IGL hikes CNG prices, passes on additional cost

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IGL hikes CNG prices, passes on additional cost

Indraprastha Gas Ltd (IGL) has hiked the price of compressed natural gas. In an interview to CNBC-TV18, M Ravindran, managing director of IGL says, the company has passed on the entire additional cost because of the rupee devaluation and issue of gas price increase.

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Indraprastha Gas Ltd (IGL) has hiked the price of compressed natural gas (CNG) by Rs 1.75 per kg in Delhi and by Rs 2 per kg in Noida, Greater Noida and Ghaziabad.

In an interview to CNBC-TV18, M Ravindran, managing director of IGL says, the company has passed on the entire additional cost because of the rupee devaluation and issue of gas price increase.

Below is the edited transcript of his interview with CNBC-TV18's Sonia Shenoy and Gautam Broker. Also watch the accompanying video.

Q: You have raised prices for CNG. Have all of the additional costs been passed? What exactly are you trying to pass on in terms of PNG going forward?

A: I think we have passed on the entire additional cost we have been incurring because of this rupee devaluation and issue of gas price increase. Practically that is the process that we have been following all these past few months. Because of these issues, I think this is how we have to go in the coming years also.

Q: What about PNG? The last hike you took was in September. After that, prices have not been raised. What's the strategy on that?

A: We have not targeted the PNG segment right now because majority of the volumes are coming from the segment of CNG. This is the area we would like to have more of growth. PNG, practically we are trying to get it in within the same pricing limit in this financial year atleast.

Q: On spot prices of LNG, what's the trend looking like? Do you expect further softening once the winter season is out or would you expect prices to hold up in the current range?

A: The spot LNG prices should be in the variation of 5-10% only. It should be in this range of around USD 16-18, what we are right now being offered by the various gas suppliers. In the coming years, definitely we would like to see that the long-term sourcing is ensured so that the spot LNG's share is minimum in our entire basket of fuel.

Q: The other thing to note was that while rupee depreciated about 14% during Q3, you were able to pass on costs only at the end of the quarter, that's December 30. Will that mean that margins could be impacted in near-term and we could see a slight sequential slippage in terms of overall margins?

A: I do not think it should have very big impact. But anyway whatever issues, with respect of the price increase, we could pass on in the last part of Q3.Iit will definitely have definitive impact to that extent.

Q: The one thing that IGL definitely needs is long-term LNG tie ups. You have had quite decent growth over the last few quarters and the market is expecting you to grow significantly, but your reliance on spot LNG definitely hurts. What's the outlook on tying up more long term LNG going forward?

A: Definitely yes. Long-term LNG is the primary challenge for IGL right now. For this, we are already in talks with promoters including GAIL, BPCL as well as other parties available in the market. Our immediate challenge is to get these things. I am very hopeful that this will be done in next five-six months.

Q: Gujarat Gas, India's largest CGD player, is on the block. One of your parents, GAIL, seems to have evinced interest in that. Have you had any conversations with the GAIL management on that or their strategy with regard to a possible acquisition of Gujarat Gas?

A: No right now, it is primarily I think the promoters stake. Probably GAIL will definitely take a call because GAIL is bigger player in the market. GAIL has a bigger vision to consolidate the CGD. So, probably there is an internal strategy within the company which they will be taking a decision. IGL has no issue to that till date.