Replacement of CNG with LPG Termed Short-lived Decision

The recent announcement by the petroleum minister Dr Asim Hussain of replacing compressed natural gas (CNG) with liquefied petroleum gas (LPG) has been termed a short-lived decision by the economic pundits, as according to them, an entire sector involving billions of rupees of local as well as foreign investment could not be pushed to the wall instantly.

According to analysts, the licenses of CNG stations which are more than 15 years old had not been renewed for the time being. However, as soon as the political establishment would change, which was most likely to happen in the forthcoming elections, the renewals would start again and new licenses would also be issued.

The CNG industry has strongly reacted to the government's decision to replace CNG with LPG, saying that this would fail to solve any issues and serve vested interests only.

According to stakeholders, investment in the CNG sector worth billions of rupees would be jeopardised if it is substituted with LPG. In addition, this would send a negative impression abroad of the government's seriousness to effectively implement policies to resolve vital issues. A stakeholder said that locally produced LPG was distributed through quota and this LPG quota was distributed on political grounds.

Shifting vehicles from CNG to LPG would increase its demand, thus pushing its price up, which would result in households in central and northern Pakistan being deprived of LPG to even run their kitchen stoves. "These quota holders were already making over 100 percent profits on LPG sale. The ban on CNG would multiply it. Besides, the country would have to import LPG to meet increased demand, which would the open doors to the dignitaries for commissions," he added.

Ghayas Paracha, central chairman of the All Pakistan CNG Association (APCNGA), said, " While the entire world is shifting from LPG to CNG as it is safer and more environment friendly, Pakistan is moving in the wrong direction."

He further said that China, Korea, Indonesia and Malaysia had replaced LPG with CNG due to safety concerns. Moreover, the Indian government had recently announced to provide gas to the CNG sector on top priority.

"The government plans to replace CNG with LPG to benefit a few individuals with vested interests. However, more than Rs 500 billion investment, network, planning, infrastructure and efforts of many are on stake just for the benefit of a few," Paracha said.

There are around 3.5 million CNG vehicles in the country, with over 3,500 CNG filling stations. Replacing CNG as a vehicle fuel with LPG would not only have adverse effects on the environment, but it would also render millions jobless.

Furthermore, the regular shortage of LPG in the residential sector, coupled with its frequent price variations at the consumer level, has posed a serious question on the government's policy to utilise petroleum gas in the transport sector.

LPG is considered as an extremely manipulated and corrupted sector. The sector, with its disorganised infrastructure and complex supply chains, including marketers, distributors and retailers, reflects its negative impact on the prices that always exceed Rs 150 per kilogram in the demanding winter season.

On the other hand, LPG is at present facing a shortage to cater to the local demand, mainly of households and the commercial sector. In this regard, high quantity imports of fuel gas are required, which in turn will be costlier than its local supply.

"The uniformity in LPG prices is impossible even after several attempts of the Oil and Gas Regulatory Authority (OGRA) in the past to maintain the price level at affordable rates," a CNG association representative said.

According to reports, the stocking of LPG fuels is in full swing to push its retail prices to maximum height, while creating demand through supply shortages.

Energy experts are of the view that the government is not likely to manage the huge supplies to the transport sector in the scenario when the government has failed to ensure supply of petroleum gas to the small domestic sector, which constituted only 10 percent of the overall market.