Lack of pricing power, competition to hit city gas distribution firms

Analysts are downgrading earnings projection and expect further cuts to APM allocations in the future

The city gas distribution (CGD) sector has enjoyed favourable policies, high arbitrage versus alternative fuels, and pricing freedom in the past. However, recent cuts in administered pricing mechanism (APM) allocation and rising competition from electric vehicles are among the factors that have led to big corrections.

 

The policy vision is to have a 15 per cent share of the energy basket for gas (from 6 per cent), raising gas consumption to 500 million metric standard cubic meters per day (mmscmd) by 2030 (currently 200 mmscmd).

 

There are 307 CGDs covering almost 100 per cent of the population. Compared with 800