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CNG Price Can Go Up To 10-11% In October: Report

The rate for gas from deepwater fields such as KG-D6 of Reliance Industries Ltd and BP Plc would rise to USD 7.4 per mmBtu next month.

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Amid the constant rise in Liquefied Petroleum Gas (LPG) price, Compressed Natural Gas (CNG) and piped cooking gas prices in Delhi and Mumbai can increase by 10-11 per cent in October, as the government-dictated gas price is set to rise by about 76 per cent, ICICI Securities said in a report.

The central government, utilizing rates prevalent in gas-surplus nations, fixes the price of natural gas produced by firms such as state-owned Oil and Natural Gas Corp (ONGC) from fields given to them on a nomination basis, every six months. The next review is due on October 1.

The price, referred to as APM or administered rate, will rise to USD 3.15 per million British thermal units (mmBtu) for the period from October 1, 2021, to March 31, 2022, from the current USD 1.79, the brokerage said.

The rate for gas from deepwater fields such as KG-D6 of Reliance Industries Ltd and BP Plc would rise to USD 7.4 per mmBtu next month.

Natural gas is the raw material that is converted into compressed natural gas (CNG) for use in automobiles as fuel or piped to household kitchens for cooking purposes.

The report said, "The expected surge in APM gas prices would present a challenge to city gas distribution (CGD) players as it would mean a rise in their gas cost for CNG and residential piped natural gas. APM gas price rise would mean hefty price hikes would have to be made by IGL (which retails CNG in the national capital and adjoining cities) and MGL (which retails CNG in Mumbai) in the next one year."

The city gas distributors (CGD) "would have to make price hikes of 10-11 per cent in October," ICICI Securities said in a report.

Going by the trend in international markets, the APM gas price is likely to rise to USD 5.93 per mmBtu from April 2022 to September 2022 and to USD 7.65 from October 2022 to March 2023.

According to the report, this will result in a 22-23 per cent increase in CNG and piped natural gas prices in April 2022 and 11-12 per cent in October 2022. 

"Rise in APM gas price from USD 1.79 per mmBtu in H1FY22 to USD 7.65 per mmBtu in H2FY23E would mean MGL and IGL would have to make price hikes of 49-53 per cent during October 2021 to October 2022," it said. "CGD players may be able to make the required hefty price hikes given sharply higher prices of competing fuels, petrol and diesel. However, some hits to prevailing lofty margins of MGL and IGL cannot be ruled out." 

(With PTI inputs)

 


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