Govt says CBG price hike will have negligible impact on CNG, PNG consumers

The government has rejected concerns that the revised CBG pricing under the GOBARdhan Scheme will significantly increase costs for CNG and household PNG consumers, saying government support and a larger domestic gas pool will limit the impact.

New Delhi: The Ministry of Petroleum and Natural Gas on Saturday rejected concerns that the revised price of Compressed Biogas (CBG) under the GOBARdhan Scheme could place a significant additional burden on CNG and household PNG consumers, saying the assessment is based on inconsistent assumptions.

The ministry said the existing pricing mechanism links the price paid to CBG producers to 85 per cent of the retail selling price of CNG. Based on the latest revision, this translates into a CBG procurement price of around Rs 1,478 per MMBtu.

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Under the revised GOBARdhan framework, the CBG procurement price has been fixed at Rs 2,110 per MMBtu, representing an increase of around 43 per cent over the prevailing price. However, the ministry clarified that this is the procurement price paid to CBG producers and is not the price directly paid by CNG or household PNG consumers.

The government will provide affordability support of Rs 10 per kg of CBG, equivalent to approximately Rs 215 per MMBtu for CBG containing 95 per cent methane. This support will be funded by the government and will reduce the amount that needs to be recovered from gas consumers.

After accounting for the government support, the effective CBG cost to be recovered from the gas consumer base would be around Rs 1,895 per MMBtu, compared with the prevailing effective price of Rs 1,478 per MMBtu. This translates into an effective increase of approximately 28 per cent, significantly lower than the headline increase in the procurement price.

The ministry further clarified that CBG is not sold to City Gas Distribution (CGD) entities at its procurement price. Instead, it is pooled with other domestically produced natural gas, with the cost distributed across the applicable domestic gas pool.

Under the earlier framework, the cost of CBG was spread only across the limited quantity of Administered Price Mechanism (APM) gas allocated to the CNG transport and domestic PNG segments. Under the new framework, however, the net cost of CBG will be distributed across a domestic gas base that is approximately 2.5 to three times larger than the earlier base.