CBG Price Mechanism to Undergo Overhaul

6 Sep 2024 , 11:29 AM

According to news reports, the government is evaluating the compressed biogas (CBG) price system in order to make rates more profitable for producers and supplies more stable for consumers.

According to the reports, the petroleum and natural gas ministry has formed a committee comprised of officials from the compressed biogas association, IndianOil, GAIL, and the ministry to propose a new system for keeping prices attractive for both producers and purchasers.

CBG prices, which are linked to retail compressed natural gas (CNG) rates, have declined by nearly 12% over the last year and a half to Rs 1,290 per mmbtu from Rs 1,470. The government’s decision in April 2023 to cap domestic natural gas prices at $6.5 per mmbtu contributed to the drop. City gas distributors blend this price-capped natural gas with CBG to serve CNG consumers.

Producers are, however, dissatisfied with the fall in CBG procurement prices, which the government is currently attempting to remedy. The government will make a final decision on pricing after the committee publishes its findings.

Two pricing methods are used for CBG, one in which the state-run GAIL acquires CBG from producers at 80% of the average retail selling price of CNG. Fuel merchants such as IndianOil use a different formula that includes a base price and a percentage of the difference between the base price and the CNG retail price.

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