New Delhi, March 13: Ongoing disruptions in West Asia are expected to impact the Indian City Gas Distribution (CGD) industry, with daily sales volumes projected to moderate by 8-10 per cent as natural gas supplies face a squeeze.
As per a press release by Crisil Ratings, the supply chain remains under pressure, and the ability of players to pass through cost increases to end consumers is likely to cushion overall profitability.
The Industrial and Commercial (I&C) segment of Piped Natural Gas (PNG) is set to bear the brunt of this volatility due to its heavy reliance on imported Liquefied Natural Gas (LNG). In contrast, Compressed Natural Gas (CNG) and domestic PNG segments, which account for roughly 70 per cent of industry volumes, remain relatively protected.
These sectors rely primarily on domestic gas and have been designated as high-priority areas for allocation under the Essential Commodities Act, 1955, following a government notification on March 9, 2026.
According to the Crisil Ratings, the conflict has severely constrained imports, particularly from Qatar. As a major supplier accounting for nearly 45 per cent of India's LNG imports, Qatar declared force majeure on international deliveries after production halted at its Ras Laffan facility. This development has triggered a domino effect, leading several major Indian gas traders to invoke force majeure as they struggle to secure scheduled cargoes.
Ankit Hakhu, Director, Crisil Ratings, said, "The industry's daily sales volume is expected to decline by 8-10% primarily due to curtailment of natural gas supply to I&C customers. This is despite likely government support to CGD companies to reduce curtailment to I&C customers from the current level of 40-50%. Meanwhile, Indian gas traders are seeking alternative sources to offset reduced LNG supply. However, limited excess supply in the export market and elevated spot prices pose a challenge. LNG facilities of key exporters are operating at 90-95% capacity (224 MTPA), leaving limited room for additional global supply (10-20 MTPA) to offset the absence of Qatar's 77-80 MTPA export volumes, if the situation prolongs."
Pricing dynamics for the PNG-I&C segment are under significant pressure as the Asian spot market prices jumped to USD 19-20 per MMBtu, nearly doubling from USD 10-11 per MMBtu in February 2026. Because these contracts are often linked to Brent crude or spot rates, the reduction in supply creates immediate input cost pressure. However, the report suggested that CGD players maintain the flexibility to pass these costs to customers, preventing a major collapse in margins.
Gauri Gupta, Team Leader, Crisil Ratings, said, "While the impact on operating margins is expected to be limited, the operating cash accruals of CGD players may moderate due to impact on volumes. However, credit profiles will be cushioned by healthy balance sheets of the players. The ratio of debt to earnings before interest, taxes, depreciation and amortisation is estimated to be ~1.0 time this fiscal as a result of larger players being debt free, with obligations towards annual capital expenditure and debt repayments being staggered over the medium term. Moreover, liquidity greater than 9 months of debt servicing and support from sponsors with strong credit profiles will provide resilience against near-term shocks."
The industry's credit resilience is further bolstered by liquidity buffers exceeding nine months of debt servicing and support from strong corporate sponsors. Nevertheless, the report noted that the situation remains fluid, and any sustained demand-supply disequilibrium or further spikes in spot prices will require close monitoring. (ANI)
