EXPLAINED | Understanding The CNG Price Hike That Led To Two-Day Strike By Cab And Auto Drivers In Delhi-NCR

CNG Price Hike: The cab strike was against a continuous increase in the prices of this important fuel that can directly impact the prices of commodities.

New Delhi: The recent rise in fuel prices, including that of natural gases like CNG or PNG, led to a two-day strike by Ola and Uber cab drivers across Delhi-NCR, creating disruptions.

The strike was against a continuous increase in the prices of this important fuel in the transport sector that can directly impact the prices of commodities.

Current Situation:

On April 14, a fresh hike took the retail price of CNG up to Rs 71.61 per kg in NCT Delhi and Rs 74.17 per kg in Noida, Greater Noida and Ghaziabad. This was the third hike in the month of April with a total increase of Rs 9.10/kg, a 15% price increase, in merely three weeks. 

Reason Behind Sudden Natural Gas Price Hike

Global gas shock: An accelerated recovery after Covid and energy demand coupled with inadequate supply expansion in 2021 have resulted in cost shock waves. The cost of natural gas produced from oil regulated fields has more than doubled in the past few weeks due to the ongoing Russia-Ukraine conflict and West sanctions.

The government generally determines the domestic natural gas prices in April and October every year based on the previous year's behaviour of international prices for natural gases. This has led to revised prices of Domestic Natural Gas from $2.9 to $6-7 per mm Btu, resulting in steep CNG price hikes. Such price hikes have also helped offset the input cost rise due to the increase in rates of LNG, which comprises about 10-15% of the gas mix for CNG customers. 

Profit Margins: Natural gas distributors enjoy the advantage of access to cheap and stable domestic gas and pricing freedom for CNG, which enjoys lower taxes compared to the heavily taxed competing fuels like petrol and diesel. This ensures huge profit margins for natural gas distributors. So, with more freedom or less regulation by the central agency, the distributors can ensure hiking prices to maintain their own profit margins.

In conclusion, for a long time, Compressed Natural Gas as a fuel has been less popular with private buyers and mainly penetrated as a fuel of choice for public transport, private cab business and auto-rickshaws. With further increase in prices of CNG, it casts a shadow on the growth of potential customers for CNG as a fuel, in spite of it being the state of the fuel economy and its eco-friendly nature as compared to conventional fuels like petrol and diesel.

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