The new regulation on the consumption of liquefied petroleum gas (LPG), the single largest source of cooking in urban India, announced by the government on Thursday evening has opened up a vista of opportunities for the city gas distribution companies.
The latest move by the government has made piped natural gas or PNG consumption almost 50% cheaper than LPG, which was so far at par or a little cheaper than PNG due to the telescopic pricing mechanism used by PNG companies.
PNG companies, also called as city gas companies, such as Indraprastha Gas in the national capital region and Mahanagar Gas in Mumbai, sell piped natural gas (PNG) for cooking, as a replacement for LPG cylinders, which are currently susbsidised in India.
Under the new regulation, consumers are allowed to consume only six subsidised 14.2 kilogram (kg) domestic LPG cylinders per year, beyond which they will have to pay market price to be determined by the oil marketing companies. An average household of four consumes one cylinder a month or 12 cylinders in a year or 170 kg of LPG, which at susbsidised rates costs them Rs400 per month or Rs4,800 per year for 12 cylinders. Now after the new order, the same household will be shelling out a total of Rs2,400 for the first 6 cylinders and Rs4,620 for the next six cylinders, which takes its total cost just over Rs7,020 per year, or almost close to 45-50% more.
PNG companies charge the first few units of gas, referred in terms of standard cubic metres (scm) at a lower rate and as the consumption goes, the charge increases by Rs5 or so on an average.
PNG companies say an average household of four consume approximately 15 scm per month, the price of which varies, but is charged at an average of Rs20 per unit. Therefore, the total monthly consumption becomes Rs300 and a yearly consumption is at Rs3,600.
At this price, PNG becomes 50% cheaper than LPG giving the PNG companies a major fillip to expand infrastructure and rope in more and more customers.
