Running on Reserve: Indraprastha Gas Faces Profit Squeeze After Allocation Slashed by 125%

Unknown Apr 02, 2026 900 Views

Indraprastha Gas Ltd (IGL), a leading gas distributor, is likely to witness a drastic cut in its domestic gas allocation, with a reduction of around 125% in volumes categorized as New Well Gas (NWG), from April 16, 2025. This adjustment is likely to have a massive negative effect on the profitability of the company and its capacity to fulfill demand for Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) in the National Capital Region.

Key Points

The government has announced a drastic reduction—about 125%—in domestic gas volumes allocated to IGL under the NWG category, effective April 16, 2025.

This move follows a series of previous cuts, with IGL’s domestic gas allocation already reduced by 20–21% in late 2024, bringing its share down from 70% to as low as 40–46%.

The cut is likely to affect IGL's profitability substantially since the company will have to buy more of its gas needs from more expensive options like spot LNG and HPHT fields.

In regulatory filings, the company said the new allocation will negatively impact its margins as well as its capacity to retain existing CNG and PNG sale volumes.

The cuts are partially due to falling production from mature local gas fields and a change of government priorities, with some gas being diverted into other uses like petrochemicals.

Market experts caution that to make up for the higher input costs, IGL will have to increase CNG prices by ₹4–6 per kg, which would affect consumers and further tighten demand.

The news has led to a negative response in the market, with city gas distributor shares, including IGL, facing selling pressure as investors worry about escalating input prices and decreased profitability.

IGL is said to be looking at alternative sources and talks with stakeholders to curb the effect, but instant relief does not seem likely to arrive.

Conclusion

The precipitous decline in Indraprastha Gas Ltd's domestic gas allocation is a tough time for the company, posing a threat to its profitability and potentially pushing up end-consumer prices. With restricted access to relatively cheap domestic gas, IGL and other city gas distributors can expect to be subjected to persistent margin pressure and operational woes until domestic supply bottlenecks are relieved or alternate arrangements are made.

Sources: Business Standard, CNBC TV18, Fortune India, India Infoline, Moneycontrol, Economic Times Energy

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