City gas companies snap up cheap local supply

The fertiliser sector's consumption of imported natural gas rose 25% YoY while that of city gas distributors fell 40% during the June quarter as more of the cheap domestic gas was made available for driving and cooking following a tweak in the domestic gas policy.

The city gas sector accounted for just 9% of the country's consumption of imported gas during the April-June period, down from 17% a year earlier. Their consumption of domestic gas rose 31% in a year to 2,490 million metric standard cubic meter (mmscm) while their use of imported gas fell to 703 mmscm.

Higher domestic gas consumption by city gas distributors meant lower availability of local supplies for the fertiliser sector. Fertiliser makers consumed 4,276 mmscm of imported gas in the quarter compared to 3,416 mmscm a year earlier. Their use of domestic gas dropped 43% to 726 mmscm. The fertiliser sector is the largest consumer of natural gas in the country while the city gas sector is the second-largest.


The refineries and power plants, the third- and the fourth-largest consumers of natural gas, respectively, also consumed more gas from overseas in the June quarter.

While volume imports by the fertiliser sector went up, the average prices of imports fell. The two factors would have opposite effects on India's subsidy bill. The liquefied natural gas benchmark Japan Korea Marker for the April-June period averaged $11 per mmbtu, down from $29 per mmbtu a year ago.

The government's move to increase the allocation of cheaper domestic gas to city gas has helped cut city gas companies' reliance on imports. The imposition of a price ceiling of $6.5 per mmbtu on domestic gas in April has also made it attractive to consumers. City gas distributors supply domestic gas to CNG vehicles and for cooking at home.

Lower natural gas prices have helped boost margins for city gas companies. Indraprastha Gas Ltd, which operates in the national capital region, made a gross margin of ₹14.4 per standard cubic meter during the quarter, higher than ₹12 in January-March and ₹14.3 in the April-June quarter of last year, as per ICICI Securities. CNG comprises 75% of IGL's total sales volume.