CNG to be costlier than diesel by April 2014 Mumbai: Planning to buy a compressed natural gas (CNG) vehicle or convert your existing vehicle into CNG for better fuel efficiency and to make your rupee travel that extra mile Think again! The environment friendly CNG is likely to lose its competitive advantage to diesel by April 2014,when the new controversial gas price hike to $8.4 per mmBtu comes into force. With the rising prices of petroleum products almost everyone is caught in the problem of choosing the type of fuel in which the vehicle shall be purchased. CNG prices have already overtaken diesel prices in Ahmedabad by 13% leading to 80% fall in CNG vehicles sales in the city as the price sensitive Indian consumers has switched to diesel and petrol run cars over the environmental friendly CNG. The same is likely to be replicated in Mumbai,Delhi and other Indian cities too as CNG is likely to lose its comparative advantage in the next six months or so.According to Union minister of state for petroleum Panabaaka Lakshmi,The impact of $1 per unit increase in price of domestic gas would result in a price hike of Rs 2.93 per kg of CNG. This translates to about Rs 12 increase in CNG prices at CNG outlets in major cities operating on the domestic gas.In New Delhi,CNG prices are expected to be Rs 54 per kg with effect from April 1 compared to current diesel price of Rs 51.4 per litre. In Ahmedabad,CNG is being sold at Rs 65.8 per kg,a 13% increase more from diesel price of Rs 57.19 per litre.What we have seen in Ahmedabad is likely to be replicated in other Indian cities as consumers are very price sensitive, said a car dealer in Mumbai.According to a Crisil analyst,CNG price hike will be the sharpest in Mumbai and Delhi to the level of Rs 50 Rs 55 per kg from the current level of Rs 35 to Rs 40 per kg affecting CNG conversion and off take. Prasad Koparkar,senior director,industry & customised research,Crisil told ToI,CNG off take and conversion would be significantly lower in other cities.Players in these cities would have to rely on imported LNG due to domestic gas unavailability which would see significant increase in CNG costs,as witnessed in Gujarat, Besides,the city gas distribution firms like Indraprastha Gas in Delhi and Mahanagar Gas in Mumbai will take a hit.We believe that the profitability of these players would be impacted,since they would be able to only partially pass on the increase in cost, said Koparker in a research note. For every $1 increase in gas prices,input costs would increase by about 10% for players operating in Delhi and Mumbai where the share of domestic gas in total consumption is high at about 80%.So for $4.2 increase in gas prices,the input cost of CGD players will go up by 42%.It will make sense to pay a Rs 1 lakh premium for diesel cars than converting a petrol vehicle to CNG by paying Rs 60,000 for the CNG kit because the running cost between CNG and diesel vehicle will be almost the same at Rs 3 per km.
Posted on: Thu, 15 Aug 2013 00:42:58 +0000
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