CNG price may go up Rs 4-6 per kg unless Centre cuts excise duty: Report

The authorities has slashed by up to 20 per cent the supplies of cheaper domestically produced earthy state to metropolis retailers -- a determination that whitethorn effect successful Rs 4-6 per kg hike successful the terms of CNG sold to automobiles, unless excise work connected the substance is cut, sources said. Natural state pumped from beneath the crushed and from nether the seabed from sites ranging from the Arabian Sea to Bay of Bengal wrong India is the earthy worldly that is turned into CNG for merchantability to automobiles and piped cooking state to households.

Production from bequest fields, whose terms is regulated by the authorities and which are utilized to provender metropolis state retailers, has been falling by up to 5 per cent annually owed to earthy diminution that has acceptable in. This has led to proviso cuts to metropolis state retailers, 4 sources successful cognize of the substance said.

While the input state for piped cooking state that households get is protected, the authorities has chopped proviso of earthy worldly for CNG. Gas from bequest fields utilized to conscionable 90 per cent of the request for CNG successful May 2023 and has progressively fallen. The proviso was chopped to conscionable 50.75 per cent of the CNG request opening October 16 from 67.74 per cent past month, they said.

City state retailers are forced to bargain imported and costlier liquefied earthy state (LNG) to marque up for the shortfall, which volition pb to a hike successful CNG prices that varies from Rs 4-6/kg.

The state from bequest fields is priced astatine USD 6.50 per cardinal British thermal portion (mmBtu) arsenic against imported LNG that costs USD 11-12 per mmBtu.

For now, the retailers person not raised CNG rates arsenic they are engaged with the Ministry of Petroleum and Natural Gas to find a solution, sources said.

One of the options is for the authorities to chopped excise work connected CNG. Currently, the cardinal authorities levies a 14 per cent excise work connected CNG, which translates into Rs 14-15 per kg. If this is cut, the retailers volition not person to walk connected the accrued outgo to consumers, they said.

CNG terms hike is besides a governmental contented since Maharashtra goes to the polls adjacent period and elections are besides owed successful Delhi soon. Delhi and Mumbai are among the biggest CNG markets successful the country.

Sources said the state supplies to metropolis state retailers had to beryllium chopped aft the authorities decided to reconstruct substance to ONGC-promoted OPaL petrochemical works successful Dahej, Gujarat.

The works was primitively allocated 4.12 cardinal modular cubic meters per time of domestically produced earthy gas. However, the allocation for assorted reasons was chopped to 1.95 mmscmd and during Covid was halved.

Lack of promised home state was the main crushed for OPaL moving into losses, sources said, adding that the authorities has present approved a bundle to revive the unit. This bundle includes promoter Oil and Natural Gas Corporation (ONGC) infusing further Rs 10,501 crore arsenic equity and the portion being made disposable domestically produced earthy gas.

The Union Cabinet approved the allocation of 3.44 mmscmd of home state -- mostly coming from caller wells of ONGC. This led to lesser state being disposable for metropolis state retailers.

Girish Kadam, Senior Vice President & Group Head - Corporate Ratings, Icra Ltd, said, "The APM state allocation has been reduced for the CGD assemblage by 20 per cent of the existent home state depletion by the sector. The simplification successful APM allocation volition person to beryllium replaced by much costly HPHT state oregon (imported) LNG, which volition propulsion the wide state costs for the sector." To support publication margins astatine existing levels, CNG prices volition person to beryllium accrued astir Rs 5-5.5 per kg.

Indraprastha Gas Ltd, which retails CNG successful the nationalist capital, and Mumbai-based Mahanagar Gas Ltd successful regulatory filings stated that supplies of domestically produced gas, which was disposable astatine a capped complaint fractional of the imported price, has been cut.

"The institution gets home state allocation for gathering the request of CNG income volumes astatine the pricing fixed by the authorities (presently astatine USD 6.5 per cardinal British thermal unit). Based connected connection received by the institution from GAIL (India) Ltd (the nodal bureau for home state allocation), this is to pass that determination has been a large simplification successful home state allocation to the institution effectual from October 16, 2024," IGL said successful a filing.

The revised home state allocation to IGL is astir 21 per cent little than erstwhile allocation, "which volition person an adverse interaction connected profitability of the company", it said, adding that it is successful discussions with cardinal stakeholders to minimise the impact.

Separately, MGL said arsenic per Policy Guideline dated August 10, 2022, issued by the Ministry of Petroleum and Natural Gas, domestically produced Administrative Price Mechanisms (APM) earthy state is to beryllium allocated to metropolis state organisation (CGD) companies for precedence segments, specifically home piped earthy state and CNG (transport).

The argumentation states that the proviso of home state to CGD entities volition beryllium made lone up to the quantity disposable and allocated to GAIL (India) constricted for these segments.

"...The institution is exploring options of sourcing state done domestically produced precocious unit precocious somesthesia (HPHT) gas, caller well/well involution state (NWG) from ONGC and benchmark-linked semipermanent state contracts, truthful arsenic to proceed to supply state to its customers with terms stability," MGL added.

Adani Total Gas Ltd -- the different important metropolis state retailer -- successful its filing said the APM priced home state allocation to the institution has been reduced by astir 16 per cent, effectual October 16, 2024, compared to the earlier allocation.

"While the institution shall instrumentality each steps needed to optimise the profitability, it whitethorn nevertheless beryllium noted that pending the resolution, determination would beryllium an adverse interaction connected the profitability of the company," it said.