CNG Shortage Pushes Prices Higher: How Will it Impact India’s Fight Against Air Pollution?

The shrinking supply of compressed natural gas (CNG) and its rising prices could exacerbate the air pollution crisis in India and Delhi in particular. Central government, struggling with the domestic production shortage of the gas is cutting CNG allocation to city retailers. As a result, cost-conscious CNG vehicle users may revert to petrol and diesel, worsening pollution levels.

The Supply Crisis

The production of natural gas, extracted from Oil and Natural Gas Corporation's (ONGC) legacy fields under the administered price mechanism (APM), has seen a decline, impacting supplies to retailers. Whereas there has been a significant increase in its demand. Natural gas production in September was 2.97 billion cubic metres (BCM), 8.4 per cent lower than government's target for the month, according to the data from Ministry of Petroleum and Natural Gas.

Daily gas production has only increased about 5 per cent in a decade, according to the provisional ministry data, not keeping pace with the rising consumption which has jumped 30 per cent.

Government cut supplies of natural gas to retailers like Indraprastha Gas (IGL), Mahanagar Gas (MGL) and Adani Total Gas by up to 20 per cent in November after 21 per cent reduction in October.

The retailers are struggling as they have to go for expensive imports or purchase from new Indian fields, both raising prices for CNG.

Rising CNG Prices

The companies in regulatory filings flagged profitability concerns due to supply cut. CNG price has risen 73 per cent since 2021 against petrol which saw 13 per cent price hike and diesel which witnessed an increase of almost 20 per cent.

IGL hiked the rates by Rs 2 per kg in Noida, Greater Noida, Ghaziabad and Gurugram this week. MGL, in Mumbai and adjoining areas, has also hiked the rate. Other city gas retailers too have hiked the prices.

While CNG rates in Delhi remain unchanged at Rs 75.09 per kg, prices have gone up to Rs 81.70 and above in other NCR cities, according to IGL website. Since 2021, prices in Delhi have surged 70 per cent in Delhi, rising from Rs 44 per kg in that year.

Push for CNG Vehicles

The push for CNG vehicles came two decades ago when Supreme Court ordered all the public buses to shift to CNG. Later, the court had banned all the non-CNG cabs in Delhi. CNG vehicles since then have proven popular among price-sensitive consumers, thereby increasing the demand 13 times between 2019 and 2024.

Currently in India the share of natural gas in energy basket is around 6 per cent and the government has set a target to raise its share in the energy mix to 15 per cent in 2030. With the reduction in gas production and rising prices, this target seems hard to meet.

While CNG is not entirely green, it has lower carbon footprint and is much better in terms of the emission of harmful pollutants into the environment.