CNG kit-fitters in Gujarat waiting for APM gas to re-open shops

Compressed natural gas (CNG) kit retrofitters in Gujarat are eagerly waiting for a reduction in gas prices to re-open their shut shops after the Supreme Court has ordered the Centre to supply CNG to Gujarat for vehicular and domestic purposes under the administered price mechanism (APM) by November 18. Most of the kit-fitting units had to shut shop in the last one year after CNG prices sky-rocketted narrowing the gap with petrol prices.

Earlier this month, the Gujarat High Court too rejected the Centre's plea for more time to provide CNG at the same rate as Delhi and Mumbai under APM prices to Gujarat and has directed the Central government to comply to the Supreme Court's order in this regard by November 18.

The industry feels that if CNG is made available to Gujarat at APM prices, CNG could become around 35-40 per cent cheaper than petrol and around 20 per cent cheaper than diesel if the gas is allotted at the prevailing APM price of $ 4.2 per mmbtu (million metric British thermal unit). At the moment, CNG prices in Ahmedabad are over Rs 66 per kg, while petrol prices are around Rs 76 a litre and diesel prices are around Rs 58 per litre.

CNG as a fuel perhaps has seen the most dramatic upswing in prices in Gujarat in recent times; from around Rs 45 per litre in end 2011, CNG prices went up to Rs 53 per kg in May 2012, and in May 2013 the gas price was close to Rs 64 per kg. Around May this year the gap in prices between CNG and petrol had narrowed down to Rs 2-3 per unit (petrol was around Rs 67.3 per litre at that time). As an impact sales of CNG vehicles in the state had crashed.

Compared to CNG prices, petrol prices had increased from around Rs 73 per litre in end of 2011 to over Rs 77 a litre in May 2012 and had dipped to Rs 67.3 a litre in May this year. As the demand for CNG vehicles came down drastically, the retrofitment industry was severely hit. From converting 5,000-7,000 cars per month during 2010-11, kit-fitters were staring at almost nil business (retrofitting only 100-120 cars a month). Not even 20-25 cars in Ahmedabad are getting converted to CNG in a month now, claim industry insiders.

Units started closing down since January this year, and now hardly a few are operational, said an industry insider adding that there was a time when almost 60 per cent of all petrol cars bought in Gujarat, especially Ahmedabad were getting converted to CNG. Anil Singhvi, president of the Ahmedabad Automobile Association and owner of Divine Auto Gas Systems said that, "If gas prices come down, it can give a new lease of life to the kit-fitters. Many have diverted to other lines of business like car parts servicing etc to survive. The industry is eagerly awaiting the reduction in prices to remain afloat."

The kit-fitting industry has approached a state government a few times. "The state government puts the blame on the non-availability of gas at APM price for the high prices of CNG in Gujarat. We are thus waiting for the Centre's move to allott gas at APM price to Gujarat," said a city-based kit-fitter on grounds of anonymity.

On an average the cost of retrofitting a car with a CNG kit is around Rs 20,000-Rs 45,000, while in case of factory-fitted CNG cars, the price difference with their petrol versions is in the range of Rs 55,000-65,000, says Singhvi.