City gas distributors (CGD) supply both compressed natural gas (CNG) for transportation and piped natural gas (PNG) for cooking.

The natural gas is sourced from legacy fields—old fields which were operated by state-run ONGC and Oil India Ltd. However, there is no specification or mandate on how much gas should go to each of the two segments.

Under the administered price mechanism (APM), the price of gas from legacy fields is capped, making it cheaper than gas from other fields.

A person aware of the developments said several gas distributors prefer to supply most of this allocated cheaper gas for CNG where margins are higher than PNG.

Currently, distributors get around 20 million standard cubic metres of natural gas every day, most of which goes for CNG, according to industry experts.

“The gas needs to be allocated to these two consumption sectors separately. The gas is given under the header of CGD, for both cooking and transport. The regulator may recommend that the cheaper gas from legacy fields should be used largely for PNG,” said the person mentioned above.

The move comes in the backdrop of slow progress in the penetration of PNG connections despite the government’s push for expanding the PNG network.

Currently, there are only around 10 million piped gas connections compared with over 290 million cylinder gas users. The government aims to take the number of piped bas connections to 125 million by 2030.

The move is also aimed at fulfilling the target of increasing the share of gas in India’s energy mix to 15% by 2030 from the current 6%. So far, gas distributors have been authorized to supply in 300 geographical areas, covering about 88% of the country’s area, and 98% of its population.

In October, the Union government launched the 12th round of bids for seven more geographical areas in five states in the Northeast and the union territories of Jammu & Kashmir and Ladakh.

In a bid to boost natural gas adoption, the Union cabinet has approved new guidelines for gas pricing following recommendations made by the Kirit Parikh-led committee on natural gas pricing, paving the way for linking domestic natural gas prices in India to global crude prices.

Following the change, the price of natural gas is calculated at 10% of the monthly average of the Indian crude basket, which is a weighted average of Dubai and Oman (sour) and Brent Crude (sweet) oil prices.

Under the new regime, a floor price as well as a ceiling price was introduced for operators to source gas from the legacy fields of oil and gas companies.

Effectively, that would shield the CGD operators from volatility in international prices. The upper and lower ceiling, respectively, are $4 per metric million British thermal unit (mmBtu) and $6.50 per mmBtu under the APM.

The government has also been trying to push for expansion of the PNG network as there is a heavy import burden of LPG and PNG is usually cheaper than LPG for the end consumer.

The union minister for petroleum and natural gas Hardeep Singh Puri had in March this year told parliament in a written reply to a question that in terms of calorific value of different petroleum products, current prices and rupees per million calories, PNG is generally cheaper per unit of energy consumed as compared to LPG.

“Depending upon local prices, conversion factor of the cooking stove, etc., PNG provides a positive competitive advantage over LPG,” he said.

Queries sent to PNGRB remained unanswered till press time.