ISLAMABAD - The federal government has announced deregulation of the compressed natural gas sector and stripped Oil and Gas Regulatory Authority of the power to determine CNG prices for end-consumer.

As a result of the decision, the Oil and Gas Regulatory Authority (Ogra) has lost its control over the price regulation for the CNG sector for Sindh and Khyber Pakhtunkhwa, leaving the masses at the mercy of the CNG sector. After deregulation of the sector, the government has given a free hand to the CNG owners of Sindh and KP to set its own prices and profit margin without any regulatory control.

According to a notification issued by the Ministry of Petroleum and Natural Resources, the Economic Coordination Committee (ECC) of the Cabinet has deregulated the pricing of CNG this month after the Petroleum Ministry had submitted a summary asking for the CNG deregulation.

As per the notification, the CNG sector stands deregulated from the date of repeal of Ogra (Amendment) Ordinance, 2009 [XVI of 2009]. In order to provide legal cover and avoid future legal ramifications, Ogra (Amendment) Ordinance, 2009, [XVI of 2009] may be re-enacted with retrospective effect containing validation and sunset clauses from the date of promulgation of the ordinance.

Both the Planning Ministry and the Oil and Gas Regulatory Authority were against the deregulation of the CNG sector and have recorded their opposition to the move, official sources told The Nation. The opponents of the move are of the view that it was due to the government’s weak monitoring mechanism that the CNG sector was regularised by the previous PPP government. Earlier, the CNG sector was deregulated, but when the government miserably failed to control the prices it regulated the CNG sector in 2008, the official added.

The official questioned what prompted the government to once again deregulate the sector when nothing changed since 2008. The official said regulation anywhere in the world benefits the consumers, but in Pakistan deregulation only benefits the business owners due to the monitoring issues. Deregulation increases the government role for regulation, but in Pakistan the opposite takes place. For example, the official said that after the deregulation of LPG, the government has completely failed to regulate the sector and the companies are selling the gas cylinder at double rates.

Resultantly, to reduce the high LPG prices, the government has recently decided to regulate its prices in the country. The Planning Ministry and Ogra also raised the question why the government is pursuing two different policies regarding LPG and CNG sectors. The move to take away the CNG sector from Ogra’s regulation is going to hurt the consumers in the long run and leave them at the mercy of CNG owners, the official said.

In a statement, All Pakistan CNG Association has welcomed the decision for having the power to decide the CNG price and profit margin. They said it is a great step which will revive the Rs 450 billion industry.

The government has recently approved the deregulation of CNG prices for Sindh and KP on the pattern of Punjab through re-enactment of an amendment of the Ogra law under which the regulator was required to notify CNG prices, it said.

It has ended the role of Ogra in determining prices, leaving the pricing issue to the market forces following the suit of Punjab where the prices have already been deregulated, said APCNGA Central Chairman Ghiyas Abdullah Paracha. He said the decision will benefit the consumers and attract more investment in this sector. Now, owners of the CNG filling stations would be free to fix price of the fuel.

He said the decision will pave way for healthy competition among the owners of the CNG filling stations, which will benefit consumers besides attracting investment in the ailing sector.

The decision will resolve many outstanding issues of the CNG industry as the owners of the CNG filling stations will be free to fix price of the fuel, he claimed. This will also have a positive impact on the number of cases in courts, he added.