Piped gas a pipe dream for many!

Updated: Jun 28, 2011, 16:27 PM IST

Pankaj Sharma/ Zee Research Group

Hit hard by Rs 50 hike in LPG prices, consumers are in for more trouble as they are finding it difficult to switch over to environment friendly option of Piped Natural Gas (PNG). This is because there is no uniform tax policy on PNG with some states like Uttar Pradesh (UP) levying an aggregate tax of 26 per cent on PNG.

The Petroleum and Natural Gas Regulatory Board (PNGRB) has repeatedly advocated tax rationalization as the best means to enable large number of consumers to switch over to the safer, uninterrupted and eco-friendly piped gas.

Tax slabs on PNG and CNG vary across states with some state governments leading to much lower than potential gas consumption in these states with Uttar Pradesh being a prime example. While Delhi government declared full tax exemption on CNG consumption, UP imposes the highest 23.5 per cent tax which makes this gas costlier to consumers in the state. Gujarat and Maharashtra both levy 15 per cent tax on CNG. Haryana imposes 5.25 per cent tax on CNG.

For PNG local state tax varies from 5 per cent in Delhi to 26 per cent in UP. Gujarat and Maharashtra each levied 15 per cent tax on PNG. Haryana levied state tax of 5.25 per cent on PNG.

Is there a co-relation between low taxation and consumption? Industry expert and former Indraprastha Gas Limited (IGL) managing director Om Narayan pointed out, “The city gas has made good impact on common man where the prices are below the LPG cost and petrol and diesel cost, which is directly dependent upon tax levied by the state government. This is why Delhi has got maximum number of domestic consumer than UP.”

Rakesh Kumar Bhardwaj, a resident of Rohini in North Delhi, claimed his family’s life had changed after the use of PNG service. “The easy availability of PNG and low cost feature makes it a better option in comparison to LPG,” he argued.

Official statistics suggest that while consumers in Delhi consumed maximum 25 lakh standard cubic meters (scm) per day of city gas, consumers in Uttar Pradesh consumed only 3.5 lakh scm gas per day. Gujarat, which has identified city gas as a key to promoting eco-friendly fuels, has encouraged consumption and at present the state consumed about 20 lakh scm daily.

Executive director, consulting firm KPGM, Arvind Mahajan concurred, “I believe state governments should encourage the use of CNG and PNG. They need to rationalize the high taxation so consumer can take advantage of this environment friendly and cheaper options.”

The petroleum regulator has publicly stated its intent to promote City Gas Distribution Networks (CGDN) in a phased manner across 335 Geographical Areas (GA) in the country out of which 243 areas have been prima facie identified.

Pointing to the enormous potential of city gas, Narayan, formerly with IGL said, “There is so much demand that the entire diesel consumption can be replaced by natural gas. Even the petrol consumption of vehicle and domestic LPG consumption can also be replaced with natural gas.” Even the LPG used for industrial purposes can be replaced by natural gas through city gas distribution projects provided gas is cheaper than these fuels, he added.

Reeling under pressure of high taxation by UP government Delhi-based Indraprastha Gas Limited (IGL) had written a letter to UP government arguing that “to promote the eco-friendly fuel in UP a tax structure similar to Delhi shall be implemented so that the consumer in UP can also take real advantage of pollution free alternative.”

The representation by IGL managing director Rajesh Vedvyas petitioned that the state of UP tax rates are comparatively very high and were becoming the hindrance in the wider acceptability of CNG and PNG in the state due to high prices.

Industry believes consumers in Delhi have shown a great response on PNG and CNG. On highest taxation on natural gas in Uttar Pradesh Narayan said, “The apparent reasons seem to be the expectation of state for getting more revenue from gas sale forgetting the benefits of tax collection on increased volume. If the rate of tax is reduced the consumption will increased tremendously and it may go manifold.”

Narayan, ex-IGL managing director, pointed out the adverse impact of high taxes in UP on the small scale industry as well. “Due to high taxation in UP with respect to neighbouring states Delhi and Haryana, the industries are either closing down or forced to migrate to other states from UP. The small scale industries will close down and no small scale industry will come up in future,” he warned.


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