Supreme Court’s CNG order
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