With global natural gas prices rising, a hike in CNG prices in India was to be expected too. Mahanagar Gas announced a price hike of Rs 6 per kg in Mumbai, which is a 7.5 percent hike. This is the seventh hike this year and takes the price of the CNG to Rs 86 per kg.

• CNG vehicle sales grew 55 percent in FY2022
• CNG vehicles more expensive to maintain too

This is the first hike since August 17, when CNG prices were reduced by Rs 6, to Rs 80. This calendar year (January-December 2022) has also witnessed two CNG price reductions by Rs 6 per kg – one in August, and the other on April 1.

Over a 20-month period, from February 2021 through to September 2022, CNG prices in Mumbai have risen by 74 percent: from Rs 49.40 per kg to Rs 86 per kg.

On October 1, the Ministry of Petroleum and Natural Gas hiked natural gas prices by 40.50 percent, neccessitating the latest price hike. On October 4, Mahanagar Gas said, “The price of domestically produced APM gas has been revised by Petroleum Pricing & Analysis Cell [PPAC] with effect from October 1, 2022.”

Price hike could impact demand for CNG cars

The substantial price difference between CNG and other fuels has always been one of the compelling reasons for users to pick CNG, albeit that is now reducing. Nonetheless, if one factors in CNG’s inherently higher fuel efficiency, it still offers increased savings. Given the high prices of petrol and diesel, sales of CNG-powered cars have been growing over the past few years, with major manufacturers like Maruti Suzuki, Hyundai Motor India and Tata Motors expanding their CNG portfolio.

In FY2022 (April 2021-March 2022), the passenger vehicle segment saw CNG-powered car sales increase near-55 percent with sales of 2,65,383 units. They accounted for 8.64 percent of the total PV sales of 30,69,499 units compared to a share of 6.30 percent the year before.

Will rising CNG prices drive consumers towards EVs?

While it is difficult to say whether CNG prices will keep increasing, the fact remains that CNG vehicle running costs are significantly lower. However, a few challenges remain. Refuelling takes longer due to fewer CNG stations, and highway driving requires additional planning in terms of trying to take a route with a CNG station. One also has to keep in mind that servicing costs of CNG-powered cars are higher compared to petrol siblings as the CNG filter requires scheduled replacement in factory-fitted CNG kits.

Car buyers now have another option – electric vehicles – and although the initial cost of an EV is higher than a CNG or petrol/diesel model, the lower running costs in the long run is very attractive. With the central and state governments offering a host of subsidies, it is likely the CNG sector's loss could be the EV segment's gain.