Looking to push for faster adoption of piped natural gas (PNG), the government has introduced an additional incentive for city gas distributors to expand household piped-gas networks. The scheme offers 200 standard cubic metres (SCM) of cheaper domestic natural gas for every new billed domestic PNG connection.The move is intended to encourage companies to speed up the shift from LPG cylinders to piped natural gas (PNG) for cooking. India has around 17.4 million domestic PNG connections at present.
New PNG incentive scheme
Approved by the government and effective from September 1, the benefit will apply to new domestic PNG connections added above a specified threshold for each geographical area, according to a PTI report.According to an official statement from the oil ministry, the scheme is designed both to activate existing connections that remain unused or unbilled and to extend PNG networks to areas that are not currently covered.The extra allocation of lower-priced domestically produced APM (administered price mechanism) gas will also give eligible city gas distribution companies some flexibility in their sourcing, the report said.They can replace part of the more expensive Liquefied Natural Gas (LNG) currently purchased for their Compressed Natural Gas (CNG) transport operations, thereby reducing their overall gas procurement costs.The government expects these savings to significantly improve the economics of household PNG connections. It estimates that the payback period for distributors’ capital expenditure could fall to roughly three years from about 10 years, providing a stronger commercial reason to add more household connections.The incentive will be rolled out in two phases of six months each.
Why the need for PNG push
The measure forms part of the government’s wider effort to increase household access to PNG, which it considers a cleaner, safer and more convenient cooking option than LPG cylinders and traditional fuels.The push for wider PNG adoption gathered pace during the Middle East conflict earlier this year, when interruptions to LPG supplies led the government to explore ways of reducing dependence on cylinders, especially among commercial users. Although household LPG supplies were given priority, city gas distributors were encouraged to speed up PNG connections, with incentives offered to consumers and businesses to make the switch.Government data show that more than 5 lakh PNG connections have been gasified since March, while over 5.7 lakh consumers have registered for new connections. The government also directed consumers who had PNG connections to surrender their domestic LPG connections and began a campaign encouraging the transition to piped gas.The government is also working to ease regulatory constraints affecting gas infrastructure, bring greater uniformity to right-of-way charges and persuade states to reduce VAT on natural gas to 5%. Several states have already lowered the tax, according to the statement.As part of the nationwide PNG Drive 2.0, the government is conducting awareness programmes, encouraging housing societies that currently use LPG to shift to PNG and providing households with a facility to surrender their LPG cylinders. Work is also underway on a common digital platform through which consumers can apply for and track PNG connections.The new incentive is aimed at improving the economics of household PNG expansion for city gas distribution companies while making it easier for more consumers to move from LPG cylinders to piped cooking gas.The resulting reduction in costs could bring the payback period for capital expenditure on domestic PNG connections down to around three years from approximately 10 years, the government said. This would give CGD companies a stronger financial incentive to add more household connections.PNG differs from LPG cylinders in that it reaches homes continuously through pipelines, with consumers charged according to metered usage. The government also says piped gas can offer greater convenience and safety by eliminating the need to store and handle cylinders.PNG burns more cleanly than several conventional cooking fuels and could therefore help lower indoor air pollutants as well as carbon emissions.