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 lakh crore 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.
Commenting on the issue, the ministry said it “is waiting for the updated data for the period October 2021 to March 2022 from CGD entities for the allocations in April 2022. This is yet to be received from the entities”.
“Additional allocation for CGD would require cut in supplies to competing demand centres viz fertiliser, power, LPG plants,” an oil ministry spokesperson said.
CGD operators have been requesting the ministry to maintain the gas supply to the sector 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 (administered price mechanism) gas for CNG and PNG have been revised from $2.90 per million British thermal unit to $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 LNG at prices that were at least six times the domestic rate.
The result is CNG prices have risen 60 per cent or over Rs 28 per kg in one year and PNG by over a third. PTI 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.
