Govt cut cheaper APM gas supply to CNG retailers IGL, MGL, Adani Total Gas

Source : PTI | The government has cut the supply of lower-cost APM gas to city gas distributors such as Indraprastha Gas Ltd, Mahanagar Gas Ltd, and Adani Total Gas Ltd, by up to 20 per cent, replacing the shortfall with more expensive fuel. GAIL (India) Ltd, the state-owned nodal agency for gas supply, has intimated about a cut in supply of gas from legacy fields, called Administered Price Mechanism (APM) gas, the three city retailers said in separate stock exchange filings.
The production of APM gas, which is currently priced at USD 6.75 per million British thermal unit, is declining at the rate of 9-10 per cent annually as recovery from old and ageing fields falls.
Oil and Natural Gas Corporation (ONGC) is investing in drilling more wells to maintain the output, but that additional cost is reflected in a higher price of the gas thus produced. Such gas is called new well gas and is priced at about USD 8 per mmBtu.
In the last one year, APM gas supplies to city gas retailers have been cut by almost 50 per cent.
With the latest cut, the APM gas now meets about 34 per cent of the total city gas requirement, down from 51 per cent previously.
IGL, the firm that retails CNG to automobiles and piped cooking gas to households in the national capital and adjoining cities, stated in its regulatory filing that it gets “domestic gas allocation for meeting the requirement of piped natural gas (to household kitchens) and CNG sales volumes at the pricing fixed by the government (presently at USD 6.75 per MMbtu).”
“Based on communication received by the company from GAIL (India) Ltd (the nodal agency for domestic gas allocation), this is to inform that there has been a reduction in domestic gas allocation to the company effective from April 16, 2025. The revised domestic gas allocation to the company is approximately 20 per cent lesser than previous allocation,” IGL said, adding that it has been allocated an additional 125 per cent of the reduction in domestic gas volumes as New Well Gas (NWG), which is priced at 12 per cent of Indian Crude Basket.
This, it said, is expected to impact the profitability of the company.
MGL, the city gas retailer in Mumbai, said as per Policy Guideline dated August 10, 2022, issued by the Ministry of Petroleum and Natural Gas, domestically produced Administrative Price Mechanisms (APM) natural gas is to be allocated to City Gas Distribution (CGD) companies for priority segments, specifically domestic Piped Natural Gas supplies (PNG) to household kitchens for cooking and CNG (Transport).
The policy states that the supply of domestic gas to CGD entities will be made only up to the quantity available and allocated to GAIL for these segments.
“In line with this policy, the company was allocated APM natural gas for Domestic PNG and CNG (Transport) based on APM gas availability. Allocation of APM to the company has been reduced by 18 per cent, effective April 16, 2025, compared to the previous fortnight APM allocation,” MGL said.
“Reduction of APM volume has been replaced with New Well/Well Intervention gas (NWG). This will have an adverse impact on the profitability, however, the company is in the process of exploring all measures to mitigate the impact.”
, the equal joint venture of Adani Group and TotalEnergies of France, said it has been informed by GAIL “for a reduction of APM gas allocation by 15 per cent.”
“This lower allocation of APM gas is being replaced with New Well Gas,” it said.
“However, the higher-priced NWG and lower APM gas allocation will have an adverse impact on the profitability of the company. The company is exploring all measures to mitigate the impact,” it added.
The cut in APM gas allocation translates into higher input costs for CGD companies, which could result in another CNG price hike by the companies.
Source: worldautoforum.com