IN THE SUPREME COURT OF PAKISTAN

(Appellate Jurisdiction)

Present:
Mr. Justice Iftikhar Muhammad Chaudhry, HCJ
Mr. Justice Jawwad S. Khawaja

Constitution Petitions Nos.33 & 34 of 2005 and HRC No.5332/2006

For the Petitioner(s): Nemo.

For the Federation: Mr. Habibullah Shakir, Dy. A.G.

On Court’s Notice:
For M/o Petroleum: Mr. Waqar Masood, Secy. Petroleum

For OGRA: Mr. Saeed Khan, Chairman OGRA

For PSO: Mr. Naeem Yahya Mir, M.D. PSO

For PPL: Mr. Asim Khan, M.D. PPL.

For SSGC: Mr. Azim Iqbal, M.D.

For SNGPL: Mr. Arif Hameed, M.D.

Mr. Asim Iqbal Ch. ASC (for SSGC & SNGPL)

For NAB: Mr. Akbar Tarar, Acting P.G.

Khawaja Azhar Rasheed, ASC
Mr. M. S. Khattak, AOR

For Byco: Mr. Mujahid Ali Syed

For CNG Station Owners: Mr. Ghayas Piracha

In Const. P.34/05:
For the Petitioner: Nemo.

For the Respondents: Mr. Ali Sibtain Fazli, ASC

Mr. M. S. Khattak, AOR

In HRC-5332/06: Nemo.

Date of Hearing: 25.10.2012

ORDER

We have heard the Secretary Petroleum, Chairman OGRA, MDs SSGP and

SNGPL and the representative of CNG Station Owners. At the moment we only

consider the mechanism/formula of price fixation of CNG.

 Const. P.33/05, etc. 2

2. The Chairman OGRA placed before us the following chart to demonstrate

CNG consumer price:-

CNG CONSUMER PRICE DETAILED BREAK UP.

Sr# Components Price w.e.f.22.10.2012 Price w.e.f.22.10.2012

Region-I Region-II

Rs./Kg Rs.MMBtu % Rs./Kg Rs.MMBtu %

A. Average Well head 18.04 358.87 92% 16.48 358.87 92%

price/cost of gas paid to
exploration companies*

B. Operating Cost of Gas 1.14 22.69 6% 1.04 22.69 6%

Companies

C. Return on investment to 0.872 17.34 4% 0.796 17.34 4%

gas companies Other
incomes (net of Prior year

D. adjustment, if any, etc.) -0.53 -10.63 -3% -0.49 -10.63 -3%

E=A Average Prescribed price 19.51 388.27 100% 17.83 388.26 100%
to D of natural gas
F Sale Price of natural gas
for CNG stations as
advised by Federal Govt.
under section 8(3) of
OGRA,Ordinance
including GDS/cross
subsidization. 35.19 700.32 38% 32.14 700.02 38%

G. **Operating Cost of CNG 20.80 113.80 22% 20.80 453.01 25%

Stations
H Profit of CNG Station 11.19 222.60 12% 10.59 230.61 13%
Owners.
I. GIDC 13.25 263.57 14% 9.18 200.00 11%

J GST (25% of Price F+1) 12.10 240.69 13% 10.33 225.00 12%

K Differential Margin for --- 1.50 32.67 2%

Region –II
Total CNG Consumer 92.53 1,840.98 100% 84.54 1,841.31 100%
Price (F-K)

Petrol Price (Rs./Ltr) 102.08 3.069 102.08 3.069

*Well head price (cost of gas price) as per GPAS for Sui & Kandhkot is attached for illustration
(copy annexed)

**Operating Cost includes compression cost, maintenance, depreciation, fee etc as per MoU
signed b/w CNG Association & FG.
Prices on 15.10.2012
CNG Price
94.66 1,883 86.48 1,883
Petrol Price
103.40 3,139 103.40 3,139
Const. P.33/05, etc. 3

2. We have objected on the inclusion of difference between the average

prescribed price of natural gas A to D and F, difference of which comes to Rs.15.68 for

Region-1 and Rs.14.3 for Region-II w.e.f. 22nd October, 2012 respectively as well as on

the operating cost of CNG stations, profit of CNG Station Owners, noted hereinabove

because in absence of any statutory provision OGRA is not authorized to fix the

operating costs and profit of the operators of CNG Stations, arbitrarily. Similarly, on

the issue of linkage between the price of the CNG and petrol price, which comes to

Rs.9.55 and Rs.17.48 per kg, respectively. We have observed that price of CNG legally

cannot be linked with the price of petrol. It is also to be noted that the prices of CNG

are being fixed on weekly basis, in pursuance of the decision of ECC dated 7th August,

