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City gas firms like Indraprastha Gas and Adani Total Gas are weighing a boost in CNG costs
City gas stores in regulative filings flagged earnings problems because of provide cuts and meant the rate walking.
City gas firms like Indraprastha Gas Ltd and Adani Total Gas Ltd are weighing a boost in CNG costs after materials of less costly input gas were reduced for the 2nd time in a month, however federal government authorities state the stores have to offer a price break up to validate the walking.
The federal government, with result from November 16, reduced materials of low-cost gas originating from old areas to city gas stores by approximately 20 percent. This decrease began the rear of a 21 percent decrease on October 16.
City gas stores IGL, which retails CNG in the nationwide resources and adjacent cities, Mahanagar Gas Ltd does the exact same in Mumbai, and Adani Total Gas Ltd which runs in Gujarat and somewhere else, in regulative filings flagged earnings problems because of provide cuts and meant the rate walking.
Officials in the Ministry of Petroleum and Natural Gas nevertheless are not impressed as they really feel the stores operate “large” margins and can easily absorb the additional cost they may have to incur on replacing the lost volumes with slighted higher-priced gas from new wells or imported LNG.
“Take for instance IGL. It posted a net profit of Rs 1,748 crore on revenue of close to Rs 16,000 crore in the fiscal year ending March 31, 2024. That is a margin of 11 per cent. MGL had a profit of about Rs 1,300 crore on a revenue of Rs 7,000 crore. Which retailer earns that kind of margin?” an elderly main asked.
Officials claimed the federal government is not versus firms making revenues however if they desire low-cost input (gas from old areas) after that they ought to likewise proclaim the expense break up of the end product (CNG).
“There can not be a scenario where you demand obtaining low-priced input however will certainly not disclose the accumulation to the end product rate,” another official said.
“The profitability numbers show they have been operating at huge margins. Indian Oil Corporation, which is also a retailer, had its best ever profit of Rs 39,617 crore on a revenue of Rs 8.71 lakh crore, implying a margin of 4.5 per cent.”
Natural gas pumped from listed below the ground and from under the seabed from websites varying from the Arabian Sea to the Bay of Bengal within India is the raw product that is developed into CNG to buy to autos and piped cooking gas to homes.
Production from heritage areas, called APM gas and whose rate is controlled by the federal government to feed city gas stores, has actually been dropping by approximately 5 percent yearly because of the all-natural decrease that has actually embeded in. This has actually caused provide cuts to city gas stores, authorities claimed.
While the input gas for piped food preparation gas that homes obtain is safeguarded, the federal government has actually reduced the supply of basic materials for CNG. Gas from heritage areas made use of to satisfy 90 percent of the need for CNG in May 2023 and has actually considerably dropped. The supply was reduced to simply 50.75 percent of the CNG need start October 16 from 67.74 percent last month. Now it has actually better been minimized.
In a stock market declaring, IGL claimed, “Based on one more interaction obtained by the firm from GAIL (India) Ltd (the nodal company for residential gas appropriation), this is to notify that there has actually been additional decrease in residential gas appropriation to the firm reliable from November 16, 2024.
“The modified residential gas appropriation to the firm is approx. 20 percent lower than previous appropriation which will certainly have a damaging effect on earnings of the firm.”
IGL gets domestic gas allocation for meeting the requirement of CNG sales volumes at the pricing fixed by the government (presently at USD 6.5 per million British thermal units).
To make up for the lost volume, it can buy gas produced from new wells that cost about USD 2 more.
Drilling new wells is at a cost and so gas from them is also priced higher, officials said.
Sources in city gas retailers said using a costlier alternative to make up for the shortfall may lead to a hike in CNG prices that varies from Rs 4-6 per kg. Adani Total Gas Ltd in a separate filing said its supplies have been cut by 13 per cent.
“Such reduction is across the city gas distribution (CGD) industry. While the industry is in discussion with key stakeholders pending resolution, there would be an adverse impact on the profitability of the company,” it claimed.
“Also, the firm is checking out the present scenario and will adjust the market prices to finish customers to reduce the influence of reduced appropriation while it will certainly remain to supply nonstop gas to its customers.”
MGL said, “As per Policy Guideline dated August 10, 2022, issued by the Ministry of Petroleum and Natural Gas, domestically produced administrative price mechanisms (APM) natural gas is to be allocated to city gas distribution (CGD) companies for priority segments, specifically domestic piped natural gas and CNG (transport). The policy states that the supply of domestic gas to CGD entities will be made only up to the quantity available and allocated to GAIL (India) Limited for these segments.”
“In line with this plan, the firm was designated APM gas for residential PNG and CNG (transportation) based upon APM gas accessibility. Allocation of APM gas to the firm has actually been minimized by 18 percent reliable November 16, 2024, contrasted to October 16, 2024, APM appropriation. This being a significant decrease in appropriation, will certainly have an influence on the earnings of the firm,” it said.
To bridge this shortfall, MGL is exploring options of sourcing gas through domestically produced new well gas from ONGC and benchmark-linked long-term gas contracts, to continue to provide gas to its customers with price stability, according to the filing.
(This tale has actually not been modified by News18 personnel and is released from a syndicated information company feed – PTI)
