New pricing formula suggested for CNG retailers
ISLAMABAD: Amid closure of CNG stations by some protesting owners, the Oil and Gas Regulatory Authority (Ogra) has decided to allow retailers a gross share of Rs8.70 per kg in the final price of compressed natural gas, down from their previous share of Rs32 per kg, subject to clearance by the Supreme Court.
According to the revised CNG pricing formula submitted to the apex court, Ogra has decided to treat CNG operators as petrol pump owners by allowing them a fixed Rs 2.95 per kg as dealer’s margin instead of the previous margin of 20 per cent of gas price, which translated into a per kg return of Rs 11.20.
Likewise, Ogra has done away with operating expenses of Rs 11.80 per kg in the price of CNG to retailers and reduced their compression cost of Rs8.99 per kg to Rs5.75 per kg by renaming it as production cost, suggested a copy of the formula available with Dawn.
Of the operating expenses, the CNG station owners used to get varying degrees of cost allowances in the form of seven different heads like costs for maintenance of machinery, lubricants, civil works, depreciation on machinery, labour, taxes and fees and retail commissions to oil marketing companies. All these costs, if any, would be borne by the CNG operators.
The revised formula also restored the sale of gas price to CNG stations to Rs618.50 per kg as it stood on July 1 after bi-annual determination of gas prices by Ogra. As a result, the cost of gas had been worked out at Rs31.09 per kg for Region-I (Balochistan, Khyber Pakhtunkhwa and Potohar) and Rs28.40 for Region-II (Sindh and Punjab).
The final CNG price for sales to end consumers has, therefore, been worked out as Rs64.12 per kg for Region-I and Rs55.68 per kg for Region-II — about Rs2 per kg higher than current prices fixed after Oct 25.
The gas infrastructure development cess has been protected at the existing level of Rs13.25 per kg and Rs9.18 per kg for Region-I and II respectively.
Likewise, the 25 per cent general sales tax has will also remain unchanged at Rs11.08 and Rs9.40 per kg for Region-I and II respectively.
The CNG station owners have opposed the new formula and had in fact demanded a total share of about Rs37 per kg that has already been rejected by Ogra. While various CNG associations have announced continued sale of CNG rates at reduced levels, they are reported to have encouraged operators to take individual decisions to close down their operations if they felt they were incurring big losses.
COERCION ALLEGED: In a letter to the Ogra and ministry of petroleum on Friday, the All Pakistan CNG Association (APCNGA) alleged that district coordination officers throughout Pakistan were forcing them through threats of penalties and cancellation of licences to continue sales at a loss.
It said they were selling CNG at reduced rates for a number of days and “the continuation of this loss shall result in insolvency and the shutting down of CNG stations”, adding it would be beyond the capacity of almost all owners to continue to subsidise the shortfall from their own resources.
“By compelling station owners to sell CNG by incurring heavy losses, Ogra and the Petroleum Ministry are convoluting the orders of the Supreme Court and transgressing and violating the fundamental rights of the CNG owners enshrined in articles 4, 8, 18 and 24 of the Constitution”, the letter said.
The APCNGA said the court had objected to operating costs of the CNG and profits because of lack of legal powers of the Ogra that did not mean there were no operating expenses and owners were not entitled to any profit but the government and the Ogra were misusing powers and misinterpreting court observations.
The CNG association called upon the government and Ogra to implement a commitment made by the secretary petroleum before the apex court to bring the price of CNG to the level that was fixed for CNG sector after the determination of the price by Ogra for six months starting on July 1, 2012. It claimed the price determined for CNG sector had taken into account the operating costs and profit margins for retailers which could not be withdrawn through an executive decision.
The government and Ogra, said the APCNGA, were “bent upon reducing the cost of CNG by passing the burden of such reduction entirely to CNG station owners”, which in fact should be brought down by also “re-addressing and revising downward the other components of the CNG price”.
It argued that natural gas as an entry forms part of Part-II of the federal subjects in the Fourth Schedule of the constitution and thus subject to supervision and control over Ogra of the Council of Common Interest and not only the federal government. It warned the government to desist from compelling CNG owners to operate at a loss and refrain from imposing penalties or other coercive measures against CNG owners who were unable to operate during the pendency of the court proceedings.