PTI New Delhi

The government has slashed allocation of natural gas used for LPG production, and diverted the low-priced fuel to city gas retailers like Indraprastha Gas Ltd and Adani-Total Gas Ltd to meet a part of their requirement for CNG/piped cooking gas supplies, according an official order.

The government had in October and November last year cut supplies of low-priced natural gas coming from old fields such as Mumbai High and Bassein fields in the Bay of Bengal, to city gas retailers by as much as 40 per cent in view of limited output.

This led to city gas retailers hiking CNG prices by Rs 2-3 per kg and threatening more increases as they replaced lost volumes with higher-priced input fuel.

The price hike made CNG less attractive when compared to alternate fuels like diesel. 

To resolve this, the Ministry of Petroleum and Natural Gas in a December 31 order rejigged some allocations of gas produced from below ground and undersea.

The ministry ordered a cut in gas supplied to state-owned GAIL and Oil and Natural Gas Corporation (ONGC) for production of LPG and diverting those volumes to city gas entities.

Out of a total 2.55 million standard cubic metres per day of gas usage for LPG production, 1.27 mmscmd (0.637 mmscmd each for GAIL and ONGC) has been ordered to be diverted for consumption in the CNG/piped cooking gas segment in January-March quarter, according to the order reviewed by PTI.

GAIL and ONGC will have to use either higher-priced gas produced from new fields or rely on imported liquefied natural gas (LNG) to replace the lost volumes. The LPG they make is supplied to fuel retailers like Indian Oil Corporation (IOC) for sale to households as domestic cooking gas LPG in cylinders.

The government subsidises domestic cooking LPG and so higher cost of production is likely to be borne by it.