Indraprastha Gas Limited (Special situation/Long term)

The entire case is based on ability of IGL to increase gas prices. It could do this successfully in the past however the current circumstances need to be investigated to determine the probability of history repeating itself. Some things have changed as against the past this time. I see 2 problems-

1. Government is against price hikes. Please go through this article.
   https://www.business-standard.com/industry/news/cng-retailers-want-price-hike-government-wants-to-see-cost-breakup-124111700140_1.html

The officials in petroluem and gas ministry believe that these companies are already charging hefty margins and hence can easily absorb additional costs to get gas from new fields. They cite example of IGL making 11% as against companies like IOCL who make 4.5% . So they are asking for break up of final price In short , we will see resistance from government.

2.I am quoting some paras from the article whose link is provided below-

Earlier, on Oct. 25, the PNGRB had issued a notice to CGDs with a proposal to declare 73 networks as common carriers. The notice implies that entities other than CGDs can enter and provide CNG services.

Also read this –
Predicting that at one point of time, the allocation from Mumbai High could touch nil, Singh explained, “Initially, priority was given to power, fertiliser and all other sectors.” And now, those sectors don’t get it. Instead, city gas distributors were given priority. However, he said that “overall volume is declining. At one point, maybe in 2–3 years time, it will go down to nil.“

Then this–
He added that due to the entry of new firms into the gas distribution business, customers are likely to benefit from the increased competition vis-a-vis a reduction in prices.

The article states that production from Mumbai high will go to nil at some point in 2 to 3 years which means IGL gets nothing and has to buy from new wells just like any other company. Now this business will be a commodity business because you get gas at price just like any other company and you also have competition. How can there be a price hike in such a case?