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CNG is made by compressing natural gas (which is mainly composed of methane [CH4]), to less than 1% of the volume it occupies at standard atmospheric pressure. It is stored and distributed in hard containers at a pressure of 200–248 bar (2900–3600 psi), usually in cylindrical or spherical shapes. Pakistan currently has the highest number of vehicles running on CNG in the world followed by Argentina, Brazil and Iran. Pakistan also has the highest number of CNG stations in the world. Majority of private vehicles have converted to CNG because of cheaper price as compared to petrol. Only luxury cars and official vehicles now run on petrol. Almost all car manufacturers in Pakistan (except Honda) now produce company fitted CNG kit versions. The genie of CNG has been strengthened, if not created, by the present government by adopting a policy of making Diesel more expensive and levying more taxes on it than petrol. In almost all economies of the world, Diesel is kept cheaper than Petrol due to the obvious reason of its use in the public transport system. It also shows how quickly the market adapts to the price signal. Public transport system appears to have converted itself to the CNG, Diesel having been made expensive both due to taxation policies and as well as due to higher international market prices. It is not, however, easy for government to absorb the loss in revenue, keeping in view the already low receipts and budgetary deficits. It finances the subsidies on Electricity, partly, from the oil taxation and levies. Petroleum taxation has been considered desirable in most countries as a source of revenue. It has been classically considered taxation on luxury, pollution and road user charge. This has worked earlier when international oil prices were low. In that regime, sometimes importing countries’ governments earned more revenue than oil producing and exporting countries. No more, today oil prices affect the lives of the poor more than any body else. In the longer run scenario, barring transitional periods such as those prevailing these days, it may be advisable to adopt zero-energy taxation, whereby for example, oil taxation income balances subsidies elsewhere, say in electricity and perhaps vice versa. It may be worthwhile to have a fresh look at the petroleum pricing policy. Taxes and levies on Diesels may be reduced and eliminated making it cheaper. Also a seasonal pricing policy making Diesel further cheaper in winters than in summers. One may have to revert to quarterly or half yearly revision of petroleum pricing as opposed to the monthly one, in order to implement a seasonal policy. There are limits to the enhancement of CNG tariff, as the recent CNG strikes and later negotiations have shown, as a result the CNG tariff enhancement had to be halved.CNG business interest would, however, resist reduction in margin which would decrease their market share. On the other hand government’s right and role of making public policy in the interest of larger good cannot be done away with under political pressure. Political conditions may be different next time. However, quick reversal in an entrenched market is neither feasible nor politically advisable. Long term signals should be recognized by the CNG business interests and refrain from bribing their way into getting more licenses despite a ban. Ban in fact increases the margins of the graft. CNG sellers should see the writing on the wall. At current prices they enjoy a gross margin of 100%; natural gas is sold to them at Rs 651 per Million Btu , which they sell at Rs 1384 per Million Btu. If imported LNG is sold to CNG stations , it would cost the latter around Rs.1600/- per Million Btu. Assuming a gross margin of 100%, CNG price would be Rs.3200/- per Million Btu, as against the current retail price of Diesel at Rs.2739/-,16.8 % higher than Diesel. If by some magic, their gross margin is kept constant at Rs 650/- per MBtu, CNG price would come down to be Rs.2250/- per million Btu, 17 % lower than Diesel. Practically, there would be no CNG-Diesel price differential, as the gross margin would go up. By the same token, LPG may not be able to acquire a reasonable market share at the prevailing price differential, unless Auto-LPG chain becomes more efficient. It appears that LPG has been successful in Europe due to high taxation on Gasoline and Diesel, making LPG attractive. Due to low income of consumers, high taxation on Petroleum should not be expected or recommended. In India also, high taxation on Gasoline and cross subsidies have, perhaps, made LPG viable. Also, GOP may have to develop an Exit policy for CNG stations. For example, CNG stations which have already worked for ten years may be delisted from supplies, so as to give opportunity for newer investments to recoup their money. Such stations may be given licenses for Auto-LPG, if it becomes viable. CNG businessmen, however, have a valid point. They argue that CNG sector would accept its share of burden and difficulties as other users would in case of hire prices and lesser availability. It should be done proportionally and that CNG sector should not be closed down arbitrarily. Investments have been made on the instance of the government policy. It may, however, be noted that only a few countries have followed the CNG band wagon in a low price and abundant gas regime and most of the world has stayed away from it .In fact ,countries like New Zealand have opted out of it. There is, however, a redeeming and legitimizing feature of CNG which falls in the domain of public transport in urban areas. CNG is a clean fuel. Under subsidies, it can be a vehicle for organizing an affordable and pollution free public transport. Eventually CNG appears to be surviving in that limited role.
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