Shares of Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL) jumped up to 2.5% on January 3 after the oil ministry asked GAIL and ONGC to give 0.6 mmscmd gas to city gas firms.
The circular said gas from new wells and oil-associated gas will not be auctioned but will be allocated proportionately to companies based on volume.
The move will reduce city gas distribution firms’ dependence on gas from the spot market.
IGL will get the highest allocation due to its higher market share.
At 10:30 am on January 3, IGL shares were trading 2.5% higher at Rs 437 per share, while MGL shares were trading 1.8% higher at Rs 1,319.5 per share.
In November, the central government cut administered price mechanism (APM) allocations to CGD players by 20 per cent for the second consecutive month. Lower allocations in APM mean that the Centre has cut the supply of low-priced natural gas from old fields to city gas retailers.
As a result, CGDs will have to look for alternative options to bridge the gap in input gas, such as new well gas or spot LNG, which are more expensive.