarked that overcharging for CNG was tantamount to exploitation of consumers.
According to the OGRA report, the government’s procurement cost of CNG in Region 1 was Rs 19 per kilogram, while it was Rs 17.57 in Region 2 and that the government decided on the price after including development surcharges. The report added that the government decided on the price after including development surcharges and that CNG station owners were making a profit of Rs 11 per kilogramme, while Rs 20 per kilogramme was the operating cost on CNG.
Justice Jawwad S Khwaja remarked that the total profit on CNG sale exceeded 50 percent, adding that Rs 67 of Rs 92.53 per kilogram CNG price were really questionable. Pointing out the mismanagement in the CNG pricing, the chief justice said there were rumours that Rs 9 million was being charged as bribe to issue a CNG station licence. The chief justice inquired why the government was charging an exorbitant amount on the pretext of operating costs and said exploitation of consumers would not be allowed. He observed that CNG sale was one of the most profitable businesses in the country. The CJ questioned the CNG pricing formula and asked under which formula Rs 20.83 operating cost was being allowed to CNG stations when they were already gaining Rs 11.19 per kg profit on CNG sales.
The bench declared the current CNG pricing mechanism against the law and ordered OGRA to announce revised prices by November 1.
Industry sources said CNG prices could not be changed without adopting the procedure laid down in the ordinance, which binds OGRA to affix prices after a public hearing with the participation of stakeholders to meet revenue requirements sought by gas utilities.