CNG to be de-linked from city gas distribution

Proposed price pool would make gas costlier in big cities & cheaper in small ones

 

The policy regime for use of natural gas in cities is set to undergo an overhaul. Rights for vending Compressed natural gas (CNG) used in automobiles have been de-linked from authorisations given for city gas distribution. Besides, the benefit of low priced gas for big cities may also go away with the government planning to pool gas.

"We have come out with a notification clarifying that the CNG stations would no longer come under the geographic limit of CGD," said a senior petroleum ministry. "Till now, the CNG network was considered to be part of CGD. This would open the market, as companies outside the CGD network can also set up CNG refill stations along highways, provided they have RLNG (re-gasified liquefied natural gas). For this, they may just have to pay a transportation tariff to the network licence holder."

While the ministry has consulted the legal affairs department under the law ministry, the Petroleum and Natural Gas Regulatory Board has objected to the move.

According to the petroleum ministry notification, CNG stations will be like any other retail outlet. Till now even after the exclusivity period of five years, CGD operators used to enjoy the rights of being the lone player for CNG supply in their respective areas.

According to experts, the availability of RLNG is a major issue, which may push up the prices of CNG in these retail outlets.

The government has a solution to this - pooling of imported and domestic gas prices for CNG networks as well as CGD.

According to the petroleum ministry, this will remove the difference in prices between Delhi or Mumbai, where gas is available at discounted rates, and other cities such as Ahmedabad. While the current CNG price in Mumbai is Rs 38.95 per kg, it is Rs 45.6 per kg in Delhi and Rs 66.3 per kg in Ahmedabad.

"Though pooling of CNG or even CGD would come up with a national uniformity, it would increase the process to Rs 60-65 per kg across the country. Consumers may not go for it as it is not too viable compared to diesel," said Dhaval Joshi, research analyst at Emkay Global Financial Services Ltd.

The petroleum ministry has a plan to bring 200 cities under CNG network by 2015.

On the other hand, the pooling of CGD is likely to impact companies such as Maharashtra Natural Gas Ltd, Sabarmati Gas Ltd, Central UP Gas Ltd, Indraprastha Gas, Green Gas and Bhagyanagar Gas Ltd, along with other players holding CGD licences.

Last year, the Supreme Court had upheld a Gujarat High Court order on supply of natural gas, including CNG, to vehicles and domestic users in Gujarat at the same price as Delhi or Mumbai.