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June 26, 2019

‘CNG sales to hit rock bottom if prices jacked again’


June 26, 2019

KARACHI: Sales of compressed natural gas (CNG) have slumped over 15 percent since January 2019 when the government had jacked the prices of smokeless fuel by 40 percent and are likely to hit rock bottom if a hike proposed in finance bill 2019/20 is approved, industry officials said on Tuesday.

“The CNG sales have dropped to around 180 mmcfd (million cubic feet per day) from 215 mmcfd earlier,” Ghayas Paracha, chairman All Pakistan CNG Association (APCNGA) said in a statement.

“The government has proposed another increase of 31 percent, which we reject as this would result in a total collapse of the industry.” Paracha said further surge in gas prices would not only push the CNG station out of business, but also dent the national exchequer on account of a bloated oil import bill.

“According to our estimates, the country will have to import an additional $3 billion worth of petroleum products in the absence of this environmentally- friendly fuel,” the APCNGA leader said.

Moreover, closure of CNG industry will also increase circular debt as the sector pays for the gas three-months in advance, he said. ”The CNG sector cannot bear the burden of increased taxes on LNG proposed in the budget,” Paracha said.

Shabbir Sulemanji, president CNG Association Sindh, said the industry sales had declined by around 30 percent since the start of this year. The CNG sales in Sindh that once used to be 85mmcfd had declined to 60mmcfd.

“Continuous load-shedding of gas for the CNG stations and ever-increasing prices hit the sales, while a significant number of station owners have suspended their operations as the business in not profitable anymore,” Sulemanji added.

He said another round of price increase was on the cards, if approved it would be the last nail in the coffin of the CNG sector. “CNG is an alternate and eco-friendly fuel. It is also known as the common man’s fuel. Since the gap between petrol and CNG is shrinking, consumers are preferring petrol. If petrol consumption increases it will also lead to more flight of the dollar, as more petrol will be imported into the country,” Sindh CNG association leader said.

Moreover, the statement said that APCNGA had urged the government not to give a go-ahead to the proposal to increase customs duty on the import of LNG as it was against the interests of millions of consumers.

“The hike in taxes and duties will increase the price of LNG by Rs6/litre, which would reduce its consumption, increase transportation cost, hit environment and balloon oil import bill,” the association said in the statement.

It may be mentioned here that the government has proposed 5.0 percent customs duty and 10 percent federal excise duty (FED) on import of LNG in the Finance Bill. The proposed taxes, if implemented, will damage the CNG sector, leave hundreds of thousands unemployed and lay waste to the investment of Rs4.5 trillion, he warned.

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