Use CNG for your vehicle? Get ready to pay more
What's the story
Gas distribution companies in India such as Indraprastha Gas and Mahanagar Gas, may soon revise the prices of compressed natural gas (CNG) and domestic piped natural gas (PNG).
This comes after the allocation of cheaper Administered Price Mechanism (APM) gas to the firms was reduced, thereby resulting in higher input costs.
The APM gas is sold at lower rates to gas distribution companies across the country to ensure steady supply of PNG and CNG to customers.
Allocation cut
APM gas allocation to be reduced from April 16
The allocation of APM gas to city gas distribution (CGD) companies will be reduced from April 16.
The reduction will affect CGD companies such as Indraprastha Gas Limited (IGL) and Mahanagar Gas Limited (MGL).
The allocation for state-run IGL will be reduced from the current 51% to 40% for CNG.
Price review
Mahanagar Gas is assessing the situation
MGL's Managing Director Ashu Shinghal said the company is assessing the situation and will review prices accordingly.
"We will wait for the final announcement. We will take a call on prices later. We might have to adjust (CNG) prices accordingly," Shinghal said.
This comes after IGL and MGL raised CNG prices last week after the government increased natural gas price from old legacy fields by 4% or $0.25/mmBtu.
History
Recent history of APM gas allocation cuts
The government has been forced to cut APM gas allocation to CGD companies in recent months due to falling domestic production.
In October, the government cut APM gas allocation for CNG from 68% to 50.75%, and further to 37% in November.
This forced CGD companies to turn to costlier sourcing options such as High Pressure High Temperature (HPHT) and spot gas, impacting their margins.
However, in January, APM gas allocation for CNG was raised back up again.