As per an assessment of gas market done by ICICI Securities, prices in gas futures market is estimated to rise by US$4.1/mmbtu to US $7.35/mmbtu in H1FY23 and by another US$3.6/mmbtu (49 per cent) to US $10.95/mmbtu in H2FY23.
This would mean that three main players supplying CNG and PNG -- Green Gas (GGL), Mahanagar Gas (MGL) and Indraprastha Gas (IGL) would need to hike CNG prices by 50-56 per cent in April-October, 2022 to fully pass on APM gas price rise to keep their margins at lofty levels.
APM gas price was at US $2.3-3.8/mmbtu in FY17-FY22 and bottomed out at US $2/mmbtu in H1FY22. It is up US $1.22/mmbtu (62 per cent) to US $3.22/mmbtu in H2FY22.
What is interesting is that gas suppliers to CNG and PNG markets have made lofty margins in the pandemic period due to non revision of piped natural gas and compressed natural gas prices during the inadequacy when the cereal gas prices had fallen globally due to demand compression and lockdowns.
Since Q2FY20, gas cost fall for CNG is Rs 5.7/scm vs Rs 1.3-2.2/scm CNG price cut by GGL, MGL and IGL. Hence, their margin was up 21-84 per cent (Rs 1.4-4.0/scm) to Rs 7.9-13.9/scm in Q1FY22 from Rs 4.3-9.9/scm in Q2FY20. In fact, CGD margins are up 44-130 per cent since FY14, and 21-84 per cent since December, 2019 as gas cost fall has not been passed on.
CGD players have not fully passed on the fall since December 2019 and in fact, on occasions, hiked prices to boost margins to make up for covid-caused volume plunge, the brokerage report said.