CNG prices may go up by ₹6, here’s the reason

There might be a hike of ₹4-6 per kg in the price of CNG sold to automobiles as the centre has cut almost 20 per cent of cheaper domestically produced natural gas supply to city retailers, news agency PTI reported. The rise in fuel prices will depend on any changes in excise duty of fuel.

CNG for automobiles and cooking gas is obtained from natural gas below the seabed from the Arabian Sea to the Bay of Bengal.

The government regulates the price of the natural gas produced from such legacy fields, which is provided to city gas retailers. The price of this gas is falling up to 5 per cent annually due to natural decline in the resources and hence the supply has been cut, the PTI report said citing sources.

The government has reduced the supply of raw material for CNG while protecting the resources for piped cooking gas for households. As of May 2023, legacy fields provide 90 per cent of CNG demand. However, this number has fallen progressively. 

Shift to imported LNG

Last month, the supply was cut to 67.74 per cent whereas from October 16, the supply was further reduced to 50.75 per cent, the report added.

Therefore, city gas retailers are coerced to buy imported liquefied natural gas (LNG), which is much more costlier to meet the demand. This will hike the CNG prices by ₹4-6 per kg.

Currently, the price of gas from legacy fields is USD 6.50 per million British thermal units (mmBtu), whereas the price of imported LNG is USD 11-12 per mmBtu.

As of the now retailers are in talks with the Ministry of Petrloeum and Natural Gas to resolve this issue, hence they have not raised the price, the report said.

One of the possible solutions for this problem could be a cut in excise duty on CNG. The government levies 14 per cent excise duty on CNG, which is ₹14-15 per kg. If the centre cuts it, the consumers will not have to bear the extra costs, it added.

The supply of gas to the city gas retailers had to be reduced as the government planned to restore ONGC’s OPaL petrochemical plant in Dahej, Gujarat, the report said.

Originally, the plant was given 4.12 million standard cubic meters per day (mmscmd) of natural gas produced domestically. This allocation was cut to 1.95 mmscmd later due to various reasons and was further halved during Covid-19 period. 

However, the government has proposed a package to revive this plant, which includes an additional ₹10,501 crore as equity from ONGC, and it is being made from natural gas produced domestically, it added

The Union Cabinet approved the proposal of allocating 3.44 mmscmd of domestic gas. Therefore, less gas is available for city gas retailers. This might hike CNG prices by ₹5-5.5 per kg, the report said.

Delhi based Indraprastha Gas Ltd and Mumbai-based Mahanagar Gas Ltd said that supplies of domestically produced gas, which was at a capped rate half of the imported price, has been cut in regulatory filings.

Adani Total Gas Ltd said that the government price-regulated domestic gas allocation to the company had been reduced by about 16 per cent from October 16, 2024, compared the report said, citing a regulatory filing.