Why CNG has seen unprecedented hike in India in last six weeks

For long, CNG vehicles offered a balance between high fuel prices and expensive electric cars. CNG cars usually cost less to run than petrol or diesel cars due to its price and lower taxes at state and central level. They still are. But with recent price hikes, CNG cars seem to be losing a bit of the advantage.

Over the last one year, CNG price has seen unprecedented hikes across India. The price of CNG has been hiked as many as three times in the first two weeks of April and 11 times since March 7 this year. In the last six weeks, the CNG price has gone up by ₹15.6 per kg. Overall, CNG price has seen nearly 60 percent hike or a jump of ₹28 per kg.

One of the key reasons cited behind the recent hike in CNG, petrol and diesel prices is the global price of oil and natural gas. For CNG, city distributors like Indraprastha Gas Limited (IGL) in Delhi or Mahanagar Gas in Mumbai, have been increasing price to cover up for the rising costs. However, there is another key reason behind the CNG price hike in recent times. The oil ministry has not made any fresh allocation of natural gas from domestic fields to the city gas sector, sending CNG as well as piped cooking gas prices to record highs.

According to sources referred to by news agency PTI, the current supply of natural gas to city distributors are still at March 2021 demand level. This despite the Union Cabinet’s decision to give 100 percent gas supply under 'no cut' priority to the city gas distribution (CGD) sector. This has resulted in city gas operators to buy high priced imported LNG to make up for the shortfall, leading to a record spike in prices.

Sources say that the Oil ministry is supposed to make an allocation of domestic natural gas, which costs a sixth of imported LNG, every six months. This is based on verified demand in the previous six months. However, no allocation has been made since March 2021.

Already grappling with the rising price of petrol and diesel, a lot of customers have been preferring CNG vehicles as the choice of ride. CNG vehicles in India saw more than 50 percent rise in sales in 2021 with more than 2 lakh unites sold. It has been the best year for CNG cars as far as sales are concerned. 2022 also promises to be equally good with more players like Tata Motors joining the CNG bandwagon besides Maruti Suzuki and Hyundai Motor.

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