Automakers seek government help as high CNG rates bite

India’s automotive industry has urged the Ministry of Petroleum and Natural Gas to lean on gas companies to reduce prices after the Centre had stepped in to boost domestic supplies of the fuel. In the wake of the 50-60% increase in gas prices over the past 12 months, CNG car sales bookings were declining 10-15%. Hence, the Society of Indian Automobile Manufacturers’ Association wrote to the ministry last week, seeking its intervention.

ETIG analysis showed that from peak monthly sales of 29,535 units in March 2022, volumes dropped to 25,480 units in July. CNG-powered vehicle sales have been consistently dropping for five consecutive months, Vahan data showed.

In June, the Centre increased domestic gas allocation to city gas distribution companies that may help curb rising CNG prices in the past few months.

Domestic allocation has increased to 94% compared with 85% in the last quarter that would increase gas volume of CGD companies to 20.8 mmscmd from 17.5 mmscmd earlier. This would mean blended gas cost of CGD companies will come down by around $2/mmbtu to around $8/mmbtu. Every $1/mmbtu decrease in gas prices would translate into lower pump prices of ₹5-6 per kg. Further lowering of retail prices should boost the cost competitiveness of CNG to 30-40% based on calorific value compared with petrol and diesel. City Gas Distribution companies have increased prices significantly in the past few months as gas cost perked up on higher prices of the spot LNG which flared up due to geopolitical tensions.

The prices of CNG increased to ₹75-86 per kg in metro cities at the beginning of August 2022, compared with below ₹50/kg a year ago.

In the past two months,

had taken one of the highest CNG price hikes of more than ₹10 per kg, while and did not take price hikes in the same period. MGL cut CNG prices by ₹6 per kg after the government increased domestic gas allocation.

Auto industry sources said that demand and enquiries of CNG vehicles have tapered in the past few months owing to higher payback period of CNG vehicles considering the pricing discount on conventionally powered cars and the upfront additional cost of ₹80,000-90,000 for a CNG variant. CNG passenger vehicles accounted for 12% of the total industry sales in July 2022, a growth of nearly 200 basis points over the year, Vahan data showed.