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Unlike popular belief, Piped Natural Gas (PNG) is three per cent costlier than subsidised Liquefied Petroleum Gas (LPG), shows a Business Standard analysis.
This is despite the recent eight per cent cut in natural gas prices to 4.66 per million British thermal units (mBtu) by the government, which pulled down the price of PNG. Before the reduction, PNG was five per cent costlier than subsidised LPG.
Among the transport fuels, Compressed Natural Gas (CNG) has become 27 per cent cheaper than diesel after the reduction in natural gas prices from April 1.
The analysis was done by converting both the Rs per litre price of diesel and Rs per standard cubic metre (scm) price of CNG into Rs per million calorie to equalise the fuel units and then looking at the percentage differential in prices before and after the gas price revision, announced on March 31 for the six months ending September.
“The gas price decline and the resulting change in the retail price of CNG and PNG has made these fuels more competitive over their traditional counterparts, diesel and subsidised LPG. The decline in gas price, thus, comes as a positive for city gas distribution (CGD) entities. IGL (Indraprastha Gas) usually passes on the benefit to consumers while keeping its operating margin intact,” said Salil Garg, director at research and rating agency India Ratings.
This is despite the recent eight per cent cut in natural gas prices to 4.66 per million British thermal units (mBtu) by the government, which pulled down the price of PNG. Before the reduction, PNG was five per cent costlier than subsidised LPG.
Among the transport fuels, Compressed Natural Gas (CNG) has become 27 per cent cheaper than diesel after the reduction in natural gas prices from April 1.
The analysis was done by converting both the Rs per litre price of diesel and Rs per standard cubic metre (scm) price of CNG into Rs per million calorie to equalise the fuel units and then looking at the percentage differential in prices before and after the gas price revision, announced on March 31 for the six months ending September.
“The gas price decline and the resulting change in the retail price of CNG and PNG has made these fuels more competitive over their traditional counterparts, diesel and subsidised LPG. The decline in gas price, thus, comes as a positive for city gas distribution (CGD) entities. IGL (Indraprastha Gas) usually passes on the benefit to consumers while keeping its operating margin intact,” said Salil Garg, director at research and rating agency India Ratings.
| Fuel Competitiveness of PNG vs Subsidized LPG with changing gas price | ||
| Competitiveness at $5.05/mmbtu | Competitiveness at $4.66 per mmbtu | |
| LPG price per Kg (Rs/Kg) | 29.4 | 29.4 |
| Calorific Value (Kcal/Kg) | 11,500 | 11,500 |
| Price of LPG per million calories (Rs/million calorie) | 25.5 | 25.5 |
| Domestic PNG price (Rs/scm) | 25.5 | 24.9 |
| Calorific Value (Kcal/scm) | 9,500 | 9,500 |
| Price of PNG per million calorie (Rs/million calorie) | 26.8 | 26.21 |
| Price differential of PNG over LPG (%) | 5 | 3 |
| mmbtu: million british thermal units | ||
| scm: standard cubic meter | ||
| Source: India Ratings, BS Research | ||
Subsidised LPG is currently priced at Rs 29.4 a kg or Rs 25.5 per million calories (considering LPG’s calorific value of 11,500 kilocalorie per kg). At the earlier natural gas price of $5.05 a unit, PNG was priced at Rs 25.5 an scm or Rs 26.8 per million calorie, five per cent higher than LPG. After the announcement of the eight per cent lower price of $4.66 a unit, IGL cut the PNG price to Rs 24.90 an scm or Rs 26.21 per million calorie (considering PNG’s calorific value of 9,500 KCal per kg), effectively reducing the price differential with LPG.
Similarly, non-branded diesel is currently priced at Rs 48.50 a litre or Rs 54.39 per million calorie (considering diesel’s calorific value of 11,500 KCal per kg). At the earlier gas price of $5.05 a unit, CNG was priced at Rs 38.15 an scm or Rs 40.16 per million calorie, 26 per cent less than diesel’s price for equivalent energy.
After the new natural gas price, IGL cut CNG’s to Rs 37.55 an scm. That translates to Rs 39.52 per million calorie (considering CNG’s calorific value of 9,500 KCal per kg), marginally increasing the price differential with diesel to 27 per cent from 26 per cent earlier.
While announcing the cut in CNG and PNG prices on April 1, IGL had said that at the revised price, the economics in favour of CNG would be over 22 per cent when compared to diesel-driven vehicles. Also, CNG now offers nearly 55 per cent savings on running cost when compared to petrol-driven vehicles. IGL currently caters to about 800,000 CNG vehicles in this city, including 520,000 private cars.
Similarly, non-branded diesel is currently priced at Rs 48.50 a litre or Rs 54.39 per million calorie (considering diesel’s calorific value of 11,500 KCal per kg). At the earlier gas price of $5.05 a unit, CNG was priced at Rs 38.15 an scm or Rs 40.16 per million calorie, 26 per cent less than diesel’s price for equivalent energy.
After the new natural gas price, IGL cut CNG’s to Rs 37.55 an scm. That translates to Rs 39.52 per million calorie (considering CNG’s calorific value of 9,500 KCal per kg), marginally increasing the price differential with diesel to 27 per cent from 26 per cent earlier.
While announcing the cut in CNG and PNG prices on April 1, IGL had said that at the revised price, the economics in favour of CNG would be over 22 per cent when compared to diesel-driven vehicles. Also, CNG now offers nearly 55 per cent savings on running cost when compared to petrol-driven vehicles. IGL currently caters to about 800,000 CNG vehicles in this city, including 520,000 private cars.
| Fuel Competitiveness of CNG vs Diesel with changing gas price | ||
| Competitiveness at $5.05/mmbtu | Competitiveness at $4.66 per mmbtu | |
| Price of Diesel (Rs/liter) | 48.5 | 48.5 |
| Calorific Value (Kcal/Kg) | 10,700 | 10,700 |
| Price of Diesel per million calories (Rs/million calorie) | 54.39 | 54.39 |
| Domestic CNG price (Rs/scm) | 38.15 | 37.55 |
| Calorific Value (Kcal/scm) | 9,500 | 9,500 |
| Price of CNG per million calorie (Rs/million calorie) | 40.16 | 39.52 |
| Price differential of CNG over Diesel (%) | 26 | 27 |
| mmbtu: million british thermal units | ||
| scm: standard cubic meter | ||
| Source: India Ratings, BS Research | ||
