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No bias against CGD players in gas allocation, says petroleum board

The CGD players have raised concerns that the reduced allocation of domestic natural gas, and a 110% hike in domestic gas price from April 1 forced them to blend RLNG with domestic gas and increase the CNG and PNG price by Rs 10 per kg/scm.

The CGD players will get the same level of hike from the March review since the sales are back to pre-Covid levels, the official said.
The CGD players will get the same level of hike from the March review since the sales are back to pre-Covid levels, the official said.

The Petroleum and Natural Gas Regulatory Board (PNGRB) has denied allegations of discrimination against city gas distribution (CGD) companies in natural gas allocations since April 2021.

A senior PNGRB official told FE that 10% extra allocation of gas used to be made to every CGD player based on their previous six months’ allocation after a review. But the reduction in sales during the Covid period lowered the base for fresh allocations. The CGD players will get the same level of hike from the March review since the sales are back to pre-Covid levels, the official said.

However, the official accepted that the allocations have not kept pace with the increased demand in the last couple of months due to which CGD players had to blend costly regasified natural gas (R-LNG) with domestic gas to produce compressed auto fuel (CNG) and piped cooking gas (PNG).

The CGD players have raised concerns that the reduced allocation of domestic natural gas, and a 110% hike in domestic gas price from April 1 forced them to blend RLNG with domestic gas and increase the CNG and PNG price by Rs 10 per kg/scm.

Companies such as Mahanagar Gas (MGL) are blending around 15-20% of R-LNG with local gas, sources said.
The government on April 1 doubled the domestic natural gas price for six months to $6.1 per million British thermal unit (mmBtu), and the price of gas from difficult — high pressure-high temperature — gas fields to $9.92 per mmBtu from $6.1/mmBtu. This coupled with increase in the landed price of imported LNG at $37/mmBtu has increased the overall cost of production for the CGD players.

The PNGRB official said, that government is aware of the development and the rising input cost for the CGD players. If the war in Ukraine extends to this year-end, the possibility of domestic gas price going up is high. Plans are afoot to pool the long term RLNG of GAIL and the high-pressure-high-temperature (HPHT) gas and sell that to well entrentched CGD players who have reached closer to completing their capex cycle.

“The CGD players have made a profit margin of over 23-24% when the natural gas price was $2.9/mmBtu. There are no serious concerns if the margins drop to 18% with increased natural gas prices. We will talk to the established CGD players who have already reached close to 80-85% of their infrastructure/network expansion work to buy the ‘difficult gas’ and long term RLNG of GAIL which would be $11-$12 per mmBtu, still cheaper from imported $37 price tag,” the official added.

Earlier PTI reported, that the oil ministry has not made any fresh allocation of natural gas from domestic fields to the city gas sector, sending CNG and piped cooking gas prices to record highs but the ministry insisted that allocations have not been stopped and providing more for the sector would lead to cut in supplies to industries like power and fertiliser units.

Despite a decision of the Union Cabinet to give 100% gas supply under ‘no cut’ priority to the CGD sector, current supplies are at March 2021 demand level. Commenting on the issue, the ministry said it “is waiting for the updated data for the period October 2021 to March 2022 from CGD entities for the allocations in April 2022. This is yet to be received from the entities.” The ministry is supposed to make an allocation of domestic natural gas, which costs a sixth of imported LNG, every six months — in April and October every year — based on verified demand in the previous six months. But no allocation has been made since March 2021, PTI report added.

Responding, the ministry said: “Based on data of October 2020 to March 2021 consumption, the allocation for April-October 21 was revised as per the guidelines in April last year.” CGD operators have been requesting the ministry to maintain the gas supply to the sector under no-cut category with last 2 months average to ensure demand of both CNG and piped natural gas (PNG) for homes is fully met but the ministry has not made any fresh allocation for over a year now, the sources said.

“CGD entities have requested for quarterly allocation. The same is under consideration,” PTI quoted a ministry spokesperson.

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