Lower taxes and traditionally cheaper domestic natural gas had helped keep CNG rates lower for years compared to heavily taxed gasoline and diesel in the country. But rising gas prices threaten to derail the math: in one year, CNG prices in Delhi are up 74% and in Mumbai by 62% and are expected to rise further.
Preferred CNG could slow sales of new gas-powered cars, which have set new records in recent years and hurt the pace of conversion of petrol and diesel vehicles, some city gas executives warned. “While petrol prices are under artificial pressure, CNG prices are steadily rising, which may soon help close the fuel gap,” said one executive.
The domestic price of natural gas, determined by a government-established formula linked to average tariffs at international hubs, was $1.79 per mmBtu last August. It rose to $2.9 last October and $6.1 in April. Because domestic production was not sufficient to meet the growing demand from town gas players, the government ordered GAIL to import gas to make up the shortfall. GAIL now covers the entire needs of city gas companies, but the price charged is the mixture of domestic and imported gas. The mixed rate, which varies each month based on the cost of imported gas, rose from $8.9 in July to $10.5 in August.