Natural gas supply cuts threaten air quality as CNG prices surge.
In November, the government has cut back supplies of natural gas to retailers such as Indraprastha Gas, Mahanagar Gas, and Adani Total Gas by around 20%, which can, in turn, impact India’s air quality, mainly over Delhi. This has occurred after cutting back on supplying natural gas by up to 21% in October-which is a rather perturbing trend for India’s energy sector.
These supply cuts of compressed natural gas (CNG) are coming when domestic production of natural gas can’t meet growing demand in India. Domestic production of natural gas has been falling steadily in India, leading to higher import costs and having to buy gas from new fields. The shortage already stretches city gas marketers to where CNG prices are being forced up, and the air pollution crisis is getting worse.
The Supply Shock
India is still producing most of the natural gas through the legacy fields of ONGC. Though Indian production has not been able to keep pace with even the growing domestic demand in the country that led to the sliding of gas production in India; gas production during September was just 2.97 billion cubic meters and well below the target set by the government for the month at 8.4 percent.
Gas production from the domestic sector increased a minuscule 5 percent over the last decade, whereas consumption is up by an impressive 30 percent. The gap has once again shot up the price of CNG, which hurts the retailers once more as they again have the choice of paying a high price for imports or accepting new domestic fields opening up, which again inflates the cost to customers. Rising CNG Prices and Consumer Impact
The price of CNG has gone up as the government cut the supply of natural gas. The percentage hike is 73 percent from last year since 2021 when petrol increased a bare minimum 13 percent and even diesel has almost touched close to 20 percent; these are alarming increases concerning the retailers who wouldn’t be able to retain the margins.
IGL increased the CNG price in Noida, Greater Noida, Ghaziabad, and Gurugram by Rs 2 per kg. On the other hand, MGL hiked its rates for CNG in the city as well as in the satellite towns of Mumbai. Actually, other city gas retailers also increased their rates since the natural gas price is rising.
CNG prices in Delhi have remained constant at Rs 75.09 per kg, but in others across the National Capital Region or NCR, they have increased to Rs 81.70 per kg and more. Since 2021, CNG rates have increased by 70% in Delhi from the original rate of Rs 44 per kg.
A new price increase has come at a time when consumers, mostly residents of urban cities, are increasingly turning to CNG automobiles.
These vehicles have come in as a clean alternative to petroleum and diesel-based vehicles by virtue of a Supreme Court directive that made it compulsory to run public buses on CNG and disallowed non-CNG cabs in Delhi. Demand for CNG has gone up 13 times from 2019 to 2024, an increasing trend towards cleaner energy alternatives.
However, the CNG is costlier. Such price-conscious consumers might instead opt for petrol and diesel vehicles to save money. That, again, would defeat the reason for using CNG-run vehicles to reduce air pollution emissions from vehicles. It gets more alarming in cities such as Delhi, where there is a critical level of air pollution due to heavy emission from vehicles.
Effect on Energy Transition for India Aspirations Indian government has set an aggressive goal of taking the share of natural gas in its energy basket to a whopping 15 percent level from a current 6 percent level by 2030. However, because of falling domestic production and an increasing natural gas price, it is really moving out of reach. Although not totally green, CNG is still a cleaner fuel compared to petrol and diesel; hence, it emits fewer pollutants and has a lower carbon footprint. Therefore, CNG represents one of the most important ingredients of India’s fight against air pollution and reduction in coal and other more polluting energy sources. All this supply cuts and price hikes on CNG, in a way, could be seen to undermine all that has been achieved so far as high costs would send the customers scurrying away from the CNG car. Then more people may turn back to petrol and diesel cars; the result will be higher emissions and poorer air quality especially in metropolitan cities such as Delhi.
Conclusion: The gas industry of India is in a rather vulnerable state of declining production with rising demand. Higher prices on account of this restricted supply of CNG to the city gas distributors have sharply propelled the price and possibly cataclysmic effects are being caused to the city’s air quality. One of the effects is that a lot of people turn away from pricey CNG back to emitting petrol and diesel, worsening already nasty pollution in the city and which might make it daunting for the government’s ambitious goals of achieving a 2030 share of natural gas in the country’s energy mix.