By earn 
Negative news for IGL and MGL
Govt most likely to cut APM gas allocation by 15-20% to CGD from 16th oct
– surprise move govt has most likely decided to cut APM gas allocation to priority segment ( CNG + Household png) of CGD by 15-20%. We understand govt has reduced 4mmscmd APM allocation to CGD and diverted the same gas to ONGC OPAL plant
– currently segment gets 65-70% APM allocation and it has been coming down by 2-3% every qtr as APM production is limited
– CGD companies have to replace this gas with market price non APM or spot/long term LNG. Given both non APM (can be bought at IGX but can’t be such big vol of 4mmscmd) and long term LNG contract are not available immediately.
– for time being CGDs are required to replace the shortfall with a costlier spot LNG which is at $13/mmbtu or non APM is at $10.2/mmbtu vs $6.5/mmbtu for APM.
– for most CGD cost of gas will go up by $0.6-1/mmbtu depend on replace from non APM or spot LNG.
– CGDs will have to pass rising cost of gas procurement to consumers through price increase and expect CNG Price increase of Rs 2-3.5 per kg increase (3-5% increase) over next few days and this will impact vol growth profile for CNG.