2012, copy of which has also been placed on record. When we inquired from the

Secretary Petroleum he candidly conceded that CNG is not covered under the

definition of petroleum products. We asked him to explain as to why the prices of

CNG are being revised on weekly basis, he answered that in this behalf a resolution

has also been passed by the National Assembly that the prices of petrol products etc.

may not be determined on weekly basis but so far no decision has been taken in the

ECC. For such reasons the Secretary Petroleum promised on 24.10.2012, to look into

all these aspects of the matter. Accordingly today, a statement has been filed by him,

which is reproduced as under:-

“1. The undersigned, Waqar Masood Khan, Secretary, Ministry of

Petroleum and Natural Resources, in pursuance of the orders of the Hon’ble
Court, after the hearing on 24.10.2012 respectfully submits as follows:-

1. The Ministry of Petroleum and Natural

Resources will expend additional efforts to ensure
that domestic and life-line consumer’s interests
in matters of gas pricing are fully protected;

2. In particular, in the case of pricing of CNG, the

arrangement evolved for linking it with the price
of petrol on weekly basis will be abandoned.

3. The Cost of Gas for the CNG sector will be

adjusted only after the determination of
prescribed price by OGRA as per law.
Const. P.33/05, etc. 4

4. With immediate effect, the price will be brought

to the level that was fixed for CNG sector
subsequent to the determination of price by
OGRA for the six months beginning 1.7.2012.

5. The MOU through which Government and CNG

Associations had agreed on a formula for
operating cost of CNG stations will be
immediately suspended and OGRA will develop
a new formula after seeking information about
the availability of gas, linkages with alternate
fuel, discussion s with all stakeholders and after
scrutiny of audited accounts of CNG stations as
per rules.

6. The Ministry of Petroleum and Natural

Resources pursuant to the Resolution of the
National Assembly has already moved a
Summary to the Cabinet [ECC] as per rules for
the review of the decision to adjust petroleum
prices on weekly basis thus paying due respect to
the Resolution of the National Assembly. It has
already communicated to OGRA not to increase
the price on weekly basis till the decision of the
ECC as per law.

2. Further, a copy of the Resolution of the National Assembly

regarding monthly adjustment of prices is placed at
Annexure-1.

3. Additionally, a copy of the Petroleum Policy 2001 as desired

during the hearing is also enclosed.

Waqar Masood Khan

Secretary, Petroleum
and Natural Resources.
25.10.2012”

3. On our inquiry he stated that the prices of CNG shall be brought to the

level that was fixed for CNG Sector after determining the price by OGRA for the six

months starting from 1.7.2012 and that the MOU through which Government and

CNG Associations had agreed on a formula for operating cost of CNG stations will be

immediately suspended and OGRA will develop a new formula after seeking full

information about the availability of gas, linkages with alternate fuel, discussion with

stakeholders and after scrutiny of audited accounts of CNG Stations as per rules, thus,

prices of CNG shall be reduced, approximately, to the extent of Rs.20/- per k.g.

4. We have also expressed our reservations in respect of GDS/cross

subsidization as mentioned in para F of the above reproduced chart. The OGRA in

Const. P.33/05, etc. 5

exercise of its powers under Section 8 (1) and (2) of the OGRA Ordinance, 2002 shall

oblige to determine estimate of total revenue requirement of each licensee for natural

gas engaged in transmission, distribution and the sale of natural gas to a retail

consumer for natural gas, in accordance with the rules and on basis of such advice the

Federal Government shall prescribe price of natural gas for each category of retail

consumer for natural gas under section 8(3) of the OGRA Ordinance. Therefore, there

must be a rationale for charging the difference noted hereinabove. The Secretary

Petroleum has pointed out that this is a surcharge being recovered from the consumers

in accordance with Section 8 (5) of the ORGRA Ordinance, 2002. His this statement is

not acceptable at this point of time. On this he requested for some time to ponder over

these issues and to reach at an acceptable conclusion.

5. Mr. Ghayas Peracha, a representative of the CNG Station Owners has

also pointed out a number of objections regarding fixation of the CNG Prices without

any rationale.

6. We have noticed that on account of non discharging of functions in

accordance with law by the Authority there have been a lot of objections from one side

or the other, however, we adjourn this matter with direction to the Chairman OGRA to

fix the price of CNG after taking into consideration the statement in writing filed by

the Government through its Secretary as well as discussion made hereinabove.

Let the matter be listed for further proceedings on 1st November, 2012.

Chief Justice

Judge
ISLAMABAD
25.10.2012