SC keeps CNG prices unchanged till Dec 5

SC keeps CNG prices unchanged till Dec 5

SC keeps CNG prices unchanged
Supreme Court

ISLAMABAD: The Supreme Court on Monday ordered to keep the CNG prices unchanged until Dec 5 and asked the stakeholders to come up with a new gas pricing formula prioritising consumer’s interest.Hearing the case of CNG (Compressed Natural Gas) price here on Monday, a three member bench rejected a CNG price adjustment formula and an audit report presented by an Ogra representative.

Ogra (Oli and Gas Regulatory Authority) had recommended a price hike of Rs12.52 per kg and the audit company had recommended the price hike of Rs21.39 per kg. But the bench, headed by Chief Justice Iftikhar Muhammad Chaudhry, ruled to keep the current prices.The Ogra on 25-10-2012 had fixed CNG price Rs61.64 per kg for Region I (Potohar, Khyber Pakhtunkhwa, and Balochistan) and for Region II (Sindh, Punjab, and its areas excluding Potohar) Rs54.16 per kg, after the apex court had declared the then pricing formula as illegal.During the hearing, Ogra Chairman Saeed Ahmed proposed hike in CNG prices in order “to keep CNG stations operating” in the country.

The chief justice said there was no check and balance on the price fixing, adding that he did not understand the logic of operating cost. Justice Gulzar Ahmed said that it seems that the proposal had been written by someone who owns CNG stations.According to the break-up of the current CNG prices, the government’s tax share in Region-1 is Rs35.89 per kg, which breaks down into Rs11.57 per kg of cross subsidy, Rs7.77 per kg sales tax at a rate of 25%, Rs13.24 per kg for Gas Infrastructure Development Cess (GIDC) and a sales tax on GIDC at a rate of 25%, amounting to Rs3.31 per kg.The chief justice said that it was government’s domain to issue policy guidelines to Ogra for determination of petroleum prices, adding that as per law, Ogra cannot regulate prices without such guidelines.

“We (the court) will only concern about the constitution and fundamental rights of the citizens,” the CJP said. It was the “duty of the Supreme Court to prevent unjust burden on people’s pocket.”Ogra counsel Salaman Akram Raja conceded before the court that affairs of the authority were being run on ad-hoc basis. To a query, he said as Ogra was regulating prices mere on the basis of an ECC-approved MoU (memorandum of understanding), which was also withdrawn when the court declared it illegal. He said in the absence of policy guidelines from the federal government, Ogra was determining prices on the basis of legitimate cost and fair return.

The court also questioned the process of issuance of the licenses by Ogra for setting up of CNG stations. “Why this license did not mention about price formula and its contents,” the chief justice inquired. The CJP said in the name of CNG pumps, a huge chunk of National Highway Authority’s (NHA) land was occupied by private investors, and that licenses were issued to favourites.The court was informed that around 3,400 CNG stations are operating in the country, of which 2,600 are set up only in Punjab province. Ogra’s lawyer told the court that 90 per cent licences were issued during 2004-05.

The chief justice appreciated the incumbent government when it was informed that after 2008, no CNG pump was set up in the country. The court also sought from Ogra the year wise break-up of CNG stations since 2002 and public land encroached in the name of these CNG stations. The bench pointed out that in the current scenario, Ogra was bearing all operational cost of CNG stations including electricity bills. The court also highlighted the complaints about provision of sub-standard gas at some gas stations.Abdul Hafeez Pirzada, the counsel for CNG owners, said that present pricing formula was wrong and CNG owners were facing huge losses.

He said as per auditor’s recommendations, per kg price of CNG should be at least Rs74, while as per Ogra’s own assessment it should be Rs65. The lawyer said that even according to Ogra’s version, the CNG owners were facing Rs11 loss on per kg gas.Pirzada also said in the last hearing the Petroleum secretary had given his assessment that CNG price will be reduced by Rs20 per kg but later a notification of Rs30 cut was issued, while the government did not reduce its charges and taxes accordingly. Responding to a question, Pirzada said that CNG owners were being harassed. He said they should not be arrested if they are closing down their stations.

The chief justice observed that as per law, they could not be arrested; however, Ogra could cancel their licenses if they were not able to continue their business.Wasim Sajjad, counsel for CNG Association Sindh, requested the court to direct Ogra to fix new prices. The chief justice said the court will not go in nitty-gritty of price fixation process. But Ogra can announce new prices with consultation of stakeholders, the judge said. The court asked the government to issue policy guidelines for the purpose and informed the court about it on the next date of hearing. The bench also directed all the respondents to sit together and come up with a new formula of CNG price and adjourned the hearing until Dec 5. – Narion