In various parts of the country, compressed natural gas (CNG) prices are dropping, and this comes after the petroleum and natural gas minister, Hardeep Puri, mentioned that the benefits of government measures in the gas sector haven’t fully reached customers.
City gas distributors like Mahanagar Gas (MGL), Indraprastha Gas (IGL), and Adani Gas have reduced CNG prices by Rs 2.5 per kg. The decline in international gas prices in recent months has allowed companies to respond quickly to the minister’s comments about bringing gas to consumers at affordable rates. Puri highlighted the strong profits of city gas distributors.
City gas companies benefit from cheaper domestic gas and favorable tax treatment from the government. They also use their monopoly in licensed areas to sell CNG at prices ensuring strong profit margins. Despite attempts to end monopolies, many have continued enjoying extended control, leading to varied prices in different regions.
A senior city gas executive noted that some companies charge more from CNG consumers than necessary. For instance, in Uttar Pradesh, CNG prices differ by Rs 10-15 across districts with the same taxes.
Regulated domestic gas, accounting for 75% of CNG sales, is currently priced at $6.5 per mmbtu. City gas companies source the remaining gas at market rates. With the decline in average spot LNG prices from $15.1 to $8.8 per mmbtu, companies can now lower CNG prices.
Puri emphasized increased compliance by city gas distributors. The regulator’s announcement that MGL lost its monopoly over Mumbai affected investor confidence, leading to a drop in share prices. Traditionally, city gas companies make higher profits from the CNG business compared to supplying households.
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