CNG, piped gas set to be cheaper across India

Last Updated: Tue, Feb 04, 2014 04:30 hrs
UPA raises subsidized LPG cap to 12

In a move that will bring down the prices of compressed natural gas and (CNG) for transport and piped natural gas (PNG) for domestic use across the country - by about 30 per cent and 20 per cent, respectively, in Delhi - the central government has decided to meet the full requirement of city gas distribution (CGD) companies through domestic gas supply.

On the other hand, sectors like petrochemicals, refineries and steel, besides industrial & commercial consumers drawing gas beyond a certain threshold, will have to go for the more expensive imported gas, as their domestic gas allocation has been lowered.

The decision has come months after the petroleum & natural gas ministry in November raised the share of domestic gas in total supplies for the CNG (transport) and PNG (domestic) segments to 80 per cent of total consumption in 2012-13. The ministry had, through an order, also provided for the same share of domestic gas for all of the country's CGD entities, at the same base price. This removed the distortion where the entire requirement of some CGD entities was met through domestic gas, while others had to depend largely or fully on imported gas.

"The decision to raise the domestic gas share in the CNG (transport) and PNG (domestic) segments was not only guided by the health benefits on account of lower air pollution but also due to additional economic benefits that will accrue on a reduced subsidy burden for the government," Petroleum Minister M Veerappa Moily said on Monday.

The additional gas requirement of 1.92 million standard cubic metres a day (mscmd) for raising the share from 80 per cent to 100 per cent is to be met by imposing pro-rata cuts in domestic gas supplies (excluding Nelp gas) to sectors other than the priority ones. Any future increase in demand for domestic gas from the CNG (transport) and PNG (domestic) sectors will be met by imposing further cuts on the non-priority sectors and through additional production (based on the government's allocation policy).

In Delhi, the price of CNG has come down by Rs 15 a kg and that of PNG (used for domestic cooking) by about Rs 5 a standard cubic metre, as the city's gas distributor, Indraprastha Gas Ltd (IGL), will not have to rely on costlier liquefied natural gas.

The Union government, which had moved the Supreme Court for transfer of cases challenging the gas allocation policy, pending in the Bombay High Court and some other courts, on Monday withdrew its petition after Solicitor-General Mohan Parasaran filed a copy of the revised guidelines in the court.

To ensure small gas consumers were not severely hit by the latest revision in the allocation policy, the government also decided to exclude the first 5,000 standard cubic metres of gas per day from the purview of pro-rata cuts. This means all customers consuming up to 5,000 scmd will not face pro-rata allocation cuts. In the case of customers consuming up to 50,000 scmd, the pro-rata cuts will be applied only on the quantity consumed in excess of 5,000 scmd.

The quantity of gas lowered for small consumers - those drawing less than 5,000 scmd - after the ministry's November guidelines will also be restored.

CGD entities are expected to pass on their entire benefit from an increased domestic gas supply to consumers of CNG (transport) and PNG (domestic).

State governments have also been asked to lower/abolish value-added tax to pass on additional benefits to consumers across the country and further promote usage of this environment-friendly fuel.

One mscmd of domestic PNG caters to about two million households and can replace about 18 million subsidised cooking gas cylinders. At present, 50-55 geographical areas (GAs) are covered by the CGD network.

The Petroleum and Natural Gas Regulatory Board (PNGRB) had in 2009 envisaged rolling out CGD entities in about 300 GAs, in a phased manner. In a few of those authorised by PNGRB, the growth rate in the CNG (transport) and PNG (domestic) segments has not been very encouraging, as the proportion of domestic gas supply in total requirement has been low. Even the markets of Delhi and Mumbai had seen a stagnation. "So, there was an immediate need to make CNG (transport) and PNG (domestic) more attractive by providing a higher share of cheaper domestic gas," said an official release.

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