CNG to be costlier on rupee slide, gas price revision in October
The rupee’s slide continues to play havoc with fuel prices. After pushing petrol and diesel prices to historic highs across the country, a substantially weakened rupee is expected to jack up CNG (compressed natural gas) and PNG (piped natural gas) prices from October 1 when the routine six-monthly revision in domestic natural gas prices happens. Indications are that the base price of gas produced from domestic fields is expected to rise 14% to $3.5 per unit, the highest since $3.82 per unit for the six months ended March 2016. Natural gas prices are set every six months based on average rates in gas-surplus markets such as the US, Canada, UK and Russia. A weak rupee will amplify the impact on CNG and PNG prices in all cities with such services. The rupee’s slide has been making natural gas costlier for CNG and PNG service providers, forcing them to raise prices. In Delhi and its suburbs, Indraprastha Gas Ltd (IGL), the sole supplier of such services in the reigon, has raised CNG prices thrice since April, totalling Rs 2.89 per kg. Half of this increase, or Rs 1.43 per kg, has been brought about by the fluctuations in rupee-dollar exchange rates. According to company executives, the base price of natural gas procured by it from all sources is in dollars and the rupee’s depreciation makes input price costly. IGL had last raised CNG and PNG prices on September 1 by 63 paise per kg and Rs 1.11 per unit (SCM or standard cubic meter), respectively, in Delhi to offset the impact of dollar appreciation. IGL had on April 1 raised CNG price by 90 paise per kg after the government raised price gas produced from domestic fields by 6% but had left PNG price untouched. CNG price was again raised by Rs 1.36 per kg on May 28-29 to offset the impact of falling rupee. On all those occasions, the increases in neighbourhood cities of Noida, Greater Noida and Ghaziabad were marginally more due to higher state tax. The IGL executives claim the revisions have marginal impact on the per-km running cost of vehicles. In terms of running cost, CNG will still be 60% cheaper than petrol and 40% than diesel due to hefty increase in their pump prices. India imports half of its gas which costs more than double the domestic rate. Indian gas prices are calculated by taking weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter. So, the rate for October 2018 to March 2019 is based on average price at the international hubs during April 2017 to March 2018.