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City gas distribution companies like Indraprastha Gas (IGL), Mahanagar Gas (MGL), and Adani Total Gas are considering raising compressed natural gas (CNG) prices after a second round of reductions in cheaper input gas supplies from old fields.
The government, effective 16 November, slashed the allocation of low-cost natural gas to city gas retailers by 20 per cent, following a 21 per cent reduction in October. This has prompted retailers to flag profitability concerns and hint at passing on the cost burden to consumers through price hikes.
However, officials in the Ministry of Petroleum and Natural Gas have pushed back, asserting that city gas companies operate on substantial profit margins and should be able to absorb the additional cost of sourcing gas from higher-priced new fields or imported liquefied natural gas (LNG).
"For instance, IGL reported a net profit of Rs 1,748 crore on revenue of nearly Rs 16,000 crore in FY2023-24, reflecting an 11 per cent margin. Similarly, MGL earned Rs 1,300 crore in profit on Rs 7,000 crore in revenue. These are hefty margins for any retailer," a senior official said.
The government has emphasised that while it supports profitable business operations, retailers seeking to retain access to low-priced gas must justify price hikes by disclosing a detailed cost breakup of their CNG pricing structure.
City gas retailers, which supply CNG for vehicles and piped natural gas (PNG) to households, are navigating the twin challenges of supply cuts and pressure to maintain affordability, even as they warn of potential erosion in profitability.
The issue highlights the delicate balance between ensuring fair pricing for consumers and maintaining profitability for companies amid changing supply dynamics.
