Govt diverts gas from industries to city gas to moderate CNG, piped cooking gas rates

City gas companies will now get only domestic gas, and not imported liquefied natural gas (LNG) that they had been receiving as part of the government's gas pooling policy for the past three months, according to people familiar with the matter.
In May, the government had directed state-run GAIL to import liquefied natural gas (LNG) to meet the supply shortfall city gas distributors were facing due to limited availability of local gas amid sharply rising demand. GAIL was to charge a uniform blended price for gas from all city gas distributors. The price of local gas today is $6.1 per mmBtu but the blended rate city gas companies currently pay GAIL is $10.5 per mmBtu.

"Supply of domestic gas to the city gas distribution (CGD) entities shall be made only up to the quantity available and allocated to GAIL for CNG(transport)/PNG (domestic) segment instead of 102.5% of consumption level in previous quarter," the oil ministry has said in an order that would be effective from August 16.

This means city gas companies will receive domestic gas as much as is available. Currently, the domestic gas made available for CNG and PNG is about 85% of total consumption and the balance is met through imports. The government may raise the availability of domestic gas to 94% of the requirement for the July-September quarter, which may bring down the overall procurement cost for city gas companies, people familiar with the matter said. To meet the shortfall, the companies will have to procure from the open market, they added.