Blame China for higher CNG, PNG prices

If you are among those who are impacted by the hike in prices of CNG and PNG, blame it on China. Higher gas demand from the world's second-largest economy has resulted in a sharp rise in global LNG prices, which in turn, has led to the steep increase in retail gas prices.

Adani Gas, which distributes gas in Ahmedabad and Vadodara, hiked natural gas prices between 4 and 18% from January 2. CNG prices were revised from Rs45.95 per kilo to Rs47.80, whereas domestic PNG (piped natural gas) price was changed from Rs529.15 per cubic metre to Rs560.65 per cubic metre. The hike in industrial, commercial and non-commercial segments was even higher.

Similarly, state-owned Gujarat Gas had hiked gas prices for industrial consumers from Rs26.59 to Rs29.17 per cubic metre from December 23, an increase of just under 10%.

Both companies attributed the hike in prices to the spike in international gas prices.

"Spot LNG prices have gone up sharply in recent months, and we have only passed on the hike to consumers. Moreover, the revision in prices was due since long," said a senior official of Adani Gas, requesting anonymity.

Incidentally, Adani Gas had revised CNG and domestic PNG price in October, but had rolled back the hike within two days.

A Gujarat Gas official said the hikes were necessitated due to the big rise in spot LNG (liquefied natural gas) prices in global markets, which have gone up by over 60% to over $ 10 per Million Metric British Thermal Unit (MMBTU) since September.

"The huge rise in spot LNG prices in mainly because of the surprise jump in demand from China in the past 3-4 months. Increase in prices in India is because of this as spot LNG accounts for a large chunk of India's gas requirement," the official said.

A harsh winter, coal-to-gas switching policy to curb air pollution, and replacement of coal-fired heating with gas-fired boilers in Chinese households, are among the key reasons for the rise in gas demand in the neighbouring country. Industry reports said that spot LNG prices nearly doubled from the 2017 low of $ 5.35 per MMBTU, and touched double digits for the first time since January 2015 in December.

"Demand from China is expected to remain strong even in 2018, which means spot LNG prices are likely to remain high. In such a scenario, retail gas prices in India will also go up," industry experts said.

THE UPWARD TREND

• Spot LNG prices have gone up by over 60% to over $10/ per Million Metric British Thermal Unit since Sept
   
• The rise in spot LNG prices is because of the steep rise in demand from China, industry experts said