Reallocation Impact
Higher reliance on imported gas may raise city distributors' costs, says source
This story was originally published at 18:42 IST on 18 October 2024
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NEW DELHI – City gas distributors will have to increase their dependence on costlier imported gas as a result of the government reducing their allotment of cheaper domestically produced gas, a senior official with the Petroleum and Natural Gas Regulatory Board said Friday. This suggests that the retail price of compressed natural gas is likely to go up over the next few weeks, unless the companies choose to absorb the hit on their margins.
According to exchange filings, Indraprastha Gas' domestic gas allocation was reduced by 21% from the previous allocation, while for Mahanagar Gas, it was down 20%, and Adani Total Gas' allocation was reduced by 16%.
As per the guidelines issued by the Ministry of Petroleum and Natural Gas, GAIL (India) Ltd. has been mandated to procure and mix liquefied natural gas in the city gas distribution pool and supply the same at uniform base price to all city gas distribution entities.
The compressed natural gas retail price is INR 75.09 per kg in Delhi, while the domestic piped natural gas retail price is INR 48.59 per standard cubic meter.
"The 67% compressed natural gas that was being given to GAIL, which is the nodal agency to distribute among the distributing companies, was brought down to 51% as per the Oct 14 guidelines from the ministry," an official at Petroleum and Natural Gas Regulatory Board said.
However, estimating the likely hike in CNG prices is difficult as individual companies will decide on the extent to which they want to absorb the hit in margins and how much they want to pass onto the retail customers.
"This reallocation is a part of the carving out of new well/well intervention gas of upstream public sector units from the broader administered pricing mechanism pool, and would be priced much higher at 12% of Indian imported crude price," Emkay Research said in a report. Under the administered price mechanism, natural gas is priced lower than international rates due to government regulations. End
Reported by Sagar Sen and Priyasmita Dutta
Edited by Manisha Baxla
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