Prices of CNG, or compressed natural gas, in the national capital had been hiked by Rs 4.50 last month to Rs 50.10 a kg after retailers such as Indraprastha Gas Ltd (IGL) were forced to buy a fifth of their gas (LNG) requirements from overseas.
The price increase led to protests from the newly elected Aam Aadmi Party-led government in Delhi as well as autorickshaw operators, who had called a maha-panchayat this week to decide on a possible strike.
Oil Minister M Veerappa Moily said the government has now decided to meet all the requirements of CNG and piped cooking gas retailers in the country from domestic fields, sparing them the need to buy costlier LNG (liquefied natural gas).
With all the input fuel available at USD 4.2 per million British thermal units as against imported LNG, which is three times costlier, "the price of CNG in Delhi would be reduced by about Rs 15 per kg (about 30 per cent). There will also be a reduction of about Rs 5 per cubic metre (about 20 per cent) in the price of PNG," Moily said.
Supplies to CNG retailers have been increased by cutting about 1.9 million standard cubic meters per day or one-third of the domestic gas allocated to non-core users in the steel, oil refineries and petrochemical sectors.
CNG retailers, or city gas distributors, will get 8.32 mmscmd of gas from fields given to ONGC and Oil India, as compared to 6.4 mmscmd presently.
Oil Secretary Vivek Rae said while the orders to increase domestic gas supply to CNG entities were issued today, the decision will take two-three days to take effect as gas firms tie-up and sign new supply agreements.
There will be no cut in rates in Mumbai, which gets all its gas requirements from domestic fields. However, in Delhi, which presently uses as much as 28 per cent of the costlier, imported LNG, and cities in Gujarat such as Ahmedabad, which too were heavily reliant on imported fuel, will see a price cut.
However, CNG and piped gas rates may rise in April if the government were to pass on the near-doubling of natural gas prices to consumers. The hike could be as high as Rs 12 a kg for CNG in Delhi.
"All city gas entities in the country will get natural gas at uniform price. Rates of CNG and piped gas will however vary from city to city depending on transportation charges and local sales tax or VAT," Moily said.
There is no value added tax (VAT) on CNG in the national capital, he said, asking other state governments to also waive local levies on the environment friendly fuel.
Asked if the price cut was to do with improving Congress' prospects in the coming general elections, Moily said, "This debate (to supply 100 per cent domestic gas for city distribution) has been on for the past four-five years. 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," he said.
Moily said allocation of gas from domestic fields to city gas entities has been increased to 100 per cent from the current limit of 80 per cent.
"We want to give common man a relief and in a way this is an anti-inflationary measure," the minister said.
The decision will also benefit consumers in cities such as Meerut, Kanpur, Indore, Surat and Hyderabad.
B C Tripathi, Chairman and Managing Director of state-run gas utility GAIL, said the decision would be implemented immediately. It may take a couple of days to pass on the benefit because of operational issues.
The Gujarat High Court and then the Supreme Court last year ordered the government to distribute natural gas to city gas projects equitably.
However, this wasn't enough to meet demand and entities in Delhi and Gujarat had to import 20 to 30 per cent of their needs.
Non-core sectors, which have had their allocations cut, have to meet their shortfall through imports.
CNG in Delhi currently costs Rs 50.10 per kg and piped cooking gas Rs 29.50 per standard cubic metre.