NewDelhi: More often, people who decide on a CNG vehicle rather than petrol or diesel have the main goal of cutting fuel expenses. But with the recent prices hike on CNG that saving is now more of a vertical dream in the hopes of achieving.” The recent government policy might snowball the problem further, because the CNG prices are set to go up by Rs 5 to Rs 5.50 per kilogram.
Recently the government has cut the supply quota of cheaper domestic gas to the urban gas distribution companies that make CNG for vehicles. Earlier, these companies could procure a fixed quantity of domestically produced gas at subsidized prices. Nevertheless, following this development of the government reducing this quota by approximately 20%, the companies will now have to depend heavily on the expensive imported CNG. One can assume that the extra expenses are to be recovered from the consumers by increasing the price of CNG.
There is some temporary reprieve for the consumers, however. Hitherto it is believed that certain bearing in mind the prevailing circumstances, CNG distribution companies may refrain from revising their prices in the interim of state elections in Maharashtra and Jharkhand. This delay could help consumers not to be ripped off by festive offers especially during Diwali festive season.
Both companies that distribute CNG in Delhi-NCR and Mumbai issued a stock exchange notification showing that they have been receiving less supply of cheaper domestic gas. The domestic gas, which used to be supplied at a rate much below the cost of imported gas, will now be significantly cut, and therefore exert pressure on the companies to use much more costly alternative.
IGL says that it was previously getting CNG at a regulated price of $ 6.5 per MMBtu fixed by the government. This was a major supply of domestic gas which was vital in satisfying consumers. However, the nodal agency GAIL (India) Limited later communicated to IGL that from October 16, the available imported supply have been cut by 21 per cent meant for the cheaper price category.
Similarly, Mahanagar Gas Limited confirmed a cut down of its domestic gas supply by twenty percent. Therefore, the company has had to look for an alternative means, firstly by importing costly Gas to makeup for the shortages as this will see CNG prices go high.
Girish Kadam, Senior Vice President at rating agency ICRA, pointed out that a cut in cheap gas by 20% would make gas distribution companies to seek to import LNG that is much more pricey. If they are to sustain their current profit margins if I choose the CNG prices to go up in the coming weeks by ₹5 to ₹5.50 per kilogram.