High CNG prices are temporary, says CEO of Adani Total Gas

The trend towards CNG adoption still  remains strong despite increasing retail prices, says Suresh Manglani, CEO of Adani Total Gas. In his view, the uptick is a “passing storm” and “will pass away soon”.

In a recent investor Manglani said, "I think there is a huge momentum and while prices rises are again expected,  we are sure that there will bea  solution to make sure that the larger public interest is protected, " Manglani said in a recent investor call.  

The company’s  management has also noted that as  OEMs increasingly continue  to release CNG vehicles, it is still too early to determine if there has been a discernible reduction in the growth of CNG conversion as a result of retail price hikes. In the last fiscal, the passenger vehicle segment saw CNG-powered sales clock near- 55 percent  YoY growth with sales of 265,383 units, accounting for 8.64 percent  of total PV sales of 30,69,499 units compared to 6.30 percent CNG PV share in FY2021.

For Manglani, Adani Total Gas's performance during the period between April-June is an indicator of CNG's rising demand despite the price spikes,  with the  company  installing 15 new CNG stations, bringing its total to 349. In comparison to last year, the company's CNG volume during the same period increased dramatically by 61 percent, reaching 109 million cubic meters (MMCM). Adani Total Gas , which gets counted amongst  India’s largest private CGD companies is a joint venture between the Adani Group and TotalEnergies, and has won licences to expand its City Gas Distribution (CGD) network to 14 new locations.

The company's target is to take its CNG outlets  to around 2000 over next few years at an investment of around Rs 12,000 crore. 

The comments from Adani Total Gas's top leadership  should be seen in context of  a hike of  Rs 6 on August 3, which had taken prices of CNG to Rs 86 per kg in Mumbai.  Between February 8, 2021 and August 3, 2022, a period of 19 months, CNG price has risen by 72 percent  or Rs 36.60 per kg.

CY2022 has already seen six price hikes till early August, though there was a reduction  on August 17, bringing prices down by Rs 6 bringing it down to Rs 80 a kilogram in Mumbai. The situation may become a matter of concern if there is another round of Administrative Price Mechanism (APM) gas price increases, which if then followed by a spike in spot LNG prices during  winter could eventually make CNG  as expensive as gasoline itself. The APM is the mechanism that determines at what price fuel is sold to customers.

Given the high prices of fossil fuels with petrol at Rs 106.31 and diesel at Rs 94.27 per litre respectively in Mumbai, CNG still turns out to be close to 30-35  percent cheaper than conventional auto fuels. Depending on how long the vehicle runs, the payback period may change. To put things in perspective, a big fleet owner of commercial vehicles may estimate the payback period to be between 18 and 2.5 years. However, the duration of a taxicab could be anything between 12 and 18 months.

On a cautious note, Manglani added that if the CNG prices remain untamed, then it may end up  having a substantial influence on the government's aspirations to increase natural gas utilisation from its current level of 6.5 percent to 15 percent by 2030.