In what could provide a big relief to the commercial and personal CNG (Compressed Natural Gas) vehicle owners is the government of India’s move of tweaking the price guidelines for natural gas.
The update in the price mechanism could make the prices of CNG cheaper by almost 10 percent. For instance, at present in Delhi the price of CNG is Rs 79.56 per kg, while it costs Rs 87 per kg in Mumbai. The move would bring down the cost to Rs 73.59 per kg and Rs 79 per kg respectively.
Vinod Aggarwal, President, SIAM and MD & CEO CECV said “Realignment of the gas pricing mechanism by insulating the Indian consumers from the spikes in global prices will soften prices in India and will provide much-needed relief to the transportation sector.”
“This measure will also help in reigniting interest in CNG vehicles in India and would go a long way in promoting a clean alternative fuel in various parts of the country. Incentivising greater production of natural gas will result in a reduction in import dependence of conventional fuels, thereby enabling expansion of CNG infrastructure across the country and facilitating wider availability of CNG for vehicles,” he added.
What is driving the change?
The price of natural gas was based on benchmark rates of gas available in surplus nations such as Russia, Canada, and the United States. The government has now moved to index the gas prices at 10 percent of the piece of basket of imported crude oil. At present, the price of a barrel of crude oil is $85 (Rs 7,010). And under the new price regime, this translates to the cost of CNG coming down to $6.5 (Rs 532) from the existing $8.5 (Rs 696).
The Cabinet also approved a floor price of $4 per (Rs 327) metric million British thermal unit (mmBtu) and a ceiling of $6.50 (Rs 532) per mmBtu under the Administered Price Mechanism (APM) for gas pricing.
According to a report by CRISIL Ratings, “The city gas distributors could reduce prices of CNG, used by vehicles, and piped natural gas (PNG), used by homes, by 9-11 percent, with the government accepting the key recommendations of the Kirit Parikh Committee. Had the previous pricing regime continued, prices would have likely risen.”
According to a PTI report, the government has not acted on the panel’s recommendation to fully deregulate prices in 2027. Asked about the deregulation of gas prices, Oil Secretary Pankaj Jain, briefing reporters late on Thursday evening, had stated that the decisions taken by the Cabinet have been comminuted. “We don’t know if the deregulation has been postponed or stalled for now,” an industry official said.
