Indraprastha Gas Ltd (IGL) is not going to pass any increase in gas prices to customers in the short-term and will absorb them, said Pawan Kumar, Director-Commercial at the natural gas distribution firm on Friday. The government of India is working on the customers’ ease of getting CNG and PNG at an affordable price.
“As the government is giving an impetus on the increase of gas in the energy basket, definitely a favourable price mechanism will be in place,” Kumar told CNBC-TV18.
Domestic gas prices are expected to go up further by almost 100 percent from October 1. Kumar said that IGL can absorb any hikes in the short-term.
“In the short-term, we can absorb any hikes, we will not pass on to the consumers, we are working on a two-pronged strategy to reduce our internal operating expenses and to maximise sales.”
A note by brokerage firm UBS suggests that the delivered gas cost for the second half of quarter two is 30 percent lower than that for the first half of the quarter. UBS sees gross margin for September now is 25-40 percent higher than what was seen in quarter one of FY23 and this could allow companies to fully or partially absorb a potential increase in domestic gas prices from October.
After August 15, 2022, the unified base price is around $6.26 per MMBtu. The company is getting around 90 percent of the APM, non-APM gas and 10 percent it is mixing from Spot LNG, which is costing around $17-18 per MMBtu.
“So average input gas cost is around $8.5-8.8 per MMBtu in the current month,” he said.
Kumar expects the geopolitical situation to calm down and the price of spot LNG to cool down.
“This is a short-term turmoil which people should absorb and should not pass on to the customers so that the CNG conversion is increased and the consistency in sales volume growth is maintained."
The company is looking to diversify in other areas as a strategy and will be bidding aggressively wherever the new companies are coming up for sale.
On expanding to newer geographies, Kumar said, “There are some city gas distribution (CGD) companies which are coming for sale, so we are aggressively going to bid for them so that we acquire them and become a pan India company.”
There are some CGD companies in Maharashtra and Karnataka, which are already on sale, he added.
For the full interview, watch the accompanying video
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