The government has cut the supply of cheap domestic natural gas to urban retailers by up to 20 percent. Sources say that in such a situation, if the excise duty on fuel is not reduced, then the price of CNG supplied to vehicles may increase by 4 to 6 rupees per kg. Natural gas extracted from underground and below the sea level from sites from the Arabian Sea to the Bay of Bengal within India is the raw material that is converted into CNG for vehicles and piped natural gas (PNG) used in kitchens. Four sources familiar with the matter said that the prices of production from old fields are controlled by the government. These are used to urban gas retailers. Production from these fields is decreasing by five percent annually. Due to this, the supply to urban gas distribution companies has been cut.

Supply of raw material for CNG cut 

Sources said that the gas supplied to households for kitchens is conserved. In such a situation, the government has cut the supply of raw material for CNG. The gas obtained from old fields used to meet 90 percent of the CNG demand in May 2023 and it is continuously declining. He said that from October 16, the supply has been cut to just 50.75 percent of the CNG demand, which was 67.74 percent in the previous month. City gas retailers are forced to buy imported and expensive liquefied natural gas (LNG) to make up for this shortfall, which will increase the price of CNG by Rs 4-6 per kg. The price of gas obtained from old fields is US $ 6.50 per million British thermal unit (MMBTU), while the price of imported LNG is $ 11-12 per unit. 

Talks are going on with the government right now 

Sources said at the moment retailers have not raised CNG rates as they are in talks with the ministry of petroleum and natural gas to find a solution. One option is for the government to cut excise duty on CNG. Currently, the central government levies 14 per cent excise duty on CNG, which comes to Rs 14-15 per kg. If it is cut, retailers will not have to pass on the increased cost to consumers, they said. The hike in CNG prices is also a political issue as Maharashtra is due to go to polls next month and Delhi is also due to go to polls soon. Delhi and Mumbai are among the biggest CNG markets in the country.