The cuts ordered by the Petroleum and Natural Gas Regulatory Board (PNGRB) on compressed natural gas rates charged by Indraprastha Gas Ltd (IGL), and the directive to refund the excess collected with effect from 2008, have hit share prices of all companies in the sector.
IGL, the monopoly supplier to the National Capital Region, saw its stock fall 33.7 per cent to Rs 229.8, the lowest level since December 2009. Shares of the company, a joint venture between GAIL and Bharat Petroleum, had more than halved during intra-day trade.
IGL has also approached the Delhi high court, challenging the legality of PNGRB’s power to fix rates. “IGL had not been given any opportunity of a personal hearing before passing of the order by PNGRB, despite repeated requests. IGL was denied the principle of natural justice,” went a company statement.
| PRICE PRESSURE Movement seen in the shares of gas distribution companies | |||
| BSE price in Rs Apr,10 | % chg | Intra-day fall (%) | |
| Indraprastha Gas | 229.80 | -33.66 | -50.92 |
| Gujarat Gas | 341.95 | -15.10 | -17.44 |
| Gujarat State Petronet | 70.90 | -7.50 | -17.68 |
| Petronet LNG | 159.94 | -2.92 | -13.81 |
| GAIL | 356.55 | -1.82 | -10.13 |
| Data compiled by BS Research Bureau | |||
In an order passed yesterday, PNGRB directed IGL to reduce prices for its Delhi consumers with immediate effect after factoring in the reduction in both network rates (levied on CNG, PNG and industrial consumers) and the reduction in compression charges levied only on CNG. It has also asked the company to make refunds since 2008-09, based on the changes. While the company has not given any estimate of the loss due to the refund, experts suggest it could be in excess of Rs 1,000 crore. In addition, it will have to revise downward the price of CNG and PNG by 20 per cent and 10 per cent, respectively.
IGL will have to cut transportation rates to Rs 38.58 per million British thermal units (mBtu) and compression prices to Rs 2.75 per kg. The company had sought a transportation rate of Rs 104 per mBtu and a compression charge of Rs 6.66 per kg from the regulator.
Shares of other gas distribution companies also fell sharply, on fears that a similar directive may be extended to them. Gujarat Gas Co closed 15.1 per cent down at Rs 342, Gujarat State Petronet (GSPC) ended 7.5 per cent lower at Rs 70.9 and Petronet LNG fell 2.9 per cent to Rs 160. Another state-owned gas distributor, GAIL, which owns 22.5 per cent in IGL, after falling a little more than 10 per cent, ended 1.8 per cent lower at Rs 356.5
Rajesh Vedvyas, former managing director at IGL, said Gujarat Gas, Mahanagar Gas and GSPC could face similar orders from PNGRB. “Going by the IGL order, those for other companies will also be with retrospective effect,” he added.
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"The impact of the PNGRB order will be uniform and no one will be spared. This will not only hurt companies, but also create negative sentiment," said a senior executive with a Gujarat-based gas distribution company.
A Citibank report termed the PNGRB directive ‘hugely negative’ for IGL. HSBC slashed IGL's price target from Rs 366 to Rs 150 per share. An Edelweiss report warned the company might have to refund Rs 1,800 crore to its consumers, when net worth is only Rs 1,200 crore.