What Happened

The Ministry of Petroleum & Natural Gas has announced a revised pricing structure for Compressed Biogas (CBG) under the GOBARdhan Scheme. This comes in response to a newspaper article that suggested the new pricing could significantly burden CNG and household PNG consumers, a conclusion the Ministry states does not present the correct picture.

Key Facts

  • The GOBARdhan Scheme has fixed the CBG procurement price at ₹2,110 per MMBtu for producers.
  • Previously, the price paid to CBG producers was linked to 85% of the retail selling price of CNG, working out to approximately ₹1,478 per MMBtu.
  • This represents an approximate 43% increase in the procurement price paid to CBG producers.
  • The Government will provide affordability support of ₹10 per kg of CBG, equivalent to approximately ₹215 per MMBtu for CBG with 95% methane content. This support will be government-funded and not entirely recovered from gas consumers.
  • The effective CBG cost to be recovered through a wide group of gas consumers will be approximately ₹1,895 per MMBtu (₹2,110 - ₹215).
  • Compared to the prevailing CBG price of ₹1,478 per MMBtu, the effective increase is approximately 28%.
  • Under the new framework, the net cost of CBG will be spread across a domestic gas base approximately 2.5 to 3 times larger than the previous base, which was limited to APM gas for CNG (Transport) and PNG (Domestic) segments.

Why It Matters

The revised pricing framework is designed to provide CBG producers with a stable and viable price, intended to support the sustainable operation of CBG plants. Concurrently, the government-funded affordability support and the wider gas pool are implemented to prevent any material price impact on consumers.

What To Watch

Observation of the gas pooling mechanism's impact on individual consumer prices will be relevant. The stated goal is to ensure the expanded gas pool protects consumers from price shifts.