New Delhi — The Ministry of Petroleum and Natural Gas has rejected concerns that the revised procurement price of Compressed Biogas (CBG) under the GOBARdhan Scheme will lead to a significant increase in costs for consumers using CNG and household PNG.
The ministry said such concerns were based on inconsistent calculations and did not take into account the government’s financial support for CBG as well as the broader pool of domestic gas over which the cost will now be distributed.
Under the existing pricing mechanism, CBG producers receive a procurement price linked to 85 per cent of the retail selling price of CNG. Based on the latest revision, this worked out to around Rs 1,478 per MMBtu.
The revised GOBARdhan framework has increased the CBG procurement price to Rs 2,110 per MMBtu, an increase of about 43 per cent. However, the ministry pointed out that this is the price paid to CBG producers and should not be confused with the amount directly paid by CNG motorists or household PNG consumers.
The government will also provide affordability support of Rs 10 per kg of CBG, equivalent to roughly Rs 215 per MMBtu for CBG containing 95 per cent methane. The financial support will be borne by the government, thereby reducing the portion of the increased CBG cost that needs to be recovered from gas consumers.
After factoring in this support, the effective CBG cost to be recovered through the consumer gas base will be around Rs 1,895 per MMBtu, compared with the earlier effective cost of Rs 1,478 per MMBtu. This represents an effective increase of around 28 per cent, rather than the headline 43 per cent rise in the procurement price.
The ministry also clarified that City Gas Distribution (CGD) companies do not purchase CBG directly at the revised procurement price. Instead, CBG is pooled with other domestically produced natural gas, with the resulting cost distributed across the applicable domestic gas pool.
This pooling mechanism is an important change under the revised framework.
Previously, the cost of CBG was distributed only over a relatively limited quantity of Administered Price Mechanism (APM) gas supplied to the CNG transport and domestic PNG sectors. Under the new system, the net CBG cost will be spread across a much larger domestic gas base, estimated to be around 2.5 to three times the size of the earlier base.
According to the ministry, this wider cost distribution will substantially dilute the impact of the higher CBG procurement price on individual gas consumers.
The government’s move is aimed at supporting the CBG sector while ensuring that the transition does not translate into a disproportionate increase in the cost of cleaner gas-based fuels for households and transport users.
The ministry maintained that the revised pricing structure, government support and expanded pooling mechanism together mean that the impact on CNG and household PNG consumers is expected to remain limited.
With inputs from IANS