The move is aimed to popularise the use of CNG and PNG considering the high pollution levels in many cities across the country, Mr Moily said.
State-run Indraprastha Gas Limited (IGL), the distributor of CNG in Delhi, and other city gas distribution firms will get cheaper domestic gas, Mr Moily said. The exact rates across cities would vary after taking into effect local taxes.
However, there would be no effect on gas prices in cities like Mumbai which already get 100 per cent domestic gas.
The oil minister said the government has decided to raise allocation of natural gas from domestic fields to city gas entities to 100 per cent from current limit of 80 per cent. This would be done by cutting supplies to non-core sectors like petrochemicals, steel and refineries.
"This (move) would lead to reduction in price of CNG and PNG across the country (except in those cities which are already getting 100 per cent domestic gas like Mumbai). The price of CNG in Delhi would be reduced by about Rs 15 per kg (about 30 per cent). There will also be a reduction of about Rs 5 per cubic metres (about 20 per cent) in the price of PNG," Moily said.
The decision to cut rates comes at a time when the government is struggling to rein in its fiscal deficit at 4.8 per cent of the GDP. Fiscal deficit in the first three quarters have inched closer to the budgeted target for the whole year.
In January, Indraprastha Gas Limited had hiked gas rates by nearly Rs 5/kg in Delhi, citing reduced availability of cheaper gas. The Aam Aadmi Party government in Delhi had sought a rollback of the hike and had moved the Supreme Court.
The surprise decision to cut NCG prices comes after last week's Cabinet decision to raise the quota of subsidised LPG per household from nine to 12 cylinders a year. The decision is expected to inflate the government's subsidy bill by Rs 5,000 crore. (With agency inputs)