In the one decade that BJP has been in power at the Centre, daily natural gas production has risen only by about 3 per cent, while consumption has jumped 30 per cent. The faltering homegrown gas output, which has not kept pace with a growing economy, is causing unforeseen problems. Supply constraints have left retailers like Indraprastha Gas Ltd and Mahanagar Gas Ltd increasingly reliant on more expensive imports – or costly production from new Indian fields – which have proven more technically challenging. Both have begun to raise prices for compressed natural gas (CNG), which powers cars, buses, taxis and rickshaws across India.
India’s reliance on imported crude oil and natural gas grew further in the first half of the current financial year, as the delta between consumption growth and the more or less stagnant domestic production continued to widen. The country’s oil import dependency in April-September (H1) was 88.2 per cent – up from 87.6 per cent in the year-ago period and 87.8 per cent for 2023-24, according to the latest data from the oil ministry’s Petroleum Planning & Analysis Cell (PPAC). Import dependency in the case of natural gas was 51.5 per cent in the first six months of 2024-25 – up from 46.8 per cent a year ago and 47.1 per cent of the full 2023-24.
The capital city of New Delhi was pushed into CNG well over two decades ago, after a Supreme Court ruling demanded the conversion of all public buses to cope with worsening air quality. It also later banned all non-CNG cabs in the capital region. While the fuel today is not entirely ‘green’, it does emit fewer smog-related pollutants. Now, as the city lives through some of the most toxic smog days on record, the government is cutting back its supply of cheap gas for vehicles, as it struggles to cope with domestic production shortages – a move that could add to toxic air woes in major cities including New Delhi, one of the world’s most polluted cities. Proponents fear that consumers previously attracted by low running costs may begin to look more closely at the disadvantages, including long queues at filling stations and fewer models to choose from.
Surge in price
CNG prices in Delhi have risen 73 per cent since 2021. Price of petrol is up just 13 per cent, while diesel’s has increased by close to a fifth, shrinking the price gap between gas and conventional fuels. Experts fear this may deter the adoption of CNG vehicles and could even lead to a shift back to diesel and petrol, undermining efforts to promote cleaner transportation options.
We need differential pricing policy to incentivise cleaner fuels and disincentivise polluting fuelsAnumita Roychowdhury, executive director, Centre for Science & Environment
CNG vehicles have proven popular with price-sensitive consumers, surging more than 13-fold between 2019 and now. In contrast, sales of vehicles powered by diesel and petrol have fallen by 20 per cent and 13 per cent respectively during that period, according to data compiled by the transport ministry.
“We need differential pricing policy to incentivise cleaner fuels and disincentivise polluting fuels,” says Anumita Roychowdhury, executive director, Centre for Science & Environment.
With its limited low-cost gas funnelled to industrial use, the deliveries to retailers have been cut by as much as 40 per cent. That fuel, from older fields, is priced at $6.5 per million British thermal units – against about $10 for new local fields and $13-14 per mbtu for imports.
Mahanagar Gas has said it will explore options, as it tries to ensure stability for its price-sensitive customers, but scarcity has already pushed prices in some areas up by more than 2 per cent this week. Further increases will be necessary to maintain margins, analysts say.
India wants to increase the role of gas in the energy mix, and the government has announced plans to significantly increase the number of CNG stations across the country over the current decade from roughly 7,000 today – mostly in the North and the West. That target may now be at risk.
The move certainly doesn’t gel with the government’s aim to almost triple the compressed natural gas station network in the country by 2030. So far, lower prices have been working in favour of owners of CNG-driven vehicles, despite long waiting times at fuel stations. But if costs jump, say, without any commensurate increase in passenger fares for taxi or bus drivers, it will make life difficult for them. As it will for ordinary commuters, who had done their bit for the green revolution by opting for CNG-powered cars.