With Russia invading Ukraine, tensions around gas shortage have engulfed Europe. As a result, it has pushed prices higher. Germany has also halted the certification process for the Nord Stream 2 which could see prices spike even further. To understand what this could mean for a key gas player in India, CNBC-TV18 spoke to AK Jana, MD, Indraprastha Gas Limited.

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Jana confirmed that gas prices have gone up. He cited that gas price may go up by $2.5-3/mmbtu from April. He added that gas allocation from the government has also gone down. However, to tackle this, the company has gone ahead and tweaked its gas sourcing structure, he shared.

"Gas price is going high. The city gas distribution mainly was impacted by two ways. One is that the gas price has gone up. And the second thing is the gas allocation. Since the first half - in the initial two months, there was no consumption because of the long-term restrictions. Gas allocation has gone down. Definitely the price will go up and we are expecting probably USD 2.5 to 3 increase in the domestic gas prices," he said.

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Jana affirmed that the company has a robust pricing structure and it expects volumes be strong in Q4. He explained that if the volumes go up and EBITDA stays at Rs 8/scm then there won’t be any need to hike prices by a big margin. He shared that the company is targeting EBITDA at Rs 7-7.50 per scm.

"We have a robust pricing structure. We are targeting EBITDA per scm at Rs 7-7.50 per scm. And if that is there, the volume growth is around 26-30 percent compared to the last year. The volume should go up, if we can maintain EBITDA per scm at a particular level, Rs 7.5/8 per scm is the target we have fixed for the topline and bottomline; we will be able to achieve that," he said.

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On conversion rate, he said that it is at 16,000 for CNG vehicles. He expects the rate to head to 20,000, going ahead. He further mentioned that the arbitrage between fuel and CNG pricing will continue to benefit the company.

He said,"The conversion rate into the CNG vehicle is coming around - first quarter, it was around 8,000-10,000 then in the second quarter it was around 14,000; now we're running at 16,000. By the end of the March, I am targeting 20,000."

"The question here is the petrol and diesel prices - the arbitrage between the CNG price and the petrol and diesel, we are comfortable at 40 percent, currently, I am giving around 55 percent. So arbitrage is there. So that gives me a margin by which I can increase the price a bit," Jana explained.

Watch the video for the full interview.

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(Edited by : Dipikka Ghosh)

First Published:Feb 28, 2022 1:33 PM IST