Mahanagar Gas Faces Profitability Squeeze as APM Gas Allocation Cut by 18%, Replaced with Costlier New Well Gas

Mahanagar Gas Faces Profitability Squeeze as APM Gas Allocation Cut by 18%, Replaced with Costlier New Well Gas

Mahanagar Gas Limited (MGL) is set to face a significant profitability challenge as the government reduces its allocation of cheaper Administered Price Mechanism (APM) natural gas by approximately 18% effective April 16, 2025. This reduction, impacting the Domestic PNG and CNG (Transport) segments, comes under the Ministry of Petroleum and Natural Gas’s policy guidelines and is part of a broader cut affecting city gas distribution (CGD) companies nationwide.

To bridge the shortfall, MGL will now rely on New Well/Well Intervention Gas (NWG), which is substantially more expensive than APM gas. This shift is expected to increase input costs and compress margins, with analysts warning that unless MGL is able to pass on these costs through tariff hikes, its profitability will be adversely impacted. The company is currently evaluating measures to mitigate the financial impact and ensure uninterrupted supply to consumers, but a price hike for CNG and PNG customers is likely on the horizon.

The reduction reflects ongoing challenges in domestic gas production and policy-driven allocation changes, forcing CGD companies like MGL to seek alternative, costlier gas sources to maintain supply stability. MGL’s shares, however, closed 2.73% higher on April 15, indicating investor focus on the company’s response and future pricing strategy.

Source: Business Upturn, Moneycontrol, NewsBytes, Indian Chemical News