Mon Nov 18 07:14:13 UTC 2024: ## City Gas Companies Face CNG Price Hike After Government Cuts Cheap Gas Supplies

**New Delhi, Nov 17, 2024** – City gas distribution (CGD) companies are considering increasing Compressed Natural Gas (CNG) prices following a second cut in government-supplied, low-cost natural gas within a month. The Ministry of Petroleum and Natural Gas, however, is demanding a detailed cost breakdown from retailers before approving any price hikes.

The government reduced supplies of cheaper gas from older fields by up to 20 percent, effective November 16th, following a 21 percent reduction on October 16th. This has prompted companies like Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL), and Adani Total Gas Ltd to express concerns about profitability and hint at potential price increases in regulatory filings.

Government officials argue that these companies operate on substantial margins and should be able to absorb the increased costs associated with replacing the lost supply with more expensive gas from newer wells or imported LNG. They cite the high profit margins reported by IGL (11%) and MGL (around 18%) in the fiscal year ending March 31, 2024, as evidence. Officials emphasized that while the government isn’t against profitability, a transparent cost breakdown is necessary before any price adjustments are considered.

The reduction in supply stems from a natural decline in production from older, regulated gas fields (APM gas), which has fallen by up to 5 percent annually. While household piped cooking gas remains protected, the government has targeted CNG supplies, which relied on APM gas for 90% of its demand in May 2023. This has fallen to approximately 30% currently.

To compensate for the shortfall, IGL, for example, may have to purchase more expensive gas from new wells, potentially leading to a CNG price increase of ₹4-6 per kg. Adani Total Gas Ltd reported a 13% supply cut, and MGL experienced an 18% reduction. Both companies indicated they were exploring options to maintain supplies while mitigating the impact on profitability. The industry is currently in discussions with stakeholders to resolve the issue.

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