Mahanagar Gas MD explains CNG price cuts, addresses MMR exclusivity concerns

Shinghal clarified that MGL's ₹2.50/kg price cut for CNG was purely based on the decline in spot input prices.

"We have not done any price cut based on discussions with the government or anybody else but because the prices of LNG (liquefied natural gas) also has fallen down since last few months, and the cost of procurement has come down," he said.

He pointed out that MGL had cut CNG prices last year in April and October also by ₹8/kg and ₹3/kg, respectively.

Shinghal said the government's concerns may not be unfounded. He explained that the return on investments for many CGD companies is in the CNG segment, and this cross-subsidises the piped natural gas (PNG) segment. This leads to limited investments in PNG infrastructure by some companies.

However, "We (MGL) are the highest in the country about creating the infrastructure, as well as we are lowest in the pricing segment related to PNG and CNG. So I think we are in the better footing to maintain our EBITDA margins, which are not abnormal by any sense; they are reasonable. And we are also passing on the benefit to the customer."

EBITDA refers to the earnings before interest, tax, depreciation, and amortisation.

Analysts concerns intensified after the Petroleum and Natural Gas Regulatory Board (PNGRB) on March 6 said that MGL's exclusivity in the Mumbai Metropolitan Region (MMR) ended in 2021.

This means MGL will not have exclusive rights to this region when it comes to CNG sales.

MMR is among the oldest regions with exclusivity for MGL and accounts for nearly 45% of its volumes.

While MGL has taken the matter to court, Singhal said, they are also in discussion with PNGRB to amicably seek an extension of exclusivity in the region.

"We are waiting for the court to take a final call on market exclusivity and infra exclusivity, as well as we are in discussion with the regulator to seek the extension, which we are very hopeful that it will be granted in line with the Act and the provisions in the regulation," he said.

The exclusivity can extend by 10-plus years given precedents and could happen for MGL as well, he noted.

MGL and Indraprastha Gas (IGL) have the highest exposure to CNG space and these have a direct impact on retail consumers.

MGL margin has been at 19-20% in the last two years, while IGL has sustained at 15-16% for four years.

The current market capitalisation of the company is ₹12,525.02 crore.