OIL & GAS

Expensive petrol, diesel to drive city gas sales volume this fiscal: Crisil

Sales volume of city gas—comprising compressed natural gas, or CNG, used by vehicles, and piped natural gas (PNG) used by homes and industries—is set to soar 25-27% this fiscal, driven by rebounding vehicular mobility and industrial activity, and a record price advantage versus competing fuels such as petrol, diesel and furnace oil, according to Crisil Ratings.

Such strong growth will help city gas distributors sustain robust operating margins of 28%, even as higher prices of liquefied natural gas (LNG) get partly absorbed to cushion the impact on consumers. That, and strong balance sheets, will support stable credit profiles of distributors.

Last fiscal saw city gas volume contract 13% as both demand for CNG and industrial PNG, which together contribute 90% of total city gas consumption, were hard hit by the pandemic, especially in the first quarter, before recovering.

Manish Gupta, senior director, Crisil Ratings, said, “The first quarter of this fiscal, unlike last year, saw far less impact of lockdowns on vehicular mobility and industrial activities as volumes were up 130% on-year, though down 18% sequentially.

We expect sustained recovery for the rest of the year, as both CNG and industrial PNG demand improve on a combination of higher economic activity and record price advantage against alternative fuels. This will drive overall demand by 25-27% this fiscal, even 8% above fiscal 2020 levels.”

Source
Livemint
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