CNG price may go up Rs 4-6 on input supply cut

PTI New Delhi: The government has slashed by up to 20 per cent the supplies of cheaper domestically produced natural gas to city retailers a move that may result in Rs 4-6 per kg hike in the price of CNG sold to automobiles, unless excise duty on the fuel is cut, sources said. Natural gas pumped from below the ground and from under the seabed from sites ranging from the Arabian Sea to Bay of Bengal within India is the raw material that is turned into CNG for sale to automobiles and piped cooking gas to households.

Production from legacy fields, whose price is regulated by the government and which are used to feed city gas retailers, has been falling by up to 5 per cent annually due to natural decline that has set in. This has led to supply cuts to city gas retailers, four sources in know of the matter said. While the input gas for piped cooking gas that households get is protected, the government has cut supply of raw material for CNG. Gas from legacy fields used to meet 90 per cent of the demand for CNG in May 2023 and has progressively fallen. The supply was cut to just 50.75 per cent of the CNG demand beginning October 16 from 67.74 per cent last month, they said.

City gas retailers are forced to buy imported and costlier liquefied natural gas (LNG) to make up for the shortfall, which will lead to a hike in CNG prices that varies from Rs 4-6/kg. The gas from legacy fields is priced at USD 6.50 per million British thermal unit (mmBtu) as against imported LNG that costs USD 11-12 per mmBtu. For now, the retailers have not raised CNG rates as they are engaged with the Ministry of Petroleum and Natural Gas to find a solution, sources said. One of the options is for the government to cut excise duty on CNG. Currently, the central government levies a 14 per cent excise duty on CNG, which ranslates into Rs 14-15 per kg.