Centre partially restores gas supply to IGL, Adani-Total

New Delhi: The government has increased cheaper gas supply to city gas retailers IGL, Adani-Total, and Mahanagar Gas, restoring a major part of the allocation that was cut in 2024, according to regulatory filings by the companies.

The government, in October and November last year, had cut supplies of the so-called APM Gas (low-priced natural gas coming from old fields such as Mumbai High and Bassein fields in the Bay of Bengal) to city gas retailers by as much as 40 per cent in view of limited output.

This led to city gas retailers hiking CNG prices by Rs 2-3 per kg and planning more increases as they replaced lost volumes with higher-priced input fuel.

The price hike made CNG less attractive when compared to alternate fuels like diesel.

Following this, the Ministry of Petroleum and Natural Gas in a December 31, 2024 order rejigged some allocations of gas produced from below ground and undersea.

The ministry ordered a cut in gas supplied to state-owned GAIL and Oil and Natural Gas Corporation (ONGC) for production of LPG and diverting those volumes to city gas entities.

Out of a total 2.55 million standard cubic meters per day of gas usage for LPG production, 1.27 mmscmd (0.637 mmscmd each for GAIL and ONGC) was ordered to be diverted for consumption in the CNG/piped cooking gas segment in January-March quarter, according to the order reviewed by PTI.

City gas retailers in regulatory filings said increased volumes of APM gas will start from 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 $6.5 per million British thermal unit, the gas produced from new wells is priced at about $2 more.