LOK SABHA ELECTIONS 2019: INDIA DECIDES

CNG, PNG prices set to go up 3-4 per cent

DECCAN CHRONICLE. | RITWIK MUKHERJEE
Published Mar 15, 2019, 12:36 am IST
Updated Mar 15, 2019, 12:36 am IST
Six-monthly price revision is due for April-September.
However, another rating and research agency, CARE Ratings, expect a higher price increase.
 However, another rating and research agency, CARE Ratings, expect a higher price increase.

Kolkata: Election time is not always for freebies and sops! Be prepared to shell out 3-4 per cent more for your CNG and household PNG soon. Domestic gas price is due for a revision. The price is revised every six months and is linked to prices on four international hubs–Henry Hub in the US, Alberta in Canada, National Balancing Point in Europe, and Russian gas price.

The next revision, for April-September, is expected to push up domestic gas price by 7-9 per cent to $3.62-3.67 per mmBtu compared with $3.36 per million British thermal unit applicable till March 2019.

 

If that happens, the price increase will be fully passed on to the end consumers, making compressed natural gas and piped natural gas dearer. CNG prices are expected to increase by `1.5-2 per kg in Mumbai and `1.7-2.2 per kg in Gujarat – amounting to a 3-4 per cent increase over current prices, according to a CRISIL Research report. In the household PNG segment, an increase of 2-2.5 per cent is expected, the report said.

However, another rating and research agency, CARE Ratings, expect a higher price increase. “We believe the prices of domestic natural gas for the April 2019-September 2019 period will increase from the current $3.36/mmBtu to approximately $3.97/mmBtu, resulting in an 18 per cent increase,” CARE Ratings said. This will likely affect consumers, by leading to an increase the prices of CNG used as auto fuel and PNG used in households as cooking gas, CARE said.

However, despite this price increase, CNG would be nearly 35 per cent cheaper than petrol. Though household PNG could become expensive by `1.5-2 per mmBtu compared with subsidised LPG, it would remain competitive with non-subsidised LPG. Hence, demand volumes in the two segments are expected to sustain despite the price hike

The price rise may also lead to an increase in the manufacturing cost of urea and petrochemicals, where natural gas is used as a feedstock; and may also hit producers of power sector and sponge iron industry, where it is used for the generation of energy.

That’s not all. An increase in prices of domestic natural gas will also lead to a rise in wholesale price index (WPI) inflation, which gives 0.46 per cent weightage to the natural gas of the total 2.46 per cent weightage given to crude petroleum and natural gas.

While the reports fail to bring any cheers to consumers, the trend analysis by CRISIL Research certainly augurs well for city gas distribution companies.

The report said that a 22-25 per cent decline in the prices of liquefied natural gas (LNG) since January this year and an expected 5-7 per cent increase in consumption of PNG and CNG should drive up the operating profit margins of city gas distribution (CGD) companies by 250-300 basis points (bps) in the first half of fiscal 2020. That would reverse the trend of contraction seen in the first three quarters of fiscal 2019.

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