gas utilities sector, after facing significant volatility in prices and issues on the availability of LNG over the last two years, is now returning to a tentative state of normalcy, said ratings agency ICRA in a note today.
The gas offtake by the domestic market is supported by softening LNG prices, uptick in domestic gas supplies, and a regulatory push by the government.
The domestic production is projected to witness healthy growth in FY2024, primarily from the Krishna-Godavari Basin, which is likely to keep the reliance on LNG in check. The city gas distribution (CGD) and the fertiliser sectors will continue to drive the demand growth owing to favourable policy support.
ICRA expects the demand from the industrial sector to witness a healthy uptick amid soft LNG prices and increasing domestic gas production.
The CGD sector has benefitted from the implementation of the Kirit Parikh Committee recommendations in April 2023, resulting in the lowering of domestic gas prices, thereby improving the cost economics for CNG and PNG(d) vis-à-vis alternate fuels.
“The gas consumption in India is expected to grow by 6-7% YoY in FY2024 over a low base, supported by softer LNG prices and an uptick in the domestic gas production. The fertiliser sector will continue to remain the largest consumer, supported by ramp-up of new fertiliser plants that were commissioned in H2 FY2023," said Sabyasachi Majumdar, Senior Vice President and Group Head, Corporate Ratings, ICRA Ltd.
Majumdar added that the demand from the CGD sector is underpinned by the CNG segment, which remains robust owing to the strong economic advantage over alternate fuels, a testament of which is the strong uptick in CNG vehicle sales in the last couple of years.
Globally,