N the midst of a rather chaotic Senate session, the petroleum minister managed to get an important word in edgewise when he said that his ministry is actively pursuing a proposal to deregulate the CNG sector. One important result of this proposal would be an end to the role played by government in setting the price of CNG at pumps across the country. The proposal is in its advanced stages, according to the minister`s announcement, with a summary already sent to the ECC for approval. If the government is at all serious about increasing the role of imported gas in our economy in the years to come, it ought to pass the proposal quickly, provided all other details are sound. In principle, price reform in the gas sector is essential to enable imported gas to play a bigger role since the subsidised price of the vital fuel creates too many distortions to enable greater private-sector participation in gas imports.

More than a year ago, the minister petroleum gave a news conference with CNG-sector stakeholders announcing the creation of a new mechanism whereby an association of pump owners would be able to import LNG themselves through spot market purchases from international markets. But such a mechanism could not work in the presence of subsidised domestic gas, and controlled prices at the pumps. The entire gas sector needs to move towards a more market-oriented pricing regime, and CNG is a good place to start.

Pump owners should buy their gas from SSGC or SNGPL at a price linked to international spot prices and be able to sell at whatever price they wish. For guaranteed supplies, they can always buy their gas from international markets and ensure continuous supplies. A mechanism of this sort will have multiple benefits. It will inaugurate the first market pricing of gas in our country, while at the same time creating a new stakeholder in the LNG import business. Eventually, this pricing reform can be extended to other large gas consumers too, with industry being next in line, followed by fertiliser and power.

The current era of low oil prices provides a perfect window in which to implement gas-pricing reforms since the disruptive impact of the new prices will be minimal. The ECC should carefully vet the details of the proposal, but in principle it is sound and deserves expeditious approval.