Vadodara gas users can expect nasty price shock!

Vol 13, PW 12 (19 Nov 09) Midstream & Downstream

Behind the smiles and handshakes of GAIL’s landmark agreement with the Vadodara Municipal Corporation (VMC) last month sits an uncomfortable truth: the price of piped cooking gas supplied to 74,000 homes in this seat of the former Gaekwad royal family is set to double.

Until now homes in Vadodara have benefited from one of the lowest prices in India for piped cooking gas: just Rs7.90/cubic metre. But the MoU with GAIL signed on October 14 means these prices will inevitably come in line with piped gas prices elsewhere in Gujarat.

“There is no doubt Vadodara customers will have to pay more for their gas,â€‌ a GAIL source tells PETROWATCH. “There is no alternative.

â€‌ Until now VMC could supply its customers cheaply because it buys 100,000 cm/d government subsidised gas for just Rs3.20/cubic metre from GAIL. In India, Vadodara is the only city that receives subsidised piped cooking gas, but sadly for its residents there won’t be enough to go around when the new JV consolidates and expands to add another 350,000 customers, as planned.

More gas will have to be secured from the east coast or as R-LNG. “Obviously R-LNG or D6 gas can’t be as cheap as subsidised gas,â€‌ adds a VMC official.

“And we cannot have a dual price structure in the same city, discriminating between old and new customers. Therefore we need to have price parity.

â€‌ VMC and GAIL are expected to average the costs of subsidised gas and additional supplies to fix a pooled price for Vadodara gas. VMC has been distributing piped gas in Vadodara since July 19, 1972, and is the first and only municipal corporation in India to do so.

For GAIL this is the first time it is forging an alliance with a municipal corporation.