No further adjustment or price reduction for Compressed Natural Gas (CNG) is required after the government partially restored the allocation of the cheaper Administered Price Mechanism (APM) gas, Mahanagar Gas Limited managing director Ashu Singhal told Moneycontrol.
Mahanagar Gas had hiked CNG prices after the government reduced APM gas allocation to the City Gas Distribution (CGD) companies twice in October and November. With partial restoration of APM gas availability to CGD companies in January, Shinghal said the company’s CNG prices are at par with the cheaper gas allocation.
“Almost 50 percent of the deductions have come back. So that’s a positive sign. We also increased our prices by Rs 3 (per kg) in two tranches. So, we are at par now; we don’t need further adjustment. Because we increased the price and 50 percent re-allocation has happened,” Shinghal said .
The government on October 16 had reduced APM gas allocation for the CNG segment from around 68 percent to 50.75 percent and further to 37 percent on November 16. CGD companies had to rely on costlier sourcing options including High Pressure High Temperature (HPHT) and spot gas, which hit their margins. However, in January, APM gas allocation for the CNG segment was raised to 51.48 percent.
With depleting domestic production, the government had to cut allocation of APM gas to CGD companies. APM gas is sold at cheaper price to CGD players in the country to ensure essential services such as domestic PNG and CNG. According to government data, APM gas is sold at $6.5 per mmBtu while HPHT gas costs $10.16 per mmBtu.
“Every year, 7 percent APM gas allocation will come down and that gas will be allocated to new-well gas on priority to CGD entities. It’s not that the gas is going to some other place; it’s not that the production is coming down, it is just renaming the gas. The new-well gas will be (priced at) 12 percent to Indian crude basket. So, the weighted average will go up, but at the same time, volume risk is not there,” Shinghal added .
New-well gas is produced from recently drilled well, and is priced higher than gas from existing wells to make gas projects more viable.
For the company’s capital expenditure, Shinghal said MGL would spend Rs 1,100 crore in the coming financial year 2025-26 (FY26), compared to around Rs 1,000 crore spend in FY25. MGL’s total volume growth came in at 12 percent in the first nine months of the current financial year. Shinghal foresees similar trend for the coming few years with volume growth expected at around 13-14 percent for the company.
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