Shares of City Gas Distributors - Indraprastha Gas, Mahanagar Gas, and Gujarat Gas fell between 1-5 percent after APM gas prices were kept unchanged at $8.57 per mmBTU, until further orders. The move delayed a much anticipated cut in APM gas price, triggering the negative reaction in these stocks.

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However, gas pricing formula committee chairman Kirit Parikh is optimistic that the Union Cabinet will approve the gas pricing recommendations put forth by his committee.

In an exclusive interaction with CNBC-TV18, Parikh mentioned that he has heard that the cabinet is considering the recommendations proposed in the report, although he remains unsure about the timeline for any potential approval.

The committee has suggested a price cap for Administered Pricing Mechanism (APM) gas, including for ONGC and Oil India. A Reuters report said on March 28, adding that the gas committee has recommended capping the price for most local gas at $6.50 per million British thermal units (mmBtu) in April.

Parikh further mentioned that the committee has proposed all prices to be market linked by January 1, 2027.

While Parikh is against doing anything retrospectively, he remains hopeful that a majority of the recommendations put forth by his committee, would be accepted by the cabinet.

“CNG prices had gone up anywhere between 36 and 40 percent across the country and to that extent, any breather or any correction in the raw material prices will mean these companies pass on the benefit to end consumers to a great extent," Harshvardhan Dole of IIFL had told CNBC-TV18 last week.

Dole pointed out that the current gas prices in the spot market are higher than usual and not sustainable. This is a concern for the industry, as it suggests that prices may be in for a correction in the near future.

In an interview with CNBC-TV18 on March 23, Pawan Kumar, Director-Commercial at Indraprastha Gas Limited (IGL), said "If Kirit Parikh Panel recommendations are implemented, there will be some reduction in the input gas cost, there will be a reduction of $1.5/mmBtu."

Brokerage firm Citi believes that the continued delay could create a near-term overhang for City Gas Distributors, the pause in prices on a provisional basis suggests that the cabinet approval of the Kirit Parikh committee recommendations is just a matter of time. It also continues to view the stance of the government towards CGD players as favourabke.

Jefferies also called the delay unexpected but expects a new price notification, based on the committee's recommendations, to be announced in the near future.

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(Edited by : Hormaz Fatakia)

First Published:Apr 3, 2023 10:03 AM IST