New CBG pricing to support producers, limit impact on CNG/PNG, says Centre

The revised pricing framework for Compressed Biogas (CBG) under the GOBARdhan Scheme is designed to improve the viability of CBG producers while keeping the impact on CNG and household PNG consumers negligible, the Ministry of Petroleum and Natural Gas has stated.

The ministry issued the clarification rejecting concerns that the revised CBG procurement price could significantly increase the burden on consumers. It said such an assessment was based on inconsistent assumptions and failed to account for government affordability support and the wider domestic gas pool under the new framework.

Under the existing mechanism, CBG producers are paid a price linked to 85% of the retail selling price of CNG, which currently translates to around Rs 1,478 per MMBtu. The revised GOBARdhan framework fixes the CBG procurement price at Rs 2,110 per MMBtu, representing an increase of about 43%.

However, the ministry stressed that the procurement price is the amount paid to producers and is not the price directly paid by CNG or household PNG consumers.

To cushion the impact, the government will provide affordability support of Rs 10 per kg of CBG, equivalent to around Rs 215 per MMBtu for CBG containing 95% methane. After factoring in this support, the effective CBG cost to be recovered from consumers will be approximately Rs 1,895 per MMBtu, about 28% higher than the prevailing effective price.

The ministry also clarified that CBG is not supplied to city gas distribution (CGD) companies at the procurement price. Instead, it is pooled with other domestically produced natural gas, allowing the cost to be distributed across a broader consumer base.

Previously, CBG costs were spread only across the limited Administered Price Mechanism (APM) gas allocated to the CNG transport and domestic PNG segments. Under the revised framework, the net cost will be distributed across a domestic gas pool 2.5 to three times larger than the earlier base.

The ministry said the revised mechanism seeks to strike a balance between ensuring stable and viable returns for CBG producers and protecting consumers from a significant increase in gas prices. The broader gas pool and government-funded support are expected to keep the impact on individual CNG and household PNG consumers minimal.