The government Monday raised the allocation of domestic natural gas to city gas distributors (CGDs) from the current 80 percent to 100 percent spelling thereby lowering of prices of CNG (Compressed Natural Gas) by Rs.15 per kg and of piped natural gas (PNG) by Rs.5 a cubic metre on account of larger availability.
"The ministry has decided to raise the share of domestic gas to 100 percent of the country's requirement for CNG and PNG (used for transportation and domestic purposes, respectively)", Petroleum Minister M. Veerappa Moily said at a press conference here.
"This would lead to reduction in the price of CNG and PNG across the country. The price of CNG in Delhi supplied by IGL (Indraprastha Gas Ltd) would reduce by about Rs.15 per kg. There will also be a reduction of about Rs.5 per cubic metre in the price of PNG," he added.
The decision would help lower prices of CNG retailed to automobile users in cities like Delhi and Ahmedabad.
It will also bring down prices of piped cooking gas to households with cheaper domestic gas replacing imported LNG, except in cities like Mumbai, which are already getting 100 percent domestic gas.
Delhi, which presently uses 28 percent of costlier imported LNG, and cities in Gujarat, like Ahmedabad and Surat, will see price cuts. The exact rates across cities would vary after taking into account local taxes.
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The move is aimed to popularise the use of natural gas, considering the high pollution levels in many cities of the country, Moily said.
Gas allocation to CGDs would be increased by cutting supplies to non-core sectors like petrochemicals, steel and refineries.
The decision to cut rates comes at a time when the government is struggling to control its fiscal deficit at 4.8 percent of the GDP.
"The decision to raise the share of domestic gas is also because of additional economic benefits that would accrue on account of reduced subsidy burden for the government," Moily said.
The decision comes in the wake of the cabinet decision last week to raise the quota of subsidised LPG per household from nine to 12 cylinders a year -- estimated to add to the government's subsidy burden by Rs.5,000 crore annually.