Following a Gujarat High Court order, the government ordered all of domestically available natural gas for city gas projects to be equitably distributed among all the companies in the country than convert the fuel into compressed natural gas (CNG) for sale to automobiles. Prior to this, cheaper domestic gas was largely available to firms retailing CNG in Delhi and Mumbai.

Keeping in view the limited domestic availability, the government ordered that about 80 percent of the requirement of CNG retailers be met from cheaper domestic gas and the rest to be imported.

For IGL, which is the sole retailer of CNG in national capital, the order would not have made a big difference as domestic gas made up for 77-80 percent of its requirement. But for Mahanagar Gas Ltd, which solely relies on domestic gas for CNG retailing in Mumbai, the cut would have meant Rs 16 per kg increase in CNG price in the city because of costlier imported LNG coming in to replace the cut in allocation.

With such a steep hike in price on horizon, Mumbai's auto rickshaw owners association approached Maharashtra High Court and got a stay on implementation of the order in the state.

"This essentially meant that our APM (cheaper domestic) gas supply was cut to implement the uniform allocation order (of Gujarat High Court that was also upheld up the Supreme Court)," IGL Managing Director Narendra Kumar said.

IGL's APM gas allocation was reduced from 23,42,000 cubic meters per day to 22,28,000 cubic meters a day. "APM gas makes up for only 72 percent of our requirement," he said.

He said the shortfall was made good by increased buying of imported LNG which has led to rise in gas cost by 13 percent.

"We have not passed on the entire increase to customers. Some 20 percent of the increase that was due has been absorbed by us," he said.


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