MUMBAI: The government has for the second time in a month reduced supplies of cheaper domestically produced natural gas to CNG retailers.
Indraprastha Gas Ltd, the firm that retails CNG to automobiles and piped cooking gas to households in the national capital and adjoining cities, in a stock exchange filing said domestic supplies have been reduced by nearly 20% effective November 16. IGL receives domestic gas allocation for meeting the requirement of CNG sales volumes at the pricing fixed by the government (at $6.5 per million British thermal unit).
The alternative to this is to use imported gas, which is twice the domestic rate. Previously, supplies had been cut by nearly 21% effective October 16. Production from legacy fields, whose price is regulated by the government and which are used to feed city gas retailers, has been falling by up to 5% annually due to the natural decline that has set in. This has led to supply cuts to city gas retailers.
While the input gas for piped cooking gas that households get is protected, the government has reduced supply of raw material for CNG. Gas from legacy fields used to meet 90% of the demand for CNG in May 2023 and has progressively fallen.
The supply was cut to just 50.75% of the CNG demand beginning October 16 from 67.74% last month. Now it has further been reduced. According to a PTI report citing sources, buying imported and costlier liquefied natural gas (LNG) to make up for the shortfall may lead to a hike in CNG prices that varies from `4-6 per kg.
“The revised domestic gas allocation to the company is approx. 20 per cent lesser than previous allocation which will have an adverse impact on profitability of the company,” IGL said. For now, the retailers have not raised CNG rates as they are engaged with the Ministry of Petroleum and Natural Gas to find a solution, the report said. CNG price hike is also a political issue since Maharashtra goes to the polls next week and elections are also due in Delhi soon. Delhi and Mumbai are among the biggest CNG markets in the country.