Companies including Indraprastha Gas, Gujarat Gas , Mahanagar Gas have seen their margins squeezed because the allocation of natural gas sold under government-set Administered Pricing Mechanism (APM) has fallen because of lower output at domestic wells. To make up the shortfall, the companies have to buy gas on the more expensive open market.
APM allocations are expected to further decline as explorer Oil and Natural Gas Corp slashed its peak output from the KG-D6 basin in January.
“In December, we have seen some disruptions in APM gas allocations and eventually as the gas demand increases, the allocations will come down,” said Ashu Shinghal, managing director of Mahanagar Gas.
“Right now we are absorbing costs, if APM allocations go down further we will take a call on price hikes,” Shinghal said.
Shinghal expects the company’s gas demand to rise by 6% to 7% from a year ago in the fiscal year 2025. Demand from the industrial, commercial sector has been good and Asian liquefied natural gas prices are expected to be stable, Shinghal added.
(You can now subscribe to our Economic Times WhatsApp channel)