Shares of city gas distribution companies fell after the Centre reduced their allocation of low-cost domestic gas by up to 20 per cent
Shares of city gas distribution companies fell up to 6.5 per cent on April 16 after all three major players – Mahanagar Gas (MGL), Indraprastha Gas (IGL) and Adani Total Gas (ATGL) – disclosed that their allocation of low-cost domestic gas under the Administrative Price Mechanisms (APM) has been reduced, with effect from today. The cheaper gas is now being replaced with more expensive New Well Gas (NWG), which the companies said, is going to hurt their profitability.
Mahanagar Gas said its APM gas allocation has been trimmed by around 18 per cent, and the shortfall is now being compensated with NWG. "This will have an adverse impact on the profitability, however, the Company is in the process of exploring all measures to mitigate the impact," the city gas distributor said in its exchange filing.
Indraprastha Gas saw a cut of 20 per cent in its APM gas allocation. However, the company said that the shortfall is being more than compensated with NWG — approximately 125 per cent of the reduced volume.
Similarly, Adani Total Gas also reported a reduction of 15 per cent to its APM gas allocation and said that it is being replaced with higher-priced NWG. Like its peers, the Adani group company also said that this move is going to affect its profitability.
Mahanagar Gas shares fell as much as 6.46 per cent to the day’s low at Rs 1,230.50 apiece on the NSE. Over the past year, the city gas distributor has yielded a negative return of 14.4 per cent.
Indraprastha Gas shares slipped up to 3.9 per cent to an intraday low of Rs 172 per share on the NSE. Over a year, its shares have delivered a negative return of nearly 24 per cent.
Adani Total Gas shares also skid to 1.57 per cent to the day’s low of Rs 601.05 per share on the NSE. The stock has corrected 34.5 per cent.
According to the Ministry of Petroleum and Natural Gas, NWG is a form of natural gas that is produced from wells put on test production or commercial production for the first time on or after April 7, 2023.
As per Indraprastha Gas's filing, NWG is priced 12 per cent higher than the Indian Crude Basket (ICB). ICB is a benchmark price that reflects the average price of crude oil imported by India. As of April 11, 2025, ICB is priced at $65.41 per barrel, according to Petroleum Planning and Analysis Cell.