Supreme Court’s CNG or­der

The Pak Banker - - Front Page -

On Oct 25, the Supreme Court de­manded that the chair­man Ogra sub­mit the full cost build-up of the re­tail and pre­scribed prices of CNG, and what emerged was a jaw-drop­per. It turns out the busi­ness of oper­at­ing a CNG pump in Pak­istan is so prof­itable it very likely leaves ev­ery other cat­e­gory of busi­ness in the hy­dro­car­bon sec­tor gasp­ing for air. And that’s not a ca­sual metaphor. From the chart sub­mit­ted by the chair­man Ogra, we learn that CNG sta­tion own­ers charge the con­sumer Rs20 as oper­at­ing costs, and Rs11 as profit for ev­ery kilo­gramme of CNG pur­chased. Then in a small foot­note, we are told that “Oper­at­ing Cost in­cludes com­pres­sion cost, mainte- nance, de­pre­ci­a­tion, fee etc as per MoU signed b/w CNG As­so­ci­a­tion & FG.”

I par­tic­u­larly like that “etc”. Not much is known about this MoU, but it would be great if it could be shared with the me­dia.

And if you want con­text on the amount the CNG sta­tion own­ers are get­ting as ‘oper­at­ing cost’ and as profit, con­sider that the oil-mar­ket­ing com­pa­nies (OMCs) get less than Rs2 per litre as their mar­gin in petrol, kerosene and diesel, the oil deal­er­ships get just over Rs2, it costs Rs6 per litre as in­land freight to pay for cartage and stor­age that main­tains price par­ity across the coun­try. In the gas sec­tor, oper­at­ing cost of gas com­pa­nies like SSGC is just over Rs1, with re­turn on in­vest­ment at 85 paisa per kilo­gramme.

So how on earth are CNG sta­tion own­ers charg­ing oper­at­ing costs of Rs20 per kilo­gramme? And what on earth are they do­ing get­ting Rs11 as profit when the max­i­mum to­tal cost was Rs92 per kilo­gramme?

The math gets a lit­tle tough be­cause vol­umes of CNG con­sumed in the coun­try are re­ported by the min­istry in cu­bic feet, whereas the re­tail pric­ing is re­ported in kilo­grammes.

But if you con­sider that 10 per cent of all do­mes­tic gas gets used in CNG sta­tions, and about one-third of this amount goes into the pock­ets of CNG sta­tion own­ers as ‘oper­at­ing cost’ and profit, you’ll get an idea of the enor­mous trans­fer of re­sources that takes place on a daily ba­sis.

In stray re­marks be­fore the press, the CNG as­so­ci­a­tion head has claimed that out of the Rs20 he charges as ‘oper­at­ing cost’, al­most half is the cost of elec­tric­ity for com­pres­sion pur­poses.

I find that hard to be­lieve, but if it is true then Ogra is ob­li­gated to ask all CNG sta­tions to sub­mit their elec­tric­ity bills, and com­pare the amount of elec­tric­ity con­sumed with their de­clared sales, and cross­check the fig­ure with their tax records. I say ob­li­gated for one sim­ple rea­son: the Supreme Court has or­dered a “scru­tiny of

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