IGL warns of profit hit as domestic gas allocation to CNG retailers slashed again

Indraprastha Gas Limited (IGL) on Friday confirmed a further reduction in domestic gas allocation to CNG retailers, which is expected to adversely impact the company’s profitability.

In a regulatory filing to the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), the company said the revised domestic gas allocation is around 20% lower than the previous allocation. This follows a 21% cut effective October 16.

"Based on another communication received by the company from GAIL (India) Ltd (the nodal agency for domestic gas allocation), this is to inform that there has been further reduction in domestic gas allocation to the company effective from November 16, 2024. The revised domestic gas allocation to the company is approx. 20 per cent lesser than previous allocation which will have an adverse impact on profitability of the company," IGL said.

The company currently procures domestic gas at a government-regulated price of $6.5 per million British thermal units (mmbtu), primarily for its CNG operations. With the reduced supply, IGL may be forced to rely on imported liquefied natural gas (LNG), which costs nearly double, reported PTI.

Natural gas from India's ageing legacy fields, which supply city gas distributors like IGL, is declining by about 5% annually. This has progressively reduced domestic gas availability for CNG, which accounted for 90% of supply in May 2023.

While piped cooking gas supplies for households remain unaffected, the shortfall in CNG feedstock may force retailers to adjust prices. However, no immediate price hike has been announced as retailers, including IGL, are in discussions with the ministry of petroleum and natural gas for a resolution, according to PTI.

CNG price hike is also a political issue since Maharashtra goes to the polls next week and elections are also due in Delhi soon. Delhi and Mumbai are among the biggest CNG markets in the country.