CNG supply: Government reduces supply of natural gas for the second time in a month, how much will CNG become expensive?

CNG Supply: IGL said that the changed domestic gas allocation is about 20 percent less than the previous allocation, which will have a direct impact on the company's profitability. IGL gets domestic gas allocation at the government-fixed price.

CNG Price: Indraprastha Gas Limited (IGL) said that further cuts in domestic gas supply to CNG companies can have an impact on its profit. For the second time in a month, the government has cut the supply of cheap natural gas produced domestically to retail CNG vendors. The company, which retails CNG for vehicles in Delhi and surrounding cities and piped LPG to households, said in the information given to the stock market that from November 16, domestic supply has been reduced by about 20 percent.

Price of imported gas is twice the rate of domestic gas

Earlier, from October 16, the supply was cut by about 21 percent. "Based on another information received by the company from GAIL (India) Ltd (the nodal agency for allocation of domestic gas), it is informed that there has been further reduction in the domestic gas allocation to the company with effect from November 16, 2024," IGL said. Which will have a direct impact on the company's profits. IGL gets domestic gas allocation at the government-fixed price (current USD 6.5 per million British thermal unit). The alternative is imported gas, which costs twice the domestic rate.

After the reduction of 21 percent and now 20 percent, the price of CNG may increase in the coming time after the reduction in supply twice a month and the indication of reduction in profit from IGL.

In fact, the government has reduced the supply of cheap gas to city gas distribution companies selling CNG to vehicles by 21 percent and now by 20 percent. After this move of the government, the dependence of companies will increase on expensive imported fuel. To compensate for the reduction in cheap gas, companies will have to buy expensive gas. This may increase the price of CNG.

Recently, when the government cut the supply of cheap natural gas, the rating agency ICRA had expressed the possibility that companies could increase the retail price by 5 to 6 rupees. But even after about a month, there was no change in the price. But this time after this statement of IGL came out, it will have a direct impact on its profit. Now the price of CNG can be increased. It is expected that IGL can increase the price of CNG by Rs 5 to 6 to maintain profit.