High taxes force HPCL to hike CNG prices

Vol 13, PW 10 (22 Oct 09) Midstream & Downstream

High local taxes have forced Mumbai-based refiner Hindustan Petroleum to hike CNG prices at its 16 stations across Ahmedabad.

From October 1, HPCL increased the pump price from Rs28.62/kg to Rs30.62/kg, making it the most expensive in Gujarat. “There was no option,â€‌ says a HPCL source.

“We had to introduce this price rise.â€‌ HPCL blames heavy taxation in Gujarat, in particular VAT charged at 15% and excise duty charged at 14.42%, which together add Rs7/kg to the price.

“Our procurement prices work out to almost Rs22/kg,â€‌ adds HPCL. “With taxes coming in at Rs7/kg on top of that we were losing money by selling at Rs28.62.

â€‌ Fears are growing in Gujarat that other operators like Adani, GSPC Gas, Sabarmati Gas, Charotar Gas and Gujarat Gas may soon introduce similar hikes to offset soaring procurement costs, high transportation charges, and high taxes. “No gas retailer is earning money from CNG,â€‌ a leading CGD operator says.

Adani, market leader in Ahmedabad with 42 CNG stations and in Vadodara with 7 CNG stations, was planning to increase CNG prices after â€کDiwali’ (the Hindu festival of lights). “CNG is an environmentally-friendly fuel,â€‌ we hear, “the government should have a more fair tax structure.

â€‌ Gujarat is the largest and most mature CNG market in India. In Ahmedabad, more than 45,000 autorickshaws run using CNG, as do state buses and private vehicles.

“More people are using CNG,â€‌ says an industry source, “with almost every CGD operator increasing its presence in the market.â€‌ But CNG is a politically sensitive commodity and all CGD operators have had trouble in the past when raising prices.

“There have been instances,â€‌ we hear, “when price rises had to be withdrawn following protests by autorickshaw unions.â€‌ In June 2007, autorickshaw drivers went on a flash strike, throwing stones and setting public buses on fire when Adani Energy tried to increase CNG prices.

Breakdown of CNG prices in Gujarat (correct on 21 October 2009) Company Areas of operation No. of stations CNG price/kg Hindustan Petroleum Ahmedabad 16 Rs30.62/kg Adani Energy Ahmedabad, Vadodara 49 Rs28.62/kg Sabarmati Gas Gandhinagar, Mehsana, Sabarmati 10 Rs28.62/kg GSPC Gas South Gujarat (14 stations) Central and North Gujarat (26) Saurashtra (17) 57 Rs28.00/kg Charotar Gas Anand 1 Rs28.00/kg Gujarat Gas Surat, Bharuch, Ankleshwar, Bardoli, Kim 29 Rs27.50/kg GAIL Vadodara 3 Rs27.33/kg