New Delhi
The Oil Ministry has stopped making fresh allocation of natural gas from domestic fields to the city gas sector, threatening the viability of Rs 2 trillion investment planned in the sector besides leading to a hike in CNG and piped cooking gas prices to record levels, sources said.
Despite a decision of the Union Cabinet to give 100 per cent gas supply under ‘no cut’ priority to the city gas distribution (CGD) sector, current supplies have been maintained at March 2021 demand level.
Besides, the process of allocating gas on a six-monthly average drawl also is punishing the CGD entities driving growth.
under no cut category with the last two months’ average to ensure the demand for both CNG and piped natural gas (PNG) for homes is fully met but the ministry has not made any fresh allocation for over a year now, three sources aware of the matter said.
Besides the shortfall in the allocation, the prices of APM gas for CNG and PNG have been revised from USD 2.90 per million British thermal unit to USD 6.10, an increase of 110 per cent.
While the demand has grown at a rapid pace in existing cities with CNG networks and supplies starting in newer areas, lack of allocation from domestic fields meant that operators bought imported liquefied natural gas (LNG) at prices that were at least six times the domestic rate. Result – CNG prices have risen by 60 per cent or by over Rs 28 per kg in one year and PNG by over a third.
Sources said this has put a question mark on the economic viability of the entire CGD sector, putting at risk the planned Rs 2 lakh crore investment in expansion into newer cities as high prices bring the CNG at almost par with diesel and petrol, eroding the incentive for users to convert vehicles to the cleaner fuel.
The Oil Ministry had on August 20, 2014, issued revised guidelines, promising allocation of gas from domestic fields to city gas operators every six months based on a demand assessment of CNG and PNG in a particular geographical area (GA). This was used as a selling point to bid out over 200 GAs since 2018, attracting over Rs 2 lakh crore of investment commitment in the rollout of city gas distribution infrastructure.
