Shares of city gas distribution companies were in upbeat mood on Friday, with index heavyweights Indraprastha Gas (IGL), Mahanagar Gas (MGL), Gujarat Gas, and Adani Total Gas surging up to 7% in intraday trade on Friday. The rally in shares of domestic gas operators was fuelled by the government’s directive to divert natural gas from industries to city distribution companies to cool down the CNG and piped cooking (natural) gas (PNG) prices in the country, which surged up by 70% on the use of imported fuel.
The order came nearly three months after the oil ministry ordered the use of costlier imported LNG in order to meet the rising demand for automobile fuel CNG and household kitchen gas PNG. However, the ministry, in a fresh directive issued on August 10, reverted to an old policy of primarily supplying domestically produced gas for city gas operations.
The move is being seen as part of the government’s strategy to bring down CNG and PNG gas prices, which moved up significantly in the last one year. The CNG price in Delhi rose by 74%, from Rs 43.40 per kg in July 2021 to Rs 75.61 per kg in 2022, while PNG prices increased by 70% to Rs 50.59 per standard cubic meter, from Rs 29.66 per scm in July last year.
The allocation for city gas operators - Indraprastha Gas in Delhi and Mahanagar Gas Ltd of Mumbai - has been reportedly increased from 17.5 million standard cubic meters per day to 20.78 mmscmd, which is likely to meet 94% of the demand for CNG to automobiles and piped cooking gas to household kitchens in the country. Besides, the use of domestic gas in place of imported fuel will also cut down the cost of raw material and ease CNG and PNG rates. Natural gas is the raw material that is used for production of CNG and PNG.
Reacting to the government’s order, IGL share price gained 7.2% to hit an intraday high of ₹437.60 on the BSE. The largecap stock opened higher at ₹410 against the previous closing price of ₹408, while market capiltalisation (m-cap) climbed to ₹30,093 crore.
Mahanagar Gas shares rose as much as 4.7% to ₹901.40 during the session after opening marginally higher at ₹861.95 on the BSE.
Similarly, Adani Total Gas stock price climbed 2.7% to touch an intraday high of ₹3,438.70, while Gujarat Gas shares added 5% to hit a high of ₹487.65 on the BSE.
In comparsion, the BSE benchmark Sensex was trading 156 points higher at 59,489 levels at the time of reporting.
