Drop in natural gas price leads rally in city gas companies

City gas distribution companies has gained momentum in today’s trading session as the government has reduced the domestic natural gas price to a record low of $2.39 per million British thermal units (mmBtu).

This price cut is applicable for the period of April 1, 2020 to September 30, 2020. The price in the previous six months stood at $3.23 per mmBtu.

The major city gas distribution companies which are likely to get the benefit from this price drop are Mahanagar Gas (up by three per cent), Gujarat Gas (up by six per cent), Adani Gas (up by five per cent), Indraprastha Gas (up by 10 per cent) and GAIL India (up by three per cent).

However, this price drop would affect the revenue of the companies for which this gas is the final product and such companies include Oil India (down by four per cent) and ONGC (down 4.5 per cent).

Looking at the industry front, future growth could be measured with the rising demand in natural gas from all the major verticals like industrial, commercial as well as residential. Currently, CNG segment is a major contributor to this industry. As per the industry report, City Gas Distribution market in India is forecast to witness a CAGR of around 7.5 per cent to grow from an estimated 9,100 million metric standard cubic metre (MMSCM) in 2019 to more than 28,500 MMSCM by 2035.