Natural gas producers rise as government hikes prices by more than 100%

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26 Aug, 2025 12:21

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Shares of natural gas producers surged on April 1 after the government on March 31 hiked the administered gas price by more than 100 percent to $6.1 per mmBtu for the first half of the new financial year.

The spike in the domestic administered price comes on the back of a surge in global natural gas prices triggered by demand spike after the re-opening of the economy and the supply shortage caused by western sanctions slapped on Russia for its invasion of Ukraine.

At home, gas producers such as Oil & Natural Gas Corporation, Oil India and Reliance Industries will be the key beneficiaries of the hike in natural gas prices.

Market participants were relieved that the government retained its formula-based approach towards natural gas prices, amid concerns that it could momentarily abandon the mechanism given the impact it could have on inflation.

Brokerages had earlier said that city gas distribution companies, for whom natural gas is an input, had made representations to the government for a staggered increase in natural gas prices.

Brokerage firm CLSA India said that the price increase is a “big positive” for ONGC and Oil India as reforms are unlikely to be rolled back amid high energy prices. It expects 160 percent and 130 percent upside in ONGC and Oil India.

Shares of ONGC, Oil India and Reliance Industries rose 0.4-1 percent on the National Stock Exchange.

On the other side of the table, analysts expect some pain for city-gas distributors and GAIL’s marketing division.

City gas distribution companies have seen a sharp reduction in their margins over the past few months due to higher spot natural gas prices. The sector has taken sharp price hikes so far but there are concerns that demand could get hit on further hikes.

Brokerage firm Morgan Stanley India is underweight natural gas midstream players like Petronet LNG and Gujarat Gas. However, shares of Mahanagar Gas were up 0.2 percent on the NSE, while those of Indraprastha Gas were higher by 0.4 percent.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.