CNG Price Hike: Mahanagar Gas (MGL) Raises CNG & PNG Rates In Mumbai; Should You Buy The PSU Stock?

Mahanagar Gas Ltd (MGL) announced a revision in the prices of compressed natural gas (CNG) and domestic piped natural gas (PNG), effective from midnight on July 9 in Mumbai. This decision, driven by increased costs and higher demand, reflects broader trends in the gas distribution sector across India.

Starting from July 9, the price of CNG will rise by Rs 1.50 per kg, bringing the new rate to Rs 75 per kg, inclusive of all taxes. Similarly, domestic PNG prices will increase by Rs 1 per standard cubic metre (SCM), resulting in a new price of Rs 48 per SCM. These adjustments aim to address the rising costs associated with sourcing additional natural gas, particularly imported Re-gasified Liquefied Natural Gas (RLNG).

"To meet the increasing volume of CNG and domestic PNG segments and due to further shortfall in domestic gas allocation, MGL is sourcing additional market priced natural gas (imported RLNG) which has resulted in higher gas cost," the company said in a statement.

MGL is not alone in raising gas prices. Recently, Indraprastha Gas Ltd (IGL) also adjusted its CNG prices by Rs 1 per kg, setting the new price at Rs 75.09 per kg in Delhi. However, IGL opted not to revise its PNG rates, which remain at Rs 48.59 per SCM. This move comes on the back of a similar price hike by IGL in mid-December 2023, followed by a price cut of Rs 2.5 per kg in March 2024.

Additionally, Gujarat Gas raised industrial natural gas prices by Rs 2 to ₹2.48 per SCM from July 4 in the Morbi region, home to India's largest ceramic clusters. These increases reflect a broader trend of rising input costs in the gas distribution industry.

Despite the price hikes, MGL emphasizes that its CNG continues to offer savings compared to traditional fuels. The company also stated that CNG users can still save about 50% compared to petrol and 17% compared to diesel at current prices in Mumbai. Furthermore, MGL boasts that its domestic PNG provides convenience, safety, reliability, and environmental benefits.

MGL also pointed out that, even with the recent price increase, its rates for CNG and domestic PNG remain among the lowest in the country.

From a market perspective, the recent price hike has had a mixed impact on MGL's stock performance. On the National Stock Exchange (NSE), MGL shares closed 1.97% lower at Rs 1,666 in the previous session. However, the stock has shown robust performance over the year, with a 38% rally, outperforming the benchmark Nifty 50, which rose nearly 12% in the same period.

In comparison, shares of IGL and Gujarat Gas have also seen notable increases, with year-to-date (YTD) gains of 24% and 34%, respectively.

The market has responded to these price adjustments with a mix of caution and optimism. Global investment firm Morgan Stanley recently issued an overweight rating on IGL following its price hike, setting a target price of Rs 575 per share.

For consumers, the immediate impact will be an increase in monthly expenses for those relying on CNG and domestic PNG. However, the long-term benefits of using natural gas, such as lower emissions and cost savings compared to petrol and diesel, continue to make it a viable choice for many households and businesses.

The recent price hikes by MGL, IGL, and Gujarat Gas highlight the challenges faced by the gas distribution sector in managing rising input costs while meeting increasing demand. For now, consumers in Mumbai and other affected areas will need to adapt to the new rates, balancing immediate costs.