The oil ministry has stopped making a fresh allotment of natural gas from domestic fields to the city gas sector, threatening the viability of the planned Rs 2 lakh crore investment in the sector, apart from the record rise in CNG and piped cooking gas prices. level has increased. Sources said.
Despite the Union Cabinet’s decision to give 100 per cent gas supply to the urban gas distribution (CGD) sector under ‘no cut’ priority, the current supply has been maintained at the March 2021 demand level.
Besides, allocating gas on six-monthly average clearance is also penalizing CGD entities driving growth.
The CGD operators have requested the ministry to maintain the gas supply to the area under no-cut category with the average of the last two months to ensure that the demand for both CNG and Piped Natural Gas (PNG) for households is fully met. . Still, the ministry has not made any fresh allocations for over a year, three sources familiar with the matter said.
In addition to the reduction in allocation, APM gas prices for CNG and PNG have been revised upwards from $2.90 per million British thermal units to $6.10, an increase of 110 percent.
While demand has slumped due to CNG networks in existing cities and supply opening to new areas, the lack of allocation from domestic sectors meant that operators bought imported liquefied natural gas (LNG) at prices at least six times the domestic rate. . Result – CNG prices have increased by over 60 per cent or ₹28 per kg in a year and PNG prices by more than a third.
Sources said this had put a question mark on the economic viability of the entire CGD sector, risking the planned Rs 2 lakh crore investment in expansion to new cities as higher prices bring CNG at par with diesel and petrol, boosting incentives. To convert vehicles to cleaner fuels for users.
The Oil Ministry had on 20 August 2014 issued revised guidelines promising allocation of gas from domestic sectors to urban gas operators every six months based on the assessment of demand for CNG and PNG in a particular Geographical Area (GA). Was. It was used as a selling point for bidding for over 200 GAs from 2018, which attracted an investment commitment of over ₹2 lakh crore in the rollout of city gas distribution infrastructure.
But the gas allocation was not increased in the April 2021 review and subsequent cycles. He said that against the gas requirement of 22 million standard cubic metre, the CGD sector is getting 17 MMSCMD from domestic sectors.
The balance is met by purchasing imported LNG, which costs $37 per million British thermal units in the current month, he said. This compares with the $6.10 per mmBtu rate for domestic gas.
“Domestic gas saw a massive 110 percent increase in price – from $2.9 per mmBtu to 6.1 mmBtu since April 1. Being there will change that. The area is economically impractical,” said a source.
The new GA bidders in CGD rounds IX, X and XI are now approaching, and no gas allocation would mean they would have to buy imported LNG to supply automobiles as CNG and domestic kitchens as PNG.
Another source said, “GA with only imported LNG would mean a price of Rs 100-105 per kg.” This is compared to Rs 71.61 per kg in Delhi and Rs 72 in Mumbai, where almost 70 per cent of the requirement is met from domestic gas.
“CGD sector is in bad shape. It is already facing the onslaught of EVs, and now the high prices of CNG will be a deterrent to converting diesel or petrol vehicles to CNG. CNG is an eco-friendly fuel, but What ultimately matters is the cost economics, and if the conversion and running costs exceed those of diesel or petrol, then no one will convert,” the first source said.
Earlier this month, CGD operators had met Oil Secretary Pankaj Jain on the issue. Nevertheless, the ministry did not rely on the allocation and instead asked operators to pass on the increase in gas cost to consumers.
Sources said, the ministry asked CGD operators to buy imported LNG and pass on the cost to the consumers. The ministry is not increasing the allocation for the CGD sector as it would mean cutting the supply in other sectors such as fertilisers.
“The supply of domestic gas is limited. If we have to increase supply to one region, it will have to come at the cost of supply to other regions. Already the government is facing a high fertilizer subsidy bill this fiscal. The subsidy expenditure will increase further if fertilizer plants use high-priced imported LNG to make urea and other crop nutrients,” a ministry official said.