The Ministry of Petroleum and Natural Gas (MoPNG) has clarified that the revised compressed biogas (CBG) pricing under the GOBARdhan scheme will support producers without materially impacting gas consumers, as the government will fund affordability support and the cost will be spread over a wider pool.
Under the existing system, the price paid to CBG producers is linked to 85 per cent of the retail selling price of compressed natural gas (CNG). Based on the latest revision, this works out to Rs 1,478 per million British thermal units (MMBtu).
Under the GOBARdhan scheme, the CBG price has now been fixed at Rs 2,110 per MMBtu, with the increase from Rs 1,478 to Rs 2,110 per MMBtu working out to around 43 per cent. However, this is the procurement price paid to CBG producers. It is not the price directly paid by CNG or household PNG consumers.
The ministry said the full price of Rs 2,110 per MMBtu will not be recovered through gas consumers, and the government will provide affordability support of Rs 10 per kg of CBG, equivalent to Rs 215 per MMBtu for CBG with 95 per cent methane content.
“This support will be funded by the government and will not be recovered from gas consumers entirely. Therefore, the effective CBG cost to be recovered through a wide group of gas consumers will be Rs 2,110 per MMBtu – Rs 215 per MMBtu = approximately Rs 1,895 per MMBtu,” the ministry said in a statement.
Compared with the prevailing CBG price of Rs 1,478 per MMBtu, the effective increase is therefore approximately 28 per cent. Also, CBG is not sold at its procurement price to CGD entities; it is pooled with other domestically produced natural gas, and its cost is spread across the applicable domestic gas pool.
“Earlier, the cost of CBG was spread only across the limited quantity of Administered Price Mechanism (APM) gas allocated to the CNG (Transport) and PNG (Domestic) segments. Under the new framework, the net cost of CBG will be spread across a domestic gas base 2.5 to 3 times larger than the earlier base,” MoPNG said. Due to the spreading of CBG cost over a much larger gas pool, the price impact on an individual gas consumer will be negligible.
The ministry said the revised pricing framework has been carefully designed to balance two objectives. First, CBG producers receive a stable and viable price that enables plants to operate sustainably. Second, government-funded affordability support and a substantially wider gas pool protect consumers from any material price impact.
