Fueling Concerns: Domestic Gas Allocation Cuts Impact CNG Prices

The government has reduced domestically produced gas supplies to city gas distributors by 21%, increasing their reliance on expensive imported alternatives. This change, effective October 16, 2024, threatens to raise CNG prices unless deferred due to elections in Maharashtra. Companies are seeking alternative sources to manage costs.

The government has cut the supply of domestically produced gas to city gas entities by up to 21%, which retail Compressed Natural Gas (CNG) to automobiles. This decision elevates their dependency on costly imported fuel.

The shortfall, which could lead to a price hike in CNG, is unlikely to be implemented immediately due to upcoming assembly elections in Maharashtra. Key industries like Indraprastha Gas Ltd and Mahanagar Gas Ltd have highlighted the impact of the reduced domestic gas allocation at capped rates, now priced at $6.5 per million BTU.

The sector's profitability is under threat as discussions with stakeholders unfold. Meanwhile, firms are exploring alternative gas sources, such as domestically produced HPHT gas and long-term contracts, to stabilize prices. Industry experts warn that any price increases may slow the growth of CNG vehicle registrations, a major driver of sector sales.

(With inputs from agencies.)