Government Scheme Offers Short-Term Relief for City Gas Distributors

The government has announced a new scheme to boost domestic piped natural gas consumption in city gas distribution (CGD) companies.

Under this scheme, CGDs will receive an additional allocation of 200 standard cubic meters (scm) of gas through the administered price mechanism (APM) for each new customer acquired, over and above the customers added during the base period.

This one-time benefit is expected to help CGDs reduce their reliance on expensive non-APM gas and increase their margins. Analysts estimate that MGL, IGL, and GEL could save around ₹130 crore annually, assuming a market gas price of $12 per mmbtu and an APM price of $7 per mmbtu.

However, the scheme only provides short-term relief as high gas costs and policy uncertainty continue to weigh on the sector. CGDs are likely to focus on increasing adoption within their existing connected areas rather than building infrastructure and expanding their coverage.