Shares of Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL) rose up to 2.5% on January 3 as Oil Ministry has asked GAIL and ONGC to divert 0.6 mmscmd gas to city gas firms.
New well gas and oil-linked gas will not be auctioned but allocated proportionally on basis of volume to companies, said the circular.
This move will reduce City Gas Distribution firms' dependence on gas from spot market.
IGL will get the highest allocation owing to higher market share.
At 10:30 am on January 3, IGL's shares were trading 2.5% higher at Rs 437 apiece while the shares of MGL were trading 1.8% higher at Rs 1,319.5 apiece.
In November, the central government cut the the Administered Price Mechanism (APM) allocation to CGD players by 20 percent for the second month in a row.
A reduced allocation in the APM means that the Centre has cut the supply of low-priced natural gas from old fields to city gas retailers. As a result, the CGDs will have to look for alternative options to bridge the gap in the input gas, such as New Well Gas or spot LNG, which are more expensive.
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