The Ministry of Petroleum and Natural Resources has thus been forced to acknowledge that its forecast that petrol consumption would increase in comparison to last year as a consequence of their demand management policies has not borne fruit. This proves that as long as the price differential remains significant, the consumers are not going to begin to increase their demand for petrol. The question is at what price would the consumers cease to prefer CNG over petrol?
Basic economic logic dictates that any scarce resource must be used optimally that is defined as maximising its rate of return. CNG used in private sector vehicles is not maximising its use by any stretch of imagination given the massive sustained loadshedding that is compromising the economy's productive capacity with a negative impact on the Gross Domestic Product. There is no doubt that CNG is environmentally friendlier relative to petrol. In addition, given that the poor reliance on public transport and a lower fuel cost would imply lower fares lower CNG price relative to petrol would have beneficial implications for the vulnerable. However, CNG use is not restricted to public transporters or indeed to motorbikes and cars that are in use by the more vulnerable but to all. In effect an owner of 1600 cc plus car is not barred from using CNG and while he is unlikely to inconvenience himself by queuing for long hours, a driver may perform that task, yet he will not shift to petrol use if the difference in the operating costs of his vehicle is substantial. This requires the government to better target the use of scarce gas to the vulnerable alone and formulate other alternative policy measures in its quest for effective demand management.
The government would need to take bolder policy decisions that it has so far not taken - decisions that may have negative political repercussions given the impending general election. First and foremost, the government would have to hasten the process of equating the price of CNG with the price of petrol with the objective of equating the price of different fuels to their caloric value; or in other words, the British Thermal Unit price of each fuel must be the same as that alone would ensure that the demand for the cheaper fuel does not outpace the demand for alternative fuels irrespective of the considerable inconvenience of long queues. However, if this decision is taken then it is very likely that the 3.7 million or so users of CNG in their vehicles may change their voting loyalty away from the government but, unfortunately, this is the need of the hour and any deferral of this decision would have major negative implications for economy.
The second major policy decision would require the government to restrict its use to the vulnerable alone. Or in other words, public transporters may be allowed to continue its use; however, there must be strict monitoring of their fares as without a linkage between supply of the cheaper fuel and fares the objective of this policy option would not be met. Motorbikes and cars less than 1300 cc may also be supplied a quota per week to ensure that there is some demand management in the use of this fuel.