In order to provide relief to city gas distribution CGD companies, the Ministry of Petroleum and Natural Gas has changed the guidelines for domestic supply of compressed natural gas CNG for transport and piped natural gas PNG for domestic use. Allocation of natural gas to CGD companies will be done quarterly for better evaluation of consumption patterns instead of the basis of demand in the first three months of the epidemic, when demand and supply had shrunk.
It is a welcome step and we hope that this step, along with meeting the growing demand from the middle-class segment, will help in maintaining the attractiveness of CNG and cooking gas, an industry source says in a guarded response, refusing to be named.
Demand for gas spiked when the economic recovery began after the flu, but supply did not rise in tandem. In October 2021 domestic gas prices increased by 62 per cent and by 110 per cent on April 22, an increase from $1.9 to $6.1 per metric million British thermal unit MMBtu. GAIL, which supplies both CNG and PNG to CGD operators like Indraprastha Gas and Gujarat Gas, will supply domestic high pressure, high temperature gas at a competitive ceiling or actual price, blending with the administration mechanism APM or non-administered price mechanism NAPM gas. APM gas, subsidised by the government, comes from onshore domestic gas fields managed by ONGC and Oil India Ltd. NAPM gas is not subsidised and comes from onshore and offshore domestic and foreign gas fields. GAIL will also be able to source long-term liquefied natural gas RLNG from the global market, failing which spot RLNG may be sourced for mixing with available APM or NAPM gas.
Sources said GAIL, from May 16 has started supplying blended gas at $8.04 per MMBtu.
The policy isn't clear. There is no perceived benefit of sourcing through GAIL. Non-APM gas is on a free-market basis. Many CGDs like Gujarat Gas, Torrent and Adani Total already have some kind of internal gas sourcing pacts, and they may want to use that instead of sourcing through GAIL, says Swarnendu Bhushan, Senior Group Vice President at Motilal Oswal Financial Services.
The CGD segment is expected to grow sharply because of its low cost compared to petrol, diesel or LPG. The CGD industry believes that the government should allow operators to expand their gas sourcing from the free market instead of relying on GAIL to make sure that they can get their gas sourcing from the free market. Perhaps there is time for another amendment?