Centre diverts gas from industry for home customers

Tags: News

Transport firms to save 30%, piped gas to be 20% cheaper

In yet another election bonanza, prices of compressed natural gas (CNG) for vehicles are expected to fall by about Rs 15 per kg and piped natural gas (PNG) by about Rs 5 per standard cubic metre as the government on Monday decided to fully meet the requirement of states for cheaper domestic gas.

The price cut will generate additional demand of 1.92 mmscmd of domestically produced natural gas for cooking and transportation. Diverting allocations from what oil minister Veerappa Moily called non-priority sectors would provide this additional quantity. These include petrochemicals complexes, refineries, steel mills and entities using domestic gas for industrial or commercial purposes.

The move comes at a time when both industrial and core sector growth have been languishing dangerously below the base line. However, the government says the effect on existing industrial consumers will be minimal as only a modest quantity will be diverted that, on a pro-rata basis, would translate into insignificant cuts on individual units.

There could be slight variations in the reduced prices of CNG and PNG depending on the local taxes in the states. Citizens in national capital, Delhi, will save Rs 15 per kg on CNG price and Rs 5 per SCM for PNG. Residents of other cities too will gain similar amounts.

Moily said while price of CNG would come down by 30 per cent, PNG prices would come down by 20 per cent, as a result of Monday’s decision.

At present, India sources 80 per cent of its CNG and PNG requirements from domestic gas fields, while 20 per cent is imported as expensive liquefied natural gas (LNG).

Last week, the government raised the cap on subsidised cooking gas cylinders per household to 12 from nine, resulting in the subsidy on cooking gas going up by Rs 5,000 crore to Rs 85,000 crore annually.

Announcing the latest decision, oil minister Veerappa Moily told reporters that the move would boost city gas distribution projects across India. At present, CNG and piped gas is supplied to 55 towns and cities. This is expected to go up to 300 towns and cities in a phased manner. Several states are reluctant to execute domestic gas supply projects, considering the high price of imported natural gas. To meet the domestic demand for CNG and PNG, Moily said the government would reduce commitments to nonpriority sectors on a pro-rata basis, without hurting small users.

He said the decision to raise the share of indigenously produced gas in the CNG (transport) and PNG (domestic) segments was not only guided by the health benefits on account of significantly lower levels of air pollution, but also because of additional economic benefits that would accrue on account of reduced subsidy burden for the government.

Raising the share of domestic gas to 100 per cent would also facilitate rapid growth of CNG usage all over the country. The decision to lower gas prices would create an additional demand of 1.92 mmscmd. At 80 per cent domestic supply, the requirement is 6 mmscmd at present.

Oil secretary Vivek Rae said it would take two to three days for the decision to come into force

Sectors where gas supplies would be curtailed include petrochemicals, refineries, steel, and entities using domestic gas for industrial or commercial purposes, Moily said, any future hike in demand for domestic gas from the CNG (transport) and PNG (domestic) sectors would be met by imposing further cuts on the non-priority sector and from the extra output of domestic gas. Moily said the state governments are also expected to lower or abolish VAT as a step to pass on additional benefits to consumers across the country.

There will be no cut in rates in Mumbai, which gets all its gas requirements from domestic fields. Delhi gets 28 per cent of its gas requirement through imported LNG, and cities in Gujarat such as Ahmedabad too depend heavily on imported LNG. The reduction in these cities will be more pronounced.

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