ISLAMABAD: The government is considering lifting the ban on company fitted compressed natural gas (CNG) cylinders and kits in the locally manufactured vehicles after diplomatic missions from Japan, Italy and Argentina objected to them.
This has been revealed in a Ministry of Industries’ ‘secret’ letter to the forthcoming meeting of Economic Coordination Committee (ECC) of the Cabinet to be convened this week.
Sources said this ban would be reviewed, keeping in view the objections raised by the ministry in this connection.
The letter spells out the objections in concrete terms, arguing that the Ministry of Petroleum and Natural Resources initiated a summary for ECC of the Cabinet regarding ban on CNG kits and their import.
The diplomatic missions from Japan, Italy and Argentina approached this ministry and voiced concerns that huge investments made by the companies manufacturing CNG kits such as Landi, Renzo/Lovato, BRC, Tesla etcetera, as well as vehicle assemblers like Toyota Indus Motors and Pak Suzuki are at stake.
The missions said the decision will not only result in huge financial losses to these companies but may also send adverse signals to future prospective investors in the automotive sector.
The use of CNG was encouraged as a conscious policy decision of the government for being an environment-friendly fuel during the 1990s. As a result, huge investments in infrastructure development have been made by the aforesaid companies, as well as by local investors and the consumers.
Furthermore, the Ministry of Industries has pointed out that the Ministry of Petroleum and Natural Resources violated the Rules of Business, 1973, by not submitting its views and comments on the draft summary in this connection, sent down to it [and Federal Board of Revenue (FBR)], despite reminders.
The FBR, however, agreed to impose 10 percent import duty on CNG conversion kits and cylinders. It says that imposition of such duty would discourage use of environment-friendly and cause escalation of prices of CNG-fuelled cars in use of the lower-income strata of society.
It proposes that ban on company-fitted CNG cylinders and kits in locally manufactured cars may be lifted. It pleads that import of CNG cylinders, conversion kits and their parts be allowed.
It is pertinent to mention that presently around 3 million CNG vehicles including public transport vehicles, are plying on roads out of which around 1.6 million vehicles are private vehicles (630,000 cars) that have factory-fitted CNG cylinders and kits.
According to Pakistan Energy Book 2010, the share of CNG consumed in transport sector is only 7.7 percent of the entire consumption of natural gas in Pakistan.
Moreover, private vehicles and auto rickshaws consume roughly 3.5 percent, while the vehicles with factory-fitted CNG kits and cylinders consume less than 1.3 percent of the total gas consumption.
Furthermore, CNG consumption by commercial transport vehicles is in the vicinity of 60 percent of the total while private vehicles consume not more than 40 percent.
CNG kit manufacturing companies are exporting approximately 60,000 kits to other countries and earn $6 million foreign exchange a year. Moreover, as roughly 50 percent of the components of CNG kits are being manufactured locally, the vendor industry will also face adverse impact on employment and suffer financial losses.
Besides, a complete ban on installation of CNG cylinders and kits in private cars, including taxi and auto rickshaws will severely affect people from lower income strata of society, who will be compelled to abandon the use their vehicles due to the relatively higher cost of alternate fuels like petrol and diesel.
Hence a paradigm shift in the policy may result in decrease in foreign exchange earnings and discourage further potential foreign investment in the automotive sector, besides invoking adverse reaction from the masses.
Govt likely to lift ban on company-fitted CNG cylinders - The News