Pipeline cooking on gas, CNG consumers ATTENTION! Prices could rise to Rs 12

Amid the festivities, consumers of pipeline cooking gas may soon receive news that may dampen their revelry. Pipeline cooking gas prices could increase by Rs 6 per unit, while Compressed Natural Gas (CNG) prices could be increased by up to Rs 8-12 per kg. The surge may come after the government raises input natural gas prices to record highs. The government last week raised the prices of gas from old fields, called APM gas, from $6.1 to $8.57 per million British thermal units. Tariffs for gas produced from difficult fields were increased to $12.46 from $9.92 per mmBtu.

According to PTI, APM gas makes up two-thirds of all gas produced in the country and is converted into CNG for cars and piped into domestic kitchens for cooking.

Kotak Institutional Equities said APM gas prices have risen nearly 5x in just one year — from $1.79 per mmBtu through September 2021 to $8.57. For every gas price increase in USD per mmBtu, City Gas Distribution (CGD) entities are required to increase the CNG price by Rs 4.7-4.9 per kg.

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“For a price increase of USD 2.5 per mmBtu, and also for recent currency weakness, CGDs need an immediate CNG price increase of Rs 12-14 per kg,” it said.

According to ICICI Securities, prices for pipeline cooking, called PNG, need to be increased by Rs 6.2 per standard cubic meter and Rs 9-12.5 per kg to fully pass on the impact of these high input costs. “At best, we’re only seeing a slow, gradual pass-through of these costs in the third quarter (October to December),” it said.

Jefferies said Indraprastha Gas Ltd will have to increase the CNG price by Rs 8 per kg while Mahanagar Gas Ltd will have to increase the prices by Rs 9.

Kotak said there is a serious need to rethink the domestic gas price formula and introduce the floor/ceiling method. ICICI said the Kirit Parikh Committee has been asked to review the pricing formula.

(with PTI inputs)

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