The government has reduced the allocation of lower-cost Administered Price Mechanism (APM) gas to city gas distribution firms such as Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL), and Adani Total Gas Ltd, replacing the shortfall with costlier New Well Gas.

Gas Authority of India Ltd (GAIL), the nodal agency for domestic gas supply, issued notices informing companies of allocation cuts effective 16 April. APM gas now meets about thirty-four per cent of total city gas demand, down from fifty-one per cent a year ago.

APM gas, currently priced at $6.75 per million British thermal unit, is extracted from ageing legacy fields. The gap is being filled with New Well Gas, which is priced at twelve per cent of the Indian Crude Basket.

IGL and MGL reported a twenty and eighteen per cent reduction respectively, while Adani Total Gas saw a fifteen per cent cut. All three firms expect a negative impact on profitability and are exploring measures to offset the effect.

The switch to costlier gas is likely to increase retail prices for compressed natural gas (CNG) and piped natural gas used in households.

Source: Press Trust of India