Gas price cut: CNG, piped cooking gas may become cheaper

With 18 per cent reduction in domestic natural gas prices starting October 1, consumers of compressed natural gas (CNG) and piped cooking gas (PNG) may see their bills coming down.

PNG prices could reduce by Rs 2.1-2.3/scm, while CNG rates may fall ball Rs 2.8-3.0/kg, said India Ratings and Research (Ind-Ra) in a note on Thursday.

This would make CNG 44-45 per cent more competitive than diesel, compared with 39 per cent currently. At the same time, PNG would be 1-2 per cent more competitive than subsidised LPG, compared with negative 8 per cent currently. This would boost Prime Minister Narendra Modi’s initiative to move towards a gas-based economy and rapid expansion of city gas network to new areas.

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Over April-September 2015, the price of alternate fuel – diesel – declined by 8% while that of CNG remained unchanged, thus lowering the fuel competitiveness of CNG.

However, India Ratings and Research expects the benefit from reduced gas price to be partly offset by the near 6 per cent rupee depreciation over April-September 2015.

Thus, the net impact of the reduced domestic gas prices in rupee terms would be nearly 11-16 per cent, it said.

According to a circular from the Petroleum Planning and Analysis Cell (PPAC), the price of natural gas from domestic fields would drop to $4.24/mBtu from October 1 on net calorific value (NCV) basis, from $5.18/mBtu previously. The revised price on a gross calorific value (GCV) basis would be $3.82/mBtu.

The new price, determined on the basis of a formula linked to select global gas price indices, would be valid for six months, that is, till March 2016.

This is the second domestic gas price reduction and is driven by the decline in average gas prices prevalent at the reference hubs over the period July 2014-June 2015.

The gas price formula, which tweaked the one proposed by the Rangarajan committee, was approved by the Narendra Modi government in October last year. While the price was fixed at $5.61/mBtu for the period November 2014 to March 2015, it was revised to $5.18/mBtu for the subsequent six months.