The oil ministry has ordered the diversion of natural gas from industries to the city gas distribution sector to cool CNG and piped cooking gas prices that have shot up by 70 per cent on the use of imported fuel.
Less than three months after it ordered the use of costlier imported LNG to meet incremental demand for automobile fuel CNG and household kitchen gas PNG, the ministry on August 10 reverted to an old policy of primarily supplying domestically produced gas for city gas operations.
The allocation for city gas operators like Indraprastha Gas Ltd in Delhi and Mahanagar Gas Ltd of Mumbai has been increased from 17.5 million standard cubic meters per day to 20.78 mmscmd, officials said.
The increased allocation will meet 94 per cent of the demand for CNG to automobiles and piped cooking gas to household kitchens in the country. Previously, about 83-84 per cent of the demand was met and the remaining was met through the import of LNG by GAIL, they said.
Use of domestic gas instead of imported fuel will bring down the cost of raw material and ease CNG and PNG rates, officials said.
The move follows a massive jump in CNG and PNG prices in the country in the last one year as operators used costlier imported LNG. CNG prices in Delhi went up by a massive 74 per cent (from Rs 43.40 per kg in July 2021 to Rs 75.61 per kg now) while PNG prices rose by 70 per cent (from Rs 29.66 per standard cubic meter to Rs 50.59 per scm).
Natural gas is the raw material that is used for CNG and PNG. This gas comes from fields such as Mumbai High and Bassein in the Arabian Sea. As the domestic production of gas is insufficient to meet all the requirements, the fuel is imported in the form of Liquefied Natural Gas (LNG) in ships.
To promote the use of cleaner fuel, the government in 2014 included the City Gas Distribution (CGD) sector on the top priority list for receiving gas from older or regulated fields of state-owned ONGC and Oil India.
The CGD was put on a ‘no cut’ priority sector and allocation was made twice a year -- in April and October -- based on consumption data of the previous six months.
The ministry made such full allocation in March 2021 and thereafter, in May 2022, issued an amendment to the 2014 supply guideline to state that incremental demand over and above the last year’s level would be met through imported LNG.