MGL, IGL plunge up to 20% as govt reduces APM gas allocation to CGDs again

Price of APM gas raised by 11.5%

MGL, IGL shares saw a steep decline

Shares of city gas distribution companies such as Mahanagar Gas (MGL) and Indraprastha Gas (IGL) fell sharply by up to 20% on Friday after the government cut the allocation of APM (administered price mechanism) gas to city gas distribution (CGD) entities by 15%, while also raising the price of APM gas by 11.5%. The reduction in APM gas allocation and the hike in its price are expected to adversely impact the margins of CGD companies, leading to the sharp decline in their share prices. MGL shares plunged by 20% to Rs 866.90 apiece on the BSE, while IGL shares tanked by 19.97% to Rs 434.45. Gujarat Gas shares also fell by 19.98% to Rs 499.90, while Petronet LNG shares declined by 7.65% to Rs 230.20. The government's decision to reduce the allocation of APM gas to CGD companies is aimed at diverting more gas to fertilizer plants, which are facing a shortage of feedstock. The price of APM gas has also been increased to align it with the prevailing market prices. The reduction in APM gas allocation and the hike in its price are expected to adversely impact the margins of CGD companies, leading to the sharp decline in their share prices. CGD companies are responsible for the distribution of natural gas to households, commercial establishments, and industries in cities and towns across India. The reduction in APM gas allocation will force these companies to purchase more expensive gas from the spot market, which will squeeze their margins. The hike in the price of APM gas will also increase the cost of gas for CGD companies, further eroding their margins. Analysts expect the impact of the government's decision to be particularly severe for CGD companies that are heavily reliant on APM gas. These companies may have to raise prices or cut costs in order to maintain their profitability. The government's decision is likely to have a negative impact on the growth prospects of the CGD sector in India. CGD companies have been playing a key role in the government's efforts to increase the use of natural gas in the country. However, the reduction in APM gas allocation and the hike in its price will make it more difficult for these companies to invest in new projects and expand their operations. The government's decision is also likely to have a negative impact on the availability of natural gas for consumers. The reduction in APM gas allocation will lead to a decrease in the supply of natural gas to households, commercial establishments, and industries. This could lead to higher prices for natural gas and make it more difficult for consumers to access this clean and affordable fuel.