SC ignores new CNG prices formula
ISLAMABAD: CNG consumers will continue to buy gas for their vehicles at the reduced price for another 17 days as the Supreme Court ignored on Monday a request to undo its Nov 1 price freeze.
A three-judge bench comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Gulzar Ahmed and Justice Sheikh Azmat Saeed which had taken up a case about fixing CNG prices asked the stakeholders in the business to put their heads together and come up with an acceptable formula which should also take care of consumers’ interest.
Although the court said nothing specifically about the CNG price, the fresh order implied that it would remain unchanged till the next hearing on Dec 5. However, it stressed the need for legislation by parliament to ensure transparency in the CNG price mechanism.
The order was issued against the backdrop of a formula submitted by the Oil and Gas Regulatory Authority (Ogra) after holding cost audit of different CNG stations in the country.
Monday’s proceedings appeared to suggest that the court was not inclined to accept the new formula because it lacked any legal backing.
Ogra’s formula proposed the price of CNG at Rs74.16 per kg for Region-I comprising Khyber Pakhtunkhwa, Balochistan and Potohar and Rs72 for Region-II comprising Sindh and Punjab. The auditors suggested Rs83.03 per kg for Region-I and Rs74.59 for Region-II.
The government had fixed the CNG price at Rs61.64 per kg for Region-I and Rs54.16 for Region-II in the light of Supreme Court’s Oct 25 order.
The court was appalled to see that the new price mechanism required the consumers to pay for the expenses of CNG stations like costs of maintaining human resources, conversion of gas into CNG, oil and lubrication, rental, power generation, depreciation of equipment, salaries, maintenance and other miscellaneous expenses, including civil works.
Salman Akram Raja, the counsel for Ogra, conceded that after the withdrawal of the memorandum of understanding between the government and CNG Association on the operating cost of CNG stations and their profits, no policy guideline by the government or law was in the field.
He said Ogra had carried out the cost auditing of CNG stations to determine a reasonable price.
“The legitimate cost of CNG stations has to be met for which we have tried to objectively and fairly assess their expenditures, otherwise the business will no longer be sustainable and has to be shut down,” the counsel said.
The country, he said, had witnessed a mushroom growth of CNG stations between 2004 and 2006, adding that luxury cars like Prado were being run on gas and domestic consumers and industries were suffering.
The court regretted that licences to set up CNG stations had been issued without any open bidding or tender and a number of stations had been built on the NHA land without any formal approval.
Referring to a number of government surcharges and taxes on CNG, Advocate Raja said these primarily meant to avoid market distortion because more CNG purchased meant less gas for homes and industries. Fourteen per cent of the gas produced went to the CNG sector, he said.
Advocate Hafeez Pirzada, representing the CNG Association, regretted that all bad things were being dumped on the sellers and 90 per cent of the burden was being shifted to them.
CNG station owners, he complained, were being jailed for not selling the gas since it was difficult for them to sell it at the current price. “Let them close their business if they can’t carry on the business,” the counsel said.
But the court made it clear that it was not its job to fix prices, adding that people had great expectation from Ogra and it should fix the price at a reasonable level.
The court ignored the request by Advocate Waseem Sajjad, the counsel for the Sindh CNG Association, to withdraw its order of selling the gas at the current prices.