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Crisis: No Gas (CNG)

Hundreds of vehicles queuing up along roads and inching towards Compressed Natural Gas (CNG) filling stations is a common sight these days across the country. These frustrated CNG consumers seem caught in a quagmire — as most of the CNG stations are closed in protest against the government’s demand to heavily increase the CNG price and the Supreme Court’s direction to cut the profit rate.

The 1992 CNG policy, introduced by the Ministry of Petroleum and Natural Resources, initially focused on alternative gas usage for vehicles to control environmental damages. With the increase in petrol price, the demand for CNG started increasing — people started switching their vehicles to CNG kits and CNG filling stations mushroomed all over the country.

Studies suggest Pakistan has become the largest user of CNG in the world, overtaking Iran, Argentina and Brazil in the number of vehicles using gas as fuel. The significant cost savings also prompted the public and private transport sector to switch from petrol and, in some cases, diesel to CNG, according to the Economic Survey 2010-11. With more than 3.5 million vehicles running on CNG (21 per cent of the total vehicles), Pakistan was way ahead of India that had a little over a million vehicles converted to CNG, 730,000 in Italy, and 450,000 in China, the report reads.

The country also holds the record for the most number of CNG stations. Around 3,395 CNG stations are currently operating in the country. Among these stations, 2150 are in Punjab, 600 in Sindh, 550 in Khyber Pakhtunkhwa and 19 in Balochistan, according to the All Pakistan CNG Association.

Pakistan started experiencing gas shortfall in 2007, which worsened in the following years, forcing the government to put an end to the CNG industry, the value of which is estimated at more than Rs15 trillion.

More than three-fourth of all Pakistani car owners (77 per cent) claim that they use CNG as fuel and 81 per cent of them claim that they are facing problems with regard to its supply, states a recent public survey conducted by Gilani Research Foundation-Gallup, Pakistan.

Gas consumption by the CNG sector is rapidly growing in the country and if the current trend continues, the CNG consumption of gas would be 27 per cent of the local gas supply in less than five years, says a report of the Ministry of Petroleum and Natural Resources.

According to details, in 2005-06, the CNG consumed 107mmcfd of gas and in 2010-11, 310mmcfd, which is a growth of 23.8 per cent, making it the fastest growing sector of gas consumption in Pakistan. “If the government does not take measures to cap the CNG demand, it is expected that the consumption of gas would reach 900mmcfd by 2015-16, which would be 27 per cent of the local gas supply,” officials warned.

According to the Energy Year Book, the CNG consumption increased at the rate of 24 per cent since 2005-06 to 2010-11, the highest increase witnessed in any sector. With gas production facing a decline, this growth is at the expense of other value-added sectors like fertilisers, the general industry and the power sector.

The recent talks between All Pakistan CNG Association (APCNGA) and the Oil and Gas Regulatory Authority (OGRA) and the Association of Compressed Natural Gas (CNG) Dealers have failed to develop consensus on the CNG price. “We are holding talks to resolve the issue but it seems the government wants to make this cheap product very expensive for public, despite the fact that this sector consumes a few percentage of the total used gas,” says Ghayas Paracha, President of APCNGA.

In total, there are 3,330 fuelling stations in Pakistan that make up about 18 per cent of all CNG fuelling stations in the world. Pakistan has the highest number of CNG filling stations, according to reports.

The current CNG price is 57.62 rupees per kg without tax, while the association claims that they are paying the highest tax against it as compared to the gas given to industry, Independent Power Producers and fertiliser plants. This sector, the association says, consumes only 6.9 per cent of the total consumption of the gas which is around 4300 mmcfd. As many as 789 mmcfd of gas goes waste in line losses, while the government has also announced to add another 800 mmcfd gas in the usage by 2013. On the other side, this sector pays as many as Rs10.38 billion General Sales Tax and Rs1.66 billion direct income tax per annum.

The government studies suggest that the total demand for gas would be 6,354 mmcfd by FY2016, while its supply would be only 3,333 mmcfd.

“As one of the key tax payer sector, it is surprising for us that this cheap source of gas is planned to be kept away from public’s reach just to get more and more revenue,” the president of the association says.

“We demand the government hold an open and transparent debate to review the CNG policy so that people should know truth about this sector,” he demands, adding, “Just to tax this sector and increase the price for getting easy money is not good for the industry and the consumers.”

Dr Asim Hussain, Advisor to Prime Minister on Petroleum and Natural Resources, has recently declared that CNG stations would be phased out owing to shortage of gas in the country. “We can provide CNG to public transport but can’t make it available for luxury vehicles,” he said.

The federal cabinet met in Islamabad last Wednesday to discuss the issue but remained undecided about phasing out the CNG. The summary had proposed the Petroleum Ministry stern measures to discourage the excessive consumption of CNG. The summary proposed the use of CNG to be restricted only to public transport — rickshaws, taxis, wagons and buses etc. The summary further proposed to fix the price of CNG at 80 per cent and eventually converting all CNG stations to LPG.

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