Government partially restores gas supply to IGL, Adani Total; here’s why | Company Business News

The government has boosted the supply of cheaper gas to city gas retailers IGL, Adani-Total, and Mahanagar Gas, partially reversing the cuts made in 2024, as per the companies’ regulatory filings.

In October and November of the previous year, the government reduced the supply of APM Gas (low-priced natural gas from aging fields like Mumbai High and Bassein in the Bay of Bengal) to city gas retailers by up to 40% due to limited production.

As a result, city gas retailers raised CNG prices by ₹2-3 per kg and planned further hikes to compensate for the reduced supply, which they replaced with higher-priced fuels.

This price increase made CNG less competitive compared to alternative fuels like diesel.

The Ministry of Petroleum and Natural Gas issued an order on December 31, 2024, which revised the allocation of gas from underground and offshore sources. 

The ministry instructed a reduction in the gas supply to state-owned GAIL and Oil and Natural Gas Corporation (ONGC) for LPG production, reallocating those quantities to city gas companies. Of the total 2.55 million standard cubic meters per day used for LPG production, 1.27 mmscmd (split equally between GAIL and ONGC at 0.637 mmscmd each) was redirected for use in the CNG and piped cooking gas sectors during the January-March period, as per the order reviewed by PTI. 

City gas providers confirmed that the increased volumes of APM gas would begin on January 16.

“As per the communication received from GAIL (India) Ltd (the nodal agency for domestic gas allocation), this is to inform that the domestic gas allocations to IGL have been revised upwards by 31 per cent with effect from January 16, 2025, increasing the share of domestic gas in the CNG segment from 37 per cent to 51 per cent,” Indraprastha Gas Ltd (IGL) said in a filing.

The company has also tied-up additional volumes of imported LNG at “competitive prices”, with one of the major suppliers (around 1.0 million standard cubic meters per day).

“The above revision and signing of additional volumes shall have a positive impact on profitability of the company,” IGL, which retails CNG to automobiles and piped cooking gas to households in the national capital and adjoining cities, said.

Adani-Total Gas Ltd, the CNG retailers in cities in Gujarat and elsewhere, said “the allocation of APM gas has been revised upwards by 20 per cent effective January 16, 2025.”

“This upward revision will have a positive impact on the company and will help in stabilizing the retail prices to end-consumers,” it added.

Mahanagar Gas Ltd, the firm that retails CNG in Mumbai and other cities, said its allocation of the domestic gas at APM price has been increased by 26 per cent, thus increasing allocation for CNG from 37 per cent to 51 per cent.

GAIL and ONGC will have to use either higher-priced gas produced from new fields or rely on imported liquefied natural gas (LNG) to volumes lost to city gas retailers. The LPG they make is supplied to fuel retailers like Indian Oil Corporation (IOC) for sale to households as domestic cooking gas LPG in cylinders.

The government subsidises domestic cooking gas LPG and hence the higher cost of production is likely to be borne by it.

In two allocation cuts, the government had reduced supplies of domestically produced gas to city gas retailers by 5-5.25 mmscmd. Half of this is being immediately restored and more will come once the gas from Ramnad field and new wells flows.

Natural gas pumped from below the ground and from under the seabed from sites ranging from the Arabian Sea to the Bay of Bengal within India is the raw material that is turned into CNG for sale to automobiles and piped cooking gas to households.

Production from legacy fields, called APM gas and whose price is regulated by the government to feed city gas retailers, has been falling by up to 5 per cent annually due to the natural decline that has set in. This had led to supply cuts to city gas retailers, officials said.

While the input gas for piped cooking gas that households get is protected, the government has cut supply of raw material for CNG. Gas from legacy fields used to meet 90 per cent of the demand for CNG in May 2023 and has progressively fallen.

The supply was cut to just 50.75 per cent of the CNG demand beginning October 16, 2024, from 67.74 per cent in the previous month. It was further reduced beginning November 16, 2024.

While the APM gas is priced at USD 6.5 per million British thermal unit, the gas produced from new wells is priced at about USD 2 more.