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Competition Commission of Pakistan conducts Search and Inspection of Compressed Natural Gas Associations

Islamabad, December 05, 2012 (PPI-OT): The Competition Commission of Pakistan (CCP), in its emergent meeting held on Monday, 03 December 2012, appointed an enquiry committee with a mandate to conduct an enquiry as to whether CNG associations and/or their members are engaged in anticompetitive practices in violation of Section 4 of the Competition Act, 2010 (the ‘Act’).

The Commission also authorized a team of officers to conduct search and inspection of the premises of the associations namely: All Pakistan CNG Association, CNG Dealers Association and CNG Station Owner Association of Pakistan under Section 34 of the Act. The search and inspection was duly conducted by the authorized officers both in Islamabad and in Karachi.

The Commission has expressed appreciation for the cooperation extended by the staff of the association in conducting the lawful search and inspection. The documents have been impounded from the premises of the associations and will be duly scrutinized by the enquiry committee in order to submit its findings before the Commission.

Section 4 of the Act prohibits trade associations from taking decisions on commercial matters such as production, pricing and provision of goods and services. The enquiry committee has further been entrusted to review the policy framework in the CNG sector in order to identify policy distortions (if any) that are preventing, restricting or reducing competition in the market. The enquiry officers are required to submit their findings for consideration of the Commission within a period of 8 weeks.

While the prices were being fixed by OGRA with the approval of Federal Government, it needs to be verified as to what is the role of CNG associations in negotiating a price with the Federal Government and OGRA on behalf of CNG stations. Furthermore, CCP needs to verify whether the boycott is an individual decision of member undertakings or a collective withdrawal of services through associations to get their demands fulfilled; leading to the suspension of services from CNG stations. Closure of these stations has been witnessed across the country causing immense hardship to consumer.

In light of negotiations on price fixing and withdrawal/suspension of services by various gas stations, leading to the current crises i.e. non-availability of CNG to the general public, if it is proven that the crises is an outcome of any collective boycott organized by CNG associations or by competing undertakings (CNG licensees) for getting an economic advantage; which has resulted in output limitation placing pressure on other competitors, suppliers as well as buyers. Such conduct may fall within the purview of Section 4 of the Act.

The CNG sector is an important part of the national economy with over 2.85 million vehicles using CNG. Approximately over 35% of all vehicles in Pakistan run on CNG. There are around 3300 CNG refuelling stations out of 20,000 gas fuelling station in the world (out of which approximately 17% are in Pakistan – a large number compared to the size and population of Pakistan vis-à-vis the world).

The ‘Natural Gas Allocation and Management Policy’ places CNG fifth in the priority order for supply of natural gas and CNG sector takes approximately 9% of the total natural gas resource. The total investment made in CNG is around PKR 80 billion and according one of the estimates it has created 50,000 jobs.

These factors do highlight the economic significance and importance of the sector for the public at large. The enquiry has been initiated after several sources raised suspicion as to the collusive role of CNG associations in the industry.

It must be noted that while the OGRA pursuant to the Ordinance 2002 has been setting CNG prices with the approval of the Federal Government, it appears that CNG associations have been actively negotiating with the Federal Government and OGRA on behalf of CNG station owners to set a price of their choosing. In this regard, CCP deemed it appropriate under the circumstances to conduct an enquiry to clarify various aspects of possible contravention.

For more information, contact:
Asfandyar Khattak
Joint Director (Media and Communications)
Competition Commission of Pakistan (CCP)
4-C, Diplomatic Enclave, Shams Gate G-5, Islamabad, Pakistan
Tel: 051-9247531
Fax: +92-51-9247548
Email: akhattak@cc.gov.pk
Web: www.cc.gov.pk

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