The government has slashed by up to a fifth the supplies of cheaper gas to city gas entities that retail CNG to automobiles, increasing their dependence on costly imported fuel.
Shares of Indraprastha Gas Ltd and Mahanagar Gas Ltd on Friday tumbled more than 10 per cent each after both the firms stated that supplies of domestically produced gas, which was available at a capped rate which is half of the imported price, has been cut.
The stock of Indraprastha Gas slumped 10.25 per cent to settle at Rs 452.70 apiece on the BSE. During the day, shares of the firm cracked 12.88 per cent to Rs 439.40.
Shares of Mahanagar Gas plummeted 10.09 per cent to Rs 1,582.95. Intra-day, the stock plunged 14.58 per cent to Rs 1,503.80.
The government has slashed by up to a fifth the supplies of cheaper gas to city gas entities that retail CNG to automobiles, increasing their dependence on costly imported fuel.
"The company gets domestic gas allocation for meeting the requirement of CNG sales volumes at the pricing fixed by the government (presently at USD 6.5 per million British thermal unit). Based on communication received by the company from GAIL (India) Ltd (the nodal agency for domestic gas allocation), this is to inform that there has been a major reduction in domestic gas allocation to the company effective from October 16, 2024," IGL said in a filing on Thursday.
The revised domestic gas allocation to IGL is about 21 per cent less than the previous allocation, "which will have an adverse impact on the profitability of the company", it said, adding that it is in discussions with key stakeholders to minimise the impact.
Separately, MGL said as per Policy Guideline dated August 10, 2022, issued by the Ministry of Petroleum and Natural Gas, domestically produced Administrative Price Mechanisms (APM) natural gas is to be allocated to city gas distribution (CGD) companies for priority segments, specifically domestic piped natural gas and CNG (transport).
The policy states that the supply of domestic gas to CGD entities will be made only up to the quantity available and allocated to GAIL (India) limited for these segments.
"In line with this policy, the company was allocated APM natural gas for Domestic PNG and CNG (Transport) based on APM gas availability. Allocation to the company for CNG (Transport) has been reduced by 20 per cent, effective October 16, 2024, compared to the previous average quarterly APM allocation," MGL said.
This, it said, being a major reduction in allocation, will have an adverse impact on the profitability of the company.