The cost of CNG, which will get reduced by up to Rs. 15 per kg in the next few days following a rejig in natural gas allocation, will go up by Rs. 10.6 a kg in April, when domestic gas prices almost double, Goldman Sachs said.
The oil ministry yesterday said city gas distribution (CGD) companies would get cheaper domestic gas to meet all of their requirements for CNG and piped natural gas (PNG) supplies to households compared with the previous limit of 80 per cent for most states.
As a result, Indraprastha Gas Ltd will cut CNG/PNG prices by aboutRs. 15 per kg and Rs. 5 per cubic metre, respectively.
"We note that this is only a temporary relief to consumers as the domestic natural gas prices will almost be doubled from the current $4.2 from April 1, thus forcing the CGD companies to raise CNG/PNG prices to pass on the increased costs.
"In the absence of any offsetting subsidy, they would need to raise CNG prices by Rs. 10.6 per kg and PNG prices by Rs. 8 per standard cubic meter," Goldman Sachs said in a research note.
It said the price of CNG in Delhi will fall to Rs. 35.1 a kg from the current level and then rise to Rs. 45.7 a kg in April.
Goldman Sachs estimates the price of locally produced natural gas will climb to $7.8 per million British thermal units in April from $4.2 currently after the Rangarajan formula for pricing domestic gas is implemented.
The formula calls for pricing all domestically produced natural gas at the average of international hub rates and the cost of imported liquefied natural gas (LNG) in India.
Oil Minister M Veerappa Moily yesterday said the price cut was possible because the government had decided to meet the entire need of CNG and PNG from domestic gas, which is subject to an administered pricing mechanism (APM). This eliminates the need to import costlier LNG.
Retail prices are set to fall in all states, except Maharashtra and Haryana, as city gas distributors stop buying higher-priced LNG and shift entirely to APM gas.
City gas entities in Mumbai and Pune as well as Faridabad in Haryana get all of their requirements from APM gas. Goldman said the additional requirement of 1.92 million standard cubic meters a day of domestically produced gas will be met by cutting supplies to non-priority sectors.
Source: NDTV Profit
The oil ministry yesterday said city gas distribution (CGD) companies would get cheaper domestic gas to meet all of their requirements for CNG and piped natural gas (PNG) supplies to households compared with the previous limit of 80 per cent for most states.
As a result, Indraprastha Gas Ltd will cut CNG/PNG prices by aboutRs. 15 per kg and Rs. 5 per cubic metre, respectively.
"We note that this is only a temporary relief to consumers as the domestic natural gas prices will almost be doubled from the current $4.2 from April 1, thus forcing the CGD companies to raise CNG/PNG prices to pass on the increased costs.
"In the absence of any offsetting subsidy, they would need to raise CNG prices by Rs. 10.6 per kg and PNG prices by Rs. 8 per standard cubic meter," Goldman Sachs said in a research note.
It said the price of CNG in Delhi will fall to Rs. 35.1 a kg from the current level and then rise to Rs. 45.7 a kg in April.
Goldman Sachs estimates the price of locally produced natural gas will climb to $7.8 per million British thermal units in April from $4.2 currently after the Rangarajan formula for pricing domestic gas is implemented.
The formula calls for pricing all domestically produced natural gas at the average of international hub rates and the cost of imported liquefied natural gas (LNG) in India.
Oil Minister M Veerappa Moily yesterday said the price cut was possible because the government had decided to meet the entire need of CNG and PNG from domestic gas, which is subject to an administered pricing mechanism (APM). This eliminates the need to import costlier LNG.
Retail prices are set to fall in all states, except Maharashtra and Haryana, as city gas distributors stop buying higher-priced LNG and shift entirely to APM gas.
City gas entities in Mumbai and Pune as well as Faridabad in Haryana get all of their requirements from APM gas. Goldman said the additional requirement of 1.92 million standard cubic meters a day of domestically produced gas will be met by cutting supplies to non-priority sectors.
Source: NDTV Profit
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