my understanding is Kirit committee’s recommendation is good for everyone as there is floor and ceiling defined and by 2027 it needs to move to open market pricing. However, at current moment, its not good for ONGC / OIL as they will get lower price for their gas from nominated fields (price for which is set under APM). For e.g. currently they were getting $8.57 per mmBtu. As per revised formulae of 10% of crude price, they should be getting $7.92 per mmBtu. But there is a ceiling of $6.5 per mmBtu. So, these companies will get $6.5 instead of $8.57 from 8th Apr.
my understanding is, companies will not pass on the entire benefit to customers. Last year when the cost escalated, they didn’t pass the entire increase, thereby taking hit on the profit. Similarly, when the price fall, they will reinstate their margins.
There is second angel to it. natural gas is in demand because of cost saving vs petrol (for CNG) and LPG (for PNG). Earlier difference between CNG & Petrol was 45-50% hence there was a demand for CNG powered cars. That difference reduced to ~20%. Now that difference will again increase to 45-50% which is good enough to keep CNG in demand. So companies will not be required to pass on additional saving on cost to customers, thereby helping improve margin.
This is a big issue. If I were to write on it, it will be an essay of more than 5000 words. In a nutshell, this natural gas (under Administered Price Mechanism) is only for priority / needy sector and hence price control. Although we have come a long way in last 8 yrs how the prices are controlled.
You may want to study business model of MGL / IGL vs GGL. Former derive ~80-90% gas under APM vs later which derive ~25%.
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