CBG Pricing Clarified: Minimal Impact on Gas Consumers
By ThePip Desk
MoPNG clarifies revised Compressed Biogas (CBG) pricing under GOBARdhan scheme. Focus on producer support with negligible impact on gas consumers due to government affordability measures.
The Ministry of Petroleum and Natural Gas (MoPNG) has clarified that new pricing for compressed biogas (CBG) under the GOBARdhan scheme will primarily support producers without significantly affecting gas consumers. This strategy involves government affordability support and distributing costs across a larger domestic gas pool.
Understanding the Pricing Adjustment
The price paid to CBG producers has been set at Rs 2,110 per MMBtu, marking an increase from the previous Rs 1,478 per MMBtu. This represents a substantial 43 percent rise in producer remuneration.
However, the MoPNG confirmed that this entire increase will not be passed directly to consumers. The government’s design prioritizes cushioning consumers from higher procurement prices.
Mechanism for Consumer Protection
The government will provide affordability support amounting to Rs 10 per kg of CBG, which translates to Rs 215 per MMBtu for CBG with 95 percent methane content. This financial aid is government-funded and not fully recovered from gas consumers.
Consequently, the effective cost of CBG to be recovered through gas consumers will be approximately Rs 1,895 per MMBtu. Compared to the previous CBG price of Rs 1,478 per MMBtu, this means an effective increase for consumers of around 28 percent.
Furthermore, CBG is not sold at its procurement price to City Gas Distribution (CGD) entities. Instead, its cost is pooled with other domestically produced natural gas and distributed across this broader domestic gas pool. The new framework expands the domestic gas base by 2.5 to 3 times, ensuring a negligible price impact on individual gas consumers.
Dual Objectives of the Framework
The revised pricing framework aims to achieve two primary goals for the sector. First, it seeks to provide CBG producers with a stable and viable price, ensuring sustainable plant operations.
Second, it is designed to protect consumers from significant price impacts. This protection is achieved through the government-funded affordability support and the substantially wider gas pool mechanism.