New Delhi, November 20 (IANS). The operating profit of city gas distribution (CGD) sector companies in India may be in the range of 7.2 to 7.5 per standard cubic meter (SCM) in the current financial year, which is 8-12 percent higher than the profit in the second half of the last financial year. This information was given in a report.
In the second half of the last financial year, the CNG segment had seen a major decline in margins due to changes in gas allocation under APM.
Meanwhile, CGD companies had to resort to the spot gas market for supply, which increased cost pressure. After this, companies have started contracted supply, which is expected to increase margins.
Crisil Ratings said in its report, “Despite companies’ proposed capital expenditure (capex), leverage will remain under control due to good earnings. Our analysis of seven CGD companies with 70 per cent share in total sales volume in the last financial year indicates this.”
CGD companies procure gas from old gas fields under APM on preferential basis at lower prices to service the domestic CNG and Piped Natural Gas-Domestic (PNG-G) segments at lower prices.
Apart from APM, companies purchase high-pressure, high-temperature (HPHT) gas and imported regasified liquefied natural gas (R-LNG) under contracted and spot purchase mechanisms.
This increases the cost of purchasing gas significantly. Due to lower allocation from APM, last year companies had made spot purchases to avoid supply disruptions, the price of which was 80-100 per cent more than APM.
Due to this, spot buying by volume increased to more than 15 per cent of the total supply, from 5 per cent in the first six months of the last financial year.
The report noted that some of the benefits of lower gas procurement costs this fiscal year will be offset by increases in other operating expenses, as companies will continue to make capital expenditures to expand gas infrastructure in existing and new geographic areas to support volume growth.
–IANS
abs/
