‘Gas prices have stabilised for now,’ says Mahanagar Gas MD

Mahanagar Gas (MGL) is planning to foray into the compressed biogas segment with an under-construction plant in Mumbai set to be commissioned in less than two years. The company is also aiming to build six new LNG outlets by next year,Ashu Shinghal, the company’s managing director, toldArunima Bharadwajin an interview. The company will source LNG and distribute it through the stations.

Edited Excerpts:

MGL has entered into more term contracts of 3-5 year duration in order to secure stability in cost of the key input. Since Europe has taken up more measures to ensure energy security, we expect that gas prices will remain more or less stable during this winter (the domestic gas prices are now linked to Indian basket of crude and revised on a monthly basis).

What are your investment plans for FY24 and the next financial year?

The total capex plan is around `800 crore this year which includes investments in both PNG and CNG segments. We expect to invest a similar amount in FY25 too. We are also in the process of finalising a deal for acquisition of Unison Enviro, for which the regulatory approval is expected shortly. Once that approval is available, Unison Enviro will become a subsidiary of MGL with three geographical areas and around `100-250 crore will be spent from their balance sheet. We will be spending around `530-550 crore this year as a one-time expenditure to acquire the firm.

As gas prices have softened, are you planning a rate cut for the consumers of MGL?

As of now we are watching how the market behaves, how the retail prices of petrol and diesel are and if there is some variation in the cost of procurement. But having said that, the cost of procurement has more or less stabilised now. So, the price cut, if any, will depend on the alternate fuel prices as well as the gross margins and the volume growth. These factors will keep on making some adjustment in the prices.

The government recently mandated blending of compressed biogas in CNG and PNG. What is MGL’s take on the policy?

We have signed an MoU with the BMC and are going to set up a CBG plant in Mumbai in 1-2 years. We are also in discussion with BMC to finalise the contours of the project which shall be done by December. This will more or less ensure our compliance with the policy. Our systems are ready, and the infrastructure is in place. If the capacity is finalised at 1,000 tonnes per day, the investment will be in the range of `450-500 crore.

How do you think the common carrier rule mandated by PNGRB would impact MGL?

For the city gas distribution companies, the common carrier rule is not applicable and the matter is pending in high court. However, we don’t find threatening, as the common carrier is for only 25% of the total volumes and to get that volume of 25%, it needs a lot of effort. On the flip side, just the way other companies will be coming to our area, we can also do transactions or trading in other CGD companies’ areas too.

Are there any other segments which MGL is looking to enter?

We have formed a joint venture company with Baidyanath LNG to set up more LNG stations in and around Maharashtra. We expect 5-6 stations to be commissioned within the next calendar year. It’s a small investment project with around `50 crore, but that will be contributed by both the partners. So, we have 51% equity and Baidyanath LNG has 49%. We are also in a very preliminary stage to explore if there is some space for ethanol production which would be obviously given to the oil marketing companies for blending.

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