The Indian government has introduced a new incentive scheme for City Gas Distributors (CGDs) aimed at boosting domestic Piped Natural Gas (PNG) adoption across the country. This policy is expected to significantly benefit companies like Mahanagar Gas Ltd (MGL), Indraprastha Gas (IGL), and Gujarat Energy Ltd (formerly Gujarat Gas).
Under the new policy, CGDs will receive an additional 200 standard cubic meters (scm) of low-cost domestic Administered Price Mechanism (APM) gas for every incremental billed domestic connection established above a predefined threshold level. This measure is designed to reduce the payback period for PNG-related capital expenditure from an estimated 10 years to just 3 years for the distributors.
Nomura's Analysis on Key Beneficiaries
Foreign brokerage Nomura has provided insights into how this incentive will impact major CGDs. According to their analysis, Mahanagar Gas Ltd (MGL) is anticipated to be the primary beneficiary.
Mahanagar Gas (MGL) Poised for Highest Gains
- MGL benefits from a relatively low customer addition base during the April-June period.
- The company also has the lowest gas consumption per household among CGDs, at 108 scm per annum (assuming 62% billed customers).
- This combination implies the highest excess APM gas allocation per new household added for MGL.
- The surplus APM gas can then be utilized to reduce the proportion of higher-cost non-APM gas for non-domestic customers, further decreasing overall gas costs for MGL.
- Nomura has set a target price of Rs 1,465 for MGL.
Indraprastha Gas (IGL) Sees Steady Impact
- IGL added approximately 28,800 households per month between April and June 2026, consistent with its historical run-rate.
- The company is expected to see a moderate benefit from the incentive scheme.
- Nomura's target price for IGL is Rs 155.
Gujarat Energy Ltd Expected to Benefit Least
- Gujarat Energy Ltd, despite its significant presence, is projected to benefit the least from the new policy.
- The company records the highest per-household gas consumption at 131 scm per annum (assuming 94% active customers).
- This higher consumption rate translates to the lowest excess APM allocation per new household added compared to its peers.
- Nomura has suggested a target of Rs 379 for Gujarat Energy.
Market Opportunity and Scheme Implementation
Data from the Petroleum and Natural Gas Regulatory Board (PNGRB) as of March 2026 indicates a substantial opportunity for CGDs. Out of 16.9 million connected households, only 10.7 million (approximately 63%) were billed customers. This significant gap provides ample headroom for CGDs to convert existing connections into billed customers, thereby qualifying for higher APM gas allocations from the government.
The incentive scheme is set to commence on September 1, 2026. The threshold for incremental household additions will be calculated based on the average monthly additions recorded during April-June, increased by 10 percent.