The government fixes the price of natural gas produced by firms like state-owned ONGC from given fields on nomination basis every six months.
ICICI Securities said in a report that CNG and piped cooking gas prices in cities like Delhi and Mumbai may increase by 10-11% next month as the government-fixed gas price hiked by about 76 per cent. Might be possible.
The government prices natural gas produced by firms such as state-owned Oil and Natural Gas Corp (ONGC) from fields assigned to them on a nomination basis every six months, using rates prevailing in gas-surplus countries. . The next review will be on October 1.
The brokerage said the price, called the APM or administered rate, would rise to $3.15 per million British thermal units (mmBtu) from the current $1.79 for the period October 1, 2021 to March 31, 2022.
Gas rates from deep water fields such as Reliance Industries Ltd’s KG-D6 and BP Plc will increase to $7.4 per mmBtu next month.
Natural gas is the raw material that is converted into compressed natural gas (CNG) for use in automobiles as a fuel or piped into home kitchens for cooking.
“The expected jump in APM gas prices will present a challenge for city gas distribution (CGD) players as it will mean an increase in their gas cost for CNG and residential piped natural gas.” “The increase in APM gas prices will mean huge price hikes by IGL (which retails CNG in the national capital and adjoining cities) and MGL (which retails CNG in Mumbai) over the next one year. will be increased.” ICICI Securities said in a report that city gas distributors (CGDs) will have to hike prices by 10-11 per cent in October.
As per the trend in the international markets, the APM gas price is likely to reach $5.93 per mmBtu in April 2022 to September 2022 and $7.65 during October 2022 to March 2023.
This would mean an increase of 22-23% in CNG and piped natural gas prices in April 2022 and 11-12 per cent in October 2022.
“The increase in the price of APM gas from USD 1.79 per mmBtu in H1FY22 to USD 7.65 per mmBtu in H2FY23E will mean that MGL and IGL will have to hike prices by 49-53 per cent during October 2021 to October 2022,” it said. “CGD players may be able to take necessary hefty price hikes in view of increasingly higher prices of competing fuels, petrol and diesel. However, some hit to the existing higher margins of MGL and IGL cannot be ruled out.” The increase in gas prices will help boost margins of private companies such as ONGC and Oil India Ltd as well as Reliance Industries Ltd (RIL).
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