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Oil Min freezes fuel allocation, costs of CNG, PNG spike

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The Oil Ministry has stopped making recent allocation of pure fuel from home fields to the town fuel sector, threatening the viability of Rs 2 lakh crore funding deliberate within the sector in addition to resulting in a hike in CNG and piped cooking fuel costs to document ranges, sources stated.

Regardless of a choice of the Union Cupboard to present 100 per cent fuel provide underneath ‘no minimize’ precedence to the town fuel distribution (CGD) sector, present provides have been maintained at March 2021 demand degree.

Moreover, the method of allocating fuel on a six-monthly common drawl is also punishing the CGD entities driving progress.

CGD operators have been requesting the ministry to keep up the fuel provide to the sector underneath no minimize class with the final two months’ common to make sure the demand for each CNG and piped pure fuel (PNG) for properties is absolutely met however the ministry has not made any recent allocation for over a 12 months now, three sources conscious of the matter stated.

Moreover the shortfall within the allocation, the costs of APM fuel for CNG and PNG have been revised from USD 2.90 per million British thermal unit to USD 6.10, a rise of 110 per cent.

Whereas the demand has grown at a fast tempo in present cities with CNG networks and provides beginning in newer areas, lack of allocation from home fields meant that operators purchased imported liquefied pure fuel (LNG) at costs that have been not less than six instances the home fee. Outcome – CNG costs have risen by 60 per cent or by over Rs 28 per kg in a single 12 months and PNG by over a 3rd.

Sources stated this has put a query mark on the financial viability of all the CGD sector, placing in danger the deliberate Rs 2 lakh crore funding in enlargement into newer cities as excessive costs convey the CNG at nearly par with diesel and petrol, eroding the motivation for customers to transform autos to the cleaner gasoline.

The Oil Ministry had on August 20, 2014, issued revised tips, promising allocation of fuel from home fields to metropolis fuel operators each six months primarily based on a requirement evaluation of CNG and PNG in a specific geographical space (GA). This was used as a promoting level to bid out over 200 GAs since 2018, attracting over Rs 2 lakh crore of funding dedication within the rollout of metropolis fuel distribution infrastructure.

However the fuel allocation wasn’t elevated on the April 2021 evaluation and the following cycles, they stated including towards the requirement of twenty-two million normal cubic meters per day of fuel, the CGD sector is getting 17 mmscmd from home fields.
The stability is met by shopping for imported LNG which within the present month prices USD 37 per million British thermal unit, they stated. This compares with the USD 6.10 per mmBtu fee for home fuel.

“The home fuel value noticed an enormous 110 per cent improve – from USD 2.9 per mmBtu to USD 6.1 mmBtu from April 1. This itself places an enormous burden and on high of this being pressured to purchase even higher-priced imported LNG will flip this sector economically unviable,” a supply stated.

New GAs that have been bid out in CGD Rounds IX, X and XI are actually developing and no fuel allocation being made would imply they should purchase imported LNG for supplying as CNG to vehicles and PNG to family kitchens.

GAs with simply imported LNG would imply a value of Rs 100-105 per kg,” one other supply stated. This compares to the value of Rs 71.61 per kg in Delhi and Rs 72 in Mumbai, the place almost 70 per cent of the requirement is met by home fuel.

“The CGD sector is in a nasty form. It’s already dealing with an onslaught of EVs and now excessive costs of CNG will likely be a deterrent for diesel or petrol autos to transform to CNG. CNG is an environmentally-friendly gasoline however finally what issues is price economics and if the conversion and operating price involves be greater than diesel or petrol, nobody will convert,” the primary supply stated.

Earlier this month, CGD operators met Oil Secretary Pankaj Jain over the problem however the ministry didn’t relent on allocation and as a substitute requested the operators to move on the rise in fuel price to customers, sources stated, including the ministry requested CGD operators to purchase imported LNG and move on the associated fee to customers. The ministry just isn’t rising the allocation for the CGD sector as it could imply slicing provides to different sectors equivalent to fertilizer.

“Home fuel provides are finite. If we’ve to extend provides to 1 sector, it has to return at the price of provides to different sectors. Already the federal government is dealing with the next fertiliser subsidy invoice this fiscal and the subsidy outgo will improve additional if the fertilizer vegetation are to make use of higher-priced imported LNG to make urea and different crop vitamins,” a ministry official stated.

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