Domestic Gas Cuts Ignite CNG Price Hike Controversy

The government's decision to reduce domestic natural gas supply to city retailers by up to 20% is likely to increase CNG prices for automobiles by Rs 4-6 per kg. This measure comes as production from legacy fields declines, pushing retailers to resort to costlier imported liquefied natural gas (LNG). City gas retailers are engaging with the Ministry of Petroleum and Natural Gas for potential solutions, including possible excise duty cuts, as they aim to mitigate the impact on consumers.

The government's recent decision to cut domestic natural gas supply to city gas retailers by 20% is poised to impact CNG prices significantly. Reports suggest a rise of Rs 4-6 per kg in costs for automobiles as retailers struggle to adjust to the shortfall by purchasing more expensive imported liquefied natural gas (LNG).

This supply reduction follows a decline in production from legacy fields, which have traditionally supplied up to 90% of CNG demand. As of October 16, supply has notably decreased to just over 50% compared to previous months. The situation has prompted city gas retailers to engage in discussions with the Ministry of Petroleum and Natural Gas to explore potential solutions, including an excise duty cut on CNG.

With major markets like Delhi and Mumbai relying heavily on CNG, the issue has also taken a political dimension as upcoming elections loom in Maharashtra and Delhi. The move coincides with the government's effort to restore gas allocation to the ONGC-promoted OPaL petrochemical plant, further straining supplies for city retailers.