The slashing of the CNG and piped natural gas (PNG) price by the Petroleum and Natural Gas Ministry will be a short-lived relief for consumers as the prices are likely to go up substantially again when the domestic gas price will almost double from April this year.
The cost of CNG, which now stands reduced by up to Rs.15 a kg following the decision to allocate cheaper domestic gas to retailers of CNG and PNG, is likely to witness a sharp increase of Rs.10.6 a kg in April, when domestic gas prices will increase from $4.2 million metric British thermal unit (mmBtu) to around $8-8.4 mmBtu.
In Delhi, the CNG/PNG prices are to be cut by about Rs.15 a kg and Rs.5 per cubic metre, respectively.
“We note that this is only a temporary relief to consumers as the domestic natural gas prices will almost be doubled from the current $4.2 from April 1, thus forcing the city gas distribution (CGD) companies to raise CNG/PNG prices to pass on the increased costs. In the absence of any offsetting subsidy, they would need to raise CNG prices by Rs.10.6 a kg and PNG prices by Rs.8 per standard cubic meter,’’ Goldman Sachs said on Tuesday in a research note.
The price of CNG in Delhi will fall to Rs.35.1 a kg from the current level and then rise to Rs.45.7 a kg in April. Goldman Sachs estimates that the price of locally produced natural gas will climb to $7.8 per mmBtu in April from $4.2 after the Rangarajan formula for pricing domestic gas is implemented.
The global rating firm said the additional requirement of 1.92 million metric standard cubic meters a day of domestically produced gas will be met by cutting supplies to non-priority sectors.
“We note all non-priority sector consumers facing a pro-rata cut in their domestic gas supplies may not be able to substitute with higher priced LNG, leading to marginally negative impact on LNG growth,” it further added.
