Margin pressure ahead as city gas distribution majors continue to struggle

Given the weak demand, and lower price arbitrage versus petrol/ diesel, and upcoming Assembly elections, price increases will be gradual, hitting margins across H2FY25

The city gas distribution (CGD) sector is struggling to cope with a sharp reduction in allocation of administered price mechanism (APM) gas.

Effective October 16, APM gas allocations have been reduced to about 50 per cent.

The government has cut APM allocation to CGDs by 21.2 per cent from 19.68 mmscmd to 15.5 mmscmd from October 16, 2024. This cut is on account of the 20 per cent premium pricing of APM gas from new wells of ONGC and Oil India.

The one-time extent of reduction is a negative surprise.

Alternative supplies would be from a mix