News Oil & Gas

Several city gas companies like MGL, IGL and Adani Gas cut CNG prices


NEW DELHI: Compressed natural gas (CNG) prices have fallen in several parts of the country ahead of the general election after petroleum and natural gas minister Hardeep Puri said earlier this week that the full benefit of the government’s measures in the gas sector hasn’t reached the end customer.

Several city gas distributors, including Mahanagar Gas (MGL), Indraprastha Gas (IGL) and Adani Gas, have reduced CNG prices by Rs 2.5 per kg. A sharp decline in international gas prices in the past few months also helped companies quickly respond to the comments by the minister, who said the government’s objective was to bring “gas to the consumer at the most affordable rates”. Puri also pointed towards the strong profits of city gas distributors.

City gas companies get cheaper domestic gas and a softer tax treatment from the government, and at the same time use their monopoly in their respective licensed areas to sell CNG at a price that ensures strong profit margins. Many of them have enjoyed extended monopolies, with regulatory attempts to end monopolies ending up in courts.

A senior city gas executive, who didn’t want to be identified, said some companies extract much more from CNG consumers than others and need to be restrained but not all. He pointed to Uttar Pradesh, where CNG prices vary by Rs 10-15 from one district to another, even as taxes are the same across the state.

Regulated domestic gas, currently priced at $6.5 per mmbtu, meets about 75% of the CNG sales. City gas companies source gas at market rates from the domestic or the international market to meet the balance of CNG sales requirements. The average spot LNG prices in the Asian market have dropped to $8.8 per mmbtu in the January-March period from $15.1 in October-December 2023. This decline has given city gas companies room to cut CNG prices, an industry executive said.

Puri’s stress on increased compliance by city gas distributors and the regulator’s announcement this week that MGL has lost its monopoly over Mumbai shook many investors’ faith in companies’ ability to offer strong returns in the future, leading to a sharp drop in their share prices.Traditionally, city gas companies have made higher profits in the CNG business than by supplying to households.


Source link