Fri Oct 18 05:01:34 UTC 2024: ## CNG Prices Poised to Surge: Government’s Gas Allocation Cut Threatens Fuel Costs
**New Delhi, India:** A significant price hike for Compressed Natural Gas (CNG) is looming over India, with industry experts predicting an increase of Rs 5 per kg or more. This potential price jump stems from the government’s recent decision to slash the allocation of domestic gas for city gas distributors (CGDs) by 17-20%.
The move has been confirmed by Indian gas companies and is impacting the CNG segment the most. This cut represents approximately 4 million metric standard cubic meters of gas per day, according to Citi Research.
The cut in the allocation of Administered Price Mechanism (APM) gas, which is sourced from specific domestic fields and priced lower than international rates, is hitting CGDs hard. These companies rely on APM gas to keep operational costs down and offer affordable CNG prices to consumers.
“This move raises concerns about the government’s commitment to the sector, especially as allocations have been declining for several quarters,” said an industry analyst.
With reduced access to APM gas, CGDs will be forced to source gas from international markets at significantly higher rates. This increase in costs is likely to be passed on to consumers, pushing CNG prices up by as much as 7% for companies like Indraprastha Gas and Mahanagar Gas.
“A Rs 5 per kg increase in CNG prices would mean an average price of Rs 80 per kg in Mumbai, up from Rs 75 currently,” explained a spokesperson from CarDekho.
This move is expected to have a negative impact on the CNG segment, potentially hindering volume growth. Companies like Indraprastha Gas and Mahanagar Gas, which heavily rely on CNG, are particularly vulnerable to this price hike.
While Citi anticipates gas companies to oppose the decision, the lack of any government intervention or relief measures will further increase costs for CNG companies, making a price hike inevitable.
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