Consumer prices of gas tumble as utilities slash PNG and CNG prices

Days after new gas pricing norms adopted by Centre, city gas distribution companies across the country announce price cuts for PNG & CNG

Just a day after the Centre officially notified lower domestic natural gas prices, gas utilities across the country announced the reduction of both piped natural gas (PNG), used for cooking, and compressed natural gas (CNG), used as an auto fuel.

India's largest gas utility, state run-GAIL announced a reduction in its domestic PNG prices by Rs seven per Standard Cubic Meter (SCM) in Bengaluru and Dakshin Kannada and by Rs six per SCM in all its other geographical areas (GAs) from Sunday.

CNG prices have also been reduced by Rs seven per kg in Karnataka and Sonipat and Rs six per kg in all other GAs. GAIL Gas Limited has a presence in 16 GAs.

The Centre had, on Thursday, amended the domestic pricing model of natural gas in line with the recommendations of the Kirit Parikh committee on gas pricing.

Key among this has been the decision to impose a floor price of $4 per MMBtu (Metric Million British Thermal Unit) for the next two years, to cover the cost of gas production by state-run firms ONGC Ltd and OIL Ltd. The ceiling price will be set at $6.5 per MMBtu.

Domestic natural gas prices will now be announced every month and be pegged at 10 per cent of the international price of the Indian crude basket.

The move is expected to accelerate the expansion of CNG and PNG as preferred fuels, and will also contribute to reducing the carbon footprint of the country’s energy sector.

On Friday, Adani Total Gas Limited (TGL) reduced CNG and PNG prices to about Rs 8.13 per kg and Rs 5.06 per SCM, respectively. It also reduced PNG prices by Rs 3 per SCM for its industrial and commercial consumers in Ahmedabad, Vadodara, Faridabad, Khurja and Palwal.

ATGL is one of the largest private city gas distribution (CGD) companies. It currently supples PNG to 700,000 domestic customers and CNG to over 300,000 users across over 460 CNG stations in India.

State-run Gujarat Gas Ltd too pruned its prices on April 8 for markets in Gujarat, Maharashtra, Haryana, Punjab, Rajasthan and Madhya Pradesh.

Passing the benefit

The rapid price reductions may have come as a result of the Centre pursuing the companies to pass on the benefit within days of the official notification, sources said.

Torrent Gas, which supplies gas in 34 districts including Chennai and Jaipur, announced an immediate reduction of Rs 4-5 per SCM for PNG and Rs 6-8.25 per Kg of retailed CNG in its areas of operation on Saturday.

“The caps on domestic gas pricing that are now available to the CGD industry will allow the CGD sector to stabilise after a very difficult 12 months, where suppliers and consumers found volatile gas prices challenging to deal with," Hardip Rai, CEO of THINK Gas said.

The company is set to reduce its prices from next week for its markets in Madhya Pradesh, Uttar Pradesh, Punjab, Bihar and elsewhere. The government can further help the sector by accepting a long pending demand of including natural gas in the GST regime, which will be a big step to build a natural gas based economy, Rai added.

The new gas pricing guidelines aim to establish a stable pricing regime for domestic gas consumers while providing sufficient protection to producers from adverse market fluctuations, along with incentives to user industries and the city gas distribution sector.

STEPPING ON THE GAS

• 5,000 CNG stations as of March 
• 3,000 more stations to come up  by 2025 
• 10 million PNG connections as of January 
• 22,000 km pipeline operational, 13,000 km in the works 
• 15% share of natural gas in India’s energy mix targeted by 2030

• Source: Ministry of Petroleum and Natural Gas