CNG Price Hike: CNG prices may increase by 4 to 6 rupees, know what is the reason?

CNG Price Hike: The government has cut the supply of cheap domestic natural gas to urban retailers by up to 20 percent. Sources say that if the excise duty on fuel is not reduced, the price of CNG supplied to vehicles may increase by four to six rupees per kilogram.

Natural gas extracted from underground and below the sea level from sites from the Arabian Sea to the Bay of Bengal within India is the raw material that is converted into CNG for vehicles and piped natural gas (PNG) used in kitchens.

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Four sources familiar with the matter said that the prices of production from old fields are controlled by the government. These are used to pay urban gas retailers. Production from these fields is declining by five percent annually. Due to this, supply to urban gas distribution companies has been cut.

Sources said that the gas supplied for kitchens in homes is conserved. In such a situation, the government has cut the supply of raw material for CNG. The gas obtained from old fields used to meet 90 percent of the CNG demand in May 2023 and it is continuously declining. He said that from October 16, the supply has been reduced to only 50.75 percent of the CNG demand, which was 67.74 percent in the previous month.

City gas retailers are being forced to buy imported and expensive liquefied natural gas (LNG) to make up for this shortfall, which will increase CNG prices by Rs 4-6 per kg. Gas from old fields costs US$6.50 per million British thermal units (mmBtu), while imported LNG costs $11-12 per unit.

Sources said that at present retailers have not increased the rates of CNG as they are in talks with the Ministry of Petroleum and Natural Gas to find a solution. One option is that the government cuts the excise duty on CNG. Currently, the central government levies 14 percent excise duty on CNG, which comes to Rs 14-15 per kg.

He said that if it is reduced, retailers will not have to pass on the increased cost to consumers. The increase in CNG prices is also a political issue as elections are due in Maharashtra next month and in Delhi soon. Delhi and Mumbai are among the largest CNG markets in the country.

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