IGL, MGL face perils of policy

City gas distributors Indraprastha Gas Ltd (IGL) and Mahanagar Gas Ltd (MGL) have suffered two consecutive blows in a month.

- Manishjoshi

The government has reduced the supply of cheaper natural gas by 20% for IGL and 18% for MGL, effective 16 November. This follows a previous reduction of 21% for IGL and 20% for MGL, effective 16 October.

Cumulatively, the cut is around 36% each from the original allocation made a month ago, as the production of domestically supplied gas under the administrative price mechanism (APM) has declined. Consequently, MGL and IGL stocks have lost steam, falling 14% and 20%, respectively, over the last two trading sessions.

The price and source from which these companies meet the shortfall are crucial now. For perspective, APM gas is priced at $6.5 per mmbtu and non-APM domestic gas at $8-9 per mmbtu. Spot LNG is even higher at$14 per mmbtu. In the September quarter (Q2FY25), while IGL's gas sourcing consisted of 50% APM gas, for MGL it was 7l% given the former's larger sales volume.