CGD companies to face APM gas crunch in the near-term: MGL head Ashu Shinghal

Availability of administered price mechanism (APM) gas for city gas distribution (CGD) companies, including Mahanagar Gas Limited (MGL), would continue to remain a challenge in the near-term, the firm’s Managing Director Ashu Shinghal told Moneycontrol in an interview.

The supply of APM gas to the company has fallen to 60 percent in the first quarter of the financial year 2024-25 from 80-85 percent as compared to last year, Singhal said, adding that the shortfall has led to higher procurement costs for MGL.

“The problem is likely to continue for some more time, primarily because APM gas availability is flat, and the CGD consumption is growing. Although the reduction may not be drastic as compared to last year, there will be some shortage in the near future,” said Shinghal.

The state-run CGD company’s net profit slumped 21 percent year-on-year to Rs 289 crore in the quarter ended June 30, as compared to Rs 368 crore last year. The MGL head said the bottom line of the company was impacted due to higher procurement costs.

“Out of the priority segment, which is PNG and CNG, around 60 percent is APM gas. The balance of up to 16 percent is met through term contracts. The rest is through High Pressure High Temperature [HPHT] volumes and some balancing is done from the [gas] exchange, which depends on the availability,” said Shinghal.

The crunch of APM gas, which is partially subsidised by the government, can be attributed to a rise in consumption and stagnant domestic production.

Gas volumes

During the first quarter, MGL’s compressed natural gas (CNG) volumes reported an increase of four percent against the previous quarter. Shinghal said the increase in CNG volumes could be attributed to an ongoing upgrade of the country’s physical infrastructure.

“Since infrastructure such as road facilities, MGL-run compressed natural gas [CNG] stations and those operated by other firms are improving, the demand will be sustained over a period of time. However, the demand won’t be to this extent that was being seen in this quarter,” he added.

Meanwhile, the company reported a decline of over two percent in the piped natural gas (PNG) business in the quarter for both domestic and industrial segments. Shinghal pointed out that the volume slump in the PNG segment was primarily seasonal and due to the temporary shutdown of some of the industrial customers.

“We are not too worried about the slump. The sales will go up once the industrial customers are back in business,” he said.

MGL expects a volume growth of 7-8 per cent for this financial year.

CNG price hike

Shinghal said the company tries to maintain stable prices for both CNG and PNG, but the uptick hinges on certain triggers, including procurement cost.

Earlier, on July 8, MGL increased CNG prices by Rs 1.5 per kilogram (kg), citing shortage in APM gas allocation. Shinghal, however, did not comment on the decision regarding further price revision.

Mahanagar Gas spent Rs 240 crore during the quarter primarily to increase the PNG network and CNG stations.