Gas Companies Considering LNG Imports as Government Drops CNG Prices

City gas companies like Indraprastha Gas Ltd (IGL), Adani Total Gas Ltd, and Mahanagar Gas Ltd (MGL) are considering a hike in CNG prices following a second cut in the supply of low-cost natural gas from old fields within a month. The supply cuts affect natural gas sourced from fields across the Arabian Sea and Bay of Bengal, which is used to produce CNG for vehicles and piped cooking gas for households. Despite concerns, the government emphasizes the need for balanced profitability that does not excessively burden consumers.

On November 16, the government reduced the supply of these cheaper inputs to city gas retailers by 20%, adding to a 21% reduction implemented on October 16. These cuts have forced retailers to explore costlier alternatives like gas from new wells or imported LNG, raising concerns about profitability.

City gas retailers, including IGL, which serves the national capital region, MGL in Mumbai, and Adani Total Gas in Gujarat and other regions, have highlighted potential profitability challenges in their regulatory filings, signaling possible price increases. However, officials from the Ministry of Petroleum and Natural Gas argue that the companies operate on healthy profit margins and can absorb the increased input costs without passing them on to consumers. For instance, IGL reported a net profit of ₹1,748 crore on a revenue of nearly ₹16,000 crore in the fiscal year ending March 31, 2024, reflecting an 11% margin, while MGL posted a ₹1,300 crore profit on ₹7,000 crore revenue, yielding a similar margin.

Officials point out that these margins are far higher than other retailers, such as Indian Oil Corporation (IOC), which reported its best-ever profit of ₹39,617 crore on a revenue of ₹8.71 lakh crore, with a margin of just 4.5%. They assert that if companies seek access to low-priced natural gas, they should provide a transparent cost breakdown of the final CNG pricing. "You can’t demand low-cost inputs without disclosing the pricing structure of the end product," a senior official remarked.