A.Rafay
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ISLAMABAD: After the historic judgement of Supreme Court of Pakistan on reduction in price of compressed natural gas (CNG) by over Rs 30 per kilogramme, there is general consensus among economists that the government should not allow use of CNG in the vehicles above 1000cc because of its possible impacts on the economy.
They further argued that the impact of low gas price is not likely to be transferred on to the common man in total and the beneficiaries were either transporters or owners of cars including luxury vehicles.
Limiting use of CNG to only 1000cc and below engine capacity cars would help save this precious natural gift for other productive sectors like power and industrial sectors, which at present need strong support from the government for putting the economy on fast growth track.
On the other hand, limiting use of CNG in only 1000cc cars would also help eliminate the undue benefit gained by the rich who can afford expensive fuel, but avail the CNG fuel.
Major reduction in CNG price would automatically increase the use of CNG in motor cars and public transport and this would increase the difficulties faced by the power sector, which is already facing shortfall in gas availability.
Power crisis may worsen in the winter due to insufficient gas availability to the power sector, after possible increased use of CNG in motor cars and public transport especially during November to March period. This period is known as the Rabi season when water inflow decreases to the dams after snowfall in the catchment areas and increased outflow from dams with lower inflow brings the water level in dams to almost a dead level.
This crucial time requires increased natural gas availability for the power sector, allocation for which is capped at an agreed limited level, extra use of CNG after decrease in its price would definitely result in more shortage of gas for power sector with a possibility of more load shedding than ever experienced by the general public. Just before general elections, increased load shedding would definitely have its political implications for ruling coalition government. Switching over from hydel and gas power generation to expensive thermal power generation would require the power sector regulators to increase the power tariff to recover the increased cost of generation in these months.
The government has already spent Rs 120 billion till October 6, 2012 for bridging the power sector cash shortfall in power sold and collection made by the distribution companies. Distribution companies receivables have already gone up to Rs 402 billion and increase in power tariff would also increase the receivables of power sector as the paying capacity of the general public is already lost due to high inflation in the country.
The countrys economy which is undergoing difficult times at present when foreign direct investment has witnessed a decrease of over 50 percent in the first quarter of this fiscal year compared with last fiscal year is likely to see the increased difficult situation with curtailed gas supplies to industrial sector, which is providing millions of jobs opportunities to working industrial labour of the country.
The gas usage in vehicles would surge with the decrease in the price and as there is no quota for CNG sector like fertilizer and power sectors, the availability of gas to the power sector may not be sufficient to off set the impact of decline in hydel generation especially in winter months.
The increase in utilisation of gas by the transport sector would result in curtailment of gas to the industrial as well, which would consequently have an impact on growth and lead to increase in unemployment.
They said that the government would have to formulate a strategy regarding use of CNG for vehicles and if it wanted to make cheaper fuel available to the transport sector, CNG should not be allowed to the vehicles above 1000cc. He said that it is unfortunate that even Land Cruisers, intercity buses and other public transports are using CNG as fuel when the gas crisis is becoming worse in the country.
Daily Times - Leading News Resource of Pakistan
They further argued that the impact of low gas price is not likely to be transferred on to the common man in total and the beneficiaries were either transporters or owners of cars including luxury vehicles.
Limiting use of CNG to only 1000cc and below engine capacity cars would help save this precious natural gift for other productive sectors like power and industrial sectors, which at present need strong support from the government for putting the economy on fast growth track.
On the other hand, limiting use of CNG in only 1000cc cars would also help eliminate the undue benefit gained by the rich who can afford expensive fuel, but avail the CNG fuel.
Major reduction in CNG price would automatically increase the use of CNG in motor cars and public transport and this would increase the difficulties faced by the power sector, which is already facing shortfall in gas availability.
Power crisis may worsen in the winter due to insufficient gas availability to the power sector, after possible increased use of CNG in motor cars and public transport especially during November to March period. This period is known as the Rabi season when water inflow decreases to the dams after snowfall in the catchment areas and increased outflow from dams with lower inflow brings the water level in dams to almost a dead level.
This crucial time requires increased natural gas availability for the power sector, allocation for which is capped at an agreed limited level, extra use of CNG after decrease in its price would definitely result in more shortage of gas for power sector with a possibility of more load shedding than ever experienced by the general public. Just before general elections, increased load shedding would definitely have its political implications for ruling coalition government. Switching over from hydel and gas power generation to expensive thermal power generation would require the power sector regulators to increase the power tariff to recover the increased cost of generation in these months.
The government has already spent Rs 120 billion till October 6, 2012 for bridging the power sector cash shortfall in power sold and collection made by the distribution companies. Distribution companies receivables have already gone up to Rs 402 billion and increase in power tariff would also increase the receivables of power sector as the paying capacity of the general public is already lost due to high inflation in the country.
The countrys economy which is undergoing difficult times at present when foreign direct investment has witnessed a decrease of over 50 percent in the first quarter of this fiscal year compared with last fiscal year is likely to see the increased difficult situation with curtailed gas supplies to industrial sector, which is providing millions of jobs opportunities to working industrial labour of the country.
The gas usage in vehicles would surge with the decrease in the price and as there is no quota for CNG sector like fertilizer and power sectors, the availability of gas to the power sector may not be sufficient to off set the impact of decline in hydel generation especially in winter months.
The increase in utilisation of gas by the transport sector would result in curtailment of gas to the industrial as well, which would consequently have an impact on growth and lead to increase in unemployment.
They said that the government would have to formulate a strategy regarding use of CNG for vehicles and if it wanted to make cheaper fuel available to the transport sector, CNG should not be allowed to the vehicles above 1000cc. He said that it is unfortunate that even Land Cruisers, intercity buses and other public transports are using CNG as fuel when the gas crisis is becoming worse in the country.
Daily Times - Leading News Resource of Pakistan
