Sunday, Dec 21, 2014

And the fuel sop goes on: CNG price is down 30%

However, the relief will last only until the end of March as the government last month notified new pricing guidelines for all domestically produced gas from April 1. However, the relief will last only until the end of March as the government last month notified new pricing guidelines for all domestically produced gas from April 1.
Written by Amitav Ranjan | New Delhi | Posted: February 4, 2014 5:15 am

In yet another decision seen as linked to the Lok Sabha elections, the government Monday changed the supply priority of domestically-produced, cheaper natural gas to help slash the price of the fuel used for cooking and to run automobiles.

The move will bring down the price of piped natural gas by 20 per cent or Rs 5 per cubic metre and that of compressed natural gas by 30 per cent or Rs 15 per kg in Delhi.

However, the relief will last only until the end of March as the government last month notified new pricing guidelines for all domestically produced gas from April 1. Under this formula, gas price will double to $8.4 per million British thermal units.

Announcing the decision, Petroleum Minister Veerappa Moily said the reduction in prices was possible as the government had decided to meet the entire need of CNG and PNG from domestic gas priced through an administered pricing mechanism (APM).

All states, barring Maharashtra and Haryana, that have a city gas distribution network will also witness a drop in retail prices as they would shift from a varying mix of higher-priced LNG and APM gas to entirely APM gas now priced at $4.2 per million British thermal units.

While consumers in Mumbai and Pune get enough APM gas to meet their entire requirement, other cities buy about four-times expensive imported LNG to meet their demand.

Based on a formula recommended by the Rangarajan committee, all domestic producers – including public sector ONGC and Oil India whose gas is currently sold at APM price – will get a 12-month average of benchmark global rates and LNG import price.

Moily claimed that the prioritisation was influenced by “health benefits” and not by the Aam Aadmi party’s demand to increase Delhi’s quota of APM gas to 100 percent from 70 percent. “We decided to cut entitlement of some non-core industrial users and meet the need of lakhs of consumers because it is the most clean and green fuel,” he said.

“It has nothing to do with the elections. Our target is always to benefit the common man. If it helps the common man, we are happy. If some political party also stands to benefit, it is incidental,” Moily said.

The government will cut APM gas supply to non-core sectors such as petrochemical plants, steel units and refineries to meet the additional demand of 1.92 million standard cubic metres of gas per day for city gas distribution.

“Any future increase in demand for domestic gas for CNG and PNG sectors would be met by imposing further cuts on the non-priority sectors and from the additional production of domestic gas, based on the allocation policy of the government,” said a petroleum ministry release.

Petroleum Secretary Vivek Rae said the move would also end ongoing court cases in Gujarat and Maharashtra about discrimination in gas supply.

In November, the ministry fixed a uniform share of domestic natural gas for all cities at 80 percent after the Gujarat High Court pulled up the Centre for not supplying any domestic gas to cities in Gujarat. The high court’s decision was upheld by the Supreme Court, forcing the government to have a uniform policy.

But before it could be implemented, taxis and auto-rickshaws in Mumbai and Pune – which got 100 per cent APM gas – protested the cut to 80 percent. To accommodate them, the government decided to raise the quota for all cities and bring about equity, ministry officials said.

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