City Gas Retailers Face Profit Squeezes Amid Supply Cuts

City gas companies, including IGL and Adani Total Gas, are considering CNG price hikes due to reduced supplies of low-price input gas. This government-mandated cut has led to profitability concerns among retailers. Officials argue these companies can absorb costs due to high profit margins.

City gas companies such as Indraprastha Gas Ltd and Adani Total Gas Ltd are contemplating a rise in CNG prices following a reduction in cheaper input gas supplies for the second time in a month. Government officials insist that retailers must provide a cost breakdown to substantiate any price increase.

From November 16, the government decreased the supply of low-cost natural gas from older fields to city gas retailers by up to 20%. This action follows a previous 21% reduction on October 16, invoking concerns about the profitability of retailers such as IGL, Mahanagar Gas Ltd, and Adani Total Gas Ltd, which operate across India.

The Ministry of Petroleum and Natural Gas officials argue that city gas companies, with substantial profit margins, should be able to absorb additional costs incurred by supplementing lost volumes with slightly more expensive gas from new wells or imported LNG.

(With inputs from agencies.)