Centre for Science and Environment condemns repeated threat from IGL to increase prices of CNG, which is inciting Delhi government to hike bus fares and destroy consumer interest in the CNG strategy. At a time when the Congress led state government in Delhi has shown interest in implementing the CNG order and has even rolled back the proposed sales tax hike, it is grossly unfair on part of the NDA led Central government to continue to push IGL to jack up CNG prices.

IGL has no right to penalise consumers when its patron, the union ministry of petroleum and natural gas, has barred it from selling gas to 10,000 cars in the capital. Ironically, IGL is incurring losses for not being "allowed" to sell nearly 80,000 kg of gas per day. CSE suggests that IGL should send the bill to the Petroleum Minister and his ministry should be made liable to compensate the loss. Balance sheet of IGL shows consistent and increasing profits from the inception of the company. This year (March 2002) IGL is reported to have netted a record high net profit of Rs 18 crore.

NEW DELHI, APRIL 19, 2002: Centre for Science and Environment (CSE) expresses shock and anger at the repeated move by the Indraprastha Gas Ltd (IGL), the monopoly supplier of natural gas in Delhi, to increase CNG prices by raising the bogey of spiralling costs and mounting losses. This comes close after the recent tax hike on CNG in the Union budget, which raised the CNG prices by 90 paise per kg. IGL is reportedly expected to raise the price by yet another Rs 2-3 per kg. Such moves are instigating the Delhi government to consider bus fare hike. It is clear that the NDA led government at the centre is now more hostile as the Congress led government Delhi has publicly expressed its serious intent to implement the Court order.

Delhi government will also be ill advised to hike bus fare and penalise public transport at this juncture. Already in the Capital the road tax is so structured that it is higher per passenger travelling in a bus than in private cars. It is about time that the government revised its taxation policy to correct this distortion and make private vehicles pay higher taxes.

With any further hike in CNG prices the price difference between CNG and diesel will narrow and this will reduce the economic incentive for vehicle owners to shift to this cleaner fuel. Repeated threat of a price hike is the last-ditch effort to stymie the CNG phase-in.

IGL and its patron, Ministry for Petroleum and Natural Gas (MoPNG), are deliberately sending untimely hostile signals at a time when the Delhi CNG market is expected to grow rapidly. This is mindless as there is strong evidence that IGL is making profit consistently from day one and there is no pressing need to hike prices at this stage. The Annual Report of the IGL shows that the company has been making a profit since its inception. It had a net profit of Rs. 40.5 lakh in 1999-2000 and Rs. 1.8 crore in 2000-2001. This year IGL according to provisional estimates has scored an unprecedented profit of Rs 18 crore. With such a profit curve it is hard to believe that there is any urgent need for an immediate price hike. On the contrary, IGL is totally ignoring the fact that technologies and fuels that are brought in to lower pollution and protect public health need fiscal support to make them competitive vis a vis the polluting ones.

The problem is that IGL has more gas than it is "allowed to sell" and make money. By end January 2002, IGL could dispense 5 lakh kg of gas per day but its sales added up to only 3.6 kg of gas per day.

Therefore, IGL has no right to complain when it is not even utilising its installed dispensing capacity fully to sell gas. Under pressure from its patron ministry it has stopped selling gas to 10,000 CNG car owners in the Capital recently. Sales and capacity utilisation have now dropped further as cars are barred from CNG market.

Nothing can be more convoluted than the warped logic of MoPNG. The ministry does not want IGL to sell to earn profit, but wants it to restrict sales, incur losses and then hike prices to recover losses from consumers. On the other hand, the today investment made by individual car-owners is Rs 40 crore, which is today being wasted.

If anyone should pay this cost of incompetence it should be MoPNG. The petroleum ministry should be made liable for compensating any loss that IGL incurs due to obstructive stance of the ministry.

With little innovation even the high initial investment cost of IGL can be offset if the Central government is imaginative enough to design appropriate fiscal instruments. But both IGL and MoPNG are averse to making any link with the countervailing health costs of air pollution, conservatively estimated by the World Bank at Rs. 1000 crore per annum in Delhi and find ways of mitigating these costs through responsible fiscal planning, built on polluter pay principle.