Government Boosts Gas Supply to IGL, Adani Total and Mahanagar Gas

The government has partially restored the allocation of affordable natural gas (APM gas) to city gas retailers, including Indraprastha Gas Ltd (IGL), Adani Total Gas, and Mahanagar Gas Ltd. This move follows a significant reduction in gas supplies in late 2024, which had forced retailers to increase prices and rely on costlier alternatives.

APM Gas Cuts and Price Impact

In October and November 2024, the government reduced the supply of APM gas by up to 40%, citing limited production from older fields like Mumbai High and Bassein. As a result, city gas retailers raised CNG prices by ₹2-3 per kg, making it less attractive compared to diesel.

Revised Allocations Effective January 2025

On December 31, 2024, the Ministry of Petroleum and Natural Gas announced a reallocation of gas supplies. It diverted 1.27 million standard cubic meters per day (mmscmd) of gas—previously used for LPG production—to the CNG and piped gas segments for the January-March 2025 quarter. This reallocation aims to stabilise the market and reduce costs for city gas retailers.

Starting January 16, 2025, gas allocations to city gas companies have been revised:

• IGL: Allocation increased by 31%, raising the share of APM gas for CNG from 37% to 51%.
• Adani Total Gas: Allocation increased by 20%.
• Mahanagar Gas: Allocation increased by 26%, raising the share of APM gas for CNG to 51%.

These changes are expected to lower retail prices and positively impact profitability.

Challenges for GAIL and ONGC

To accommodate the increased allocation for city gas retailers, state-owned GAIL and ONGC will need to use costlier gas from new fields or imported liquefied natural gas (LNG) for LPG production. The additional production costs are likely to be subsidised by the government.

Supply Restoration and Future Outlook

The government is restoring about half of the previously cut supply and plans further restoration as new wells and fields, such as Ramnad, begin production. However, declining production from older fields, which supply APM gas, continues to challenge the sector, with annual output falling by approximately 5%.

Despite these challenges, the increased APM gas allocation offers relief to city gas retailers and is expected to stabilise the CNG and piped cooking gas segments in the near term.

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