Latest news with #AdministeredPricingMechanism
Time of India
12 hours ago
- Business
- Time of India
Crude oil price rise to increase import bill by $13–14 bn, widen CAD by 0.3% of GDP: ICRA
New Delhi: A $10 per barrel increase in average crude oil prices could raise India's net oil imports by $13–14 billion and widen the current account deficit (CAD) by 0.3 per cent of GDP, rating agency ICRA said in a report. The agency said that following the June 13 conflict escalation between Israel and Iran, crude prices rose sharply from $64–65 per barrel to $74–75 per barrel, raising concerns for crude- and gas-importing countries like India. India sources 45–50 per cent of its crude oil and nearly 54 per cent of its liquefied natural gas (LNG) from West Asia via the Strait of Hormuz (SoH). ICRA said that geopolitical tensions in the region have increased the risk to global energy trade, with any disruption at SoH potentially impacting about 20 per cent of global oil and 25 per cent of global LNG supplies. The agency has projected Brent crude oil prices to average $70–80 per barrel in FY26, with net oil imports expected at around $120 billion, compared with $123.4 billion in FY25. ICRA estimates the CAD to widen to $50–52 billion or 1.2–1.3 per cent of GDP in FY26, from 0.9 per cent in FY25. Marketing margins of oil marketing companies (OMCs) for petrol and diesel are likely to moderate to Rs 6–8 per litre in FY26 due to higher crude prices. Under-recoveries on subsidised liquefied petroleum gas (LPG) may increase to Rs 160 billion. While upstream companies may not see an immediate impact on their earnings at current crude prices, a prolonged surge could affect private investment and macroeconomic stability. ICRA also noted that natural gas prices are likely to rise in the upcoming reset in July 2025. The agency expects the Administered Pricing Mechanism (APM) gas price to revert to USD 6.75 per mmBtu from USD 6.5 per mmBtu. New well gas (NWG) prices are also estimated to increase by 10 per cent. India imports over 20 per cent of its global LNG from Qatar and UAE, with 85 per cent of their LNG exports passing through the SoH. Any extended disruption to shipping lanes could impact LNG supply and pricing in the domestic market. Gas-based power plants, currently operating at plant load factors of less than 20 per cent, are unlikely to see major changes unless domestic gas availability improves. Fertiliser companies may witness higher input costs and elevated subsidy needs, particularly for urea and ammonia. The report said that city gas distribution (CGD) companies and industrial consumers may also face higher spot LNG costs and shipping rates. ICRA further estimates that a 10 per cent increase in crude oil prices could lead to an 80–100 basis points increase in wholesale price index (WPI) inflation and a 20–30 basis points increase in consumer price index (CPI) inflation, depending on how much of the increase is passed on to end-users. India's GDP growth forecast of 6.2 per cent for FY26 could also be revised downward if crude oil prices remain elevated. The Reserve Bank of India's (RBI) April 2024 Monetary Policy Report estimated that a 10 per cent rise in crude oil prices over a baseline of USD 70 per barrel could reduce GDP growth by 15 basis points. ICRA said any extended disruption or closure of the SoH could impact India's LNG import availability and cost, increase domestic gas prices, and alter energy sector trade flows.
Time of India
13 hours ago
- Business
- Time of India
Crude oil price rise to increase import bill by $13–14 bn, widen CAD by 0.3% of GDP: ICRA
New Delhi: A $10 per barrel increase in average crude oil prices could raise India's net oil imports by $13–14 billion and widen the current account deficit (CAD) by 0.3 per cent of GDP, rating agency ICRA said in a report. The agency said that following the June 13 conflict escalation between Israel and Iran, crude prices rose sharply from $64–65 per barrel to $74–75 per barrel, raising concerns for crude- and gas-importing countries like India. India sources 45–50 per cent of its crude oil and nearly 54 per cent of its liquefied natural gas (LNG) from West Asia via the Strait of Hormuz (SoH). ICRA said that geopolitical tensions in the region have increased the risk to global energy trade, with any disruption at SoH potentially impacting about 20 per cent of global oil and 25 per cent of global LNG supplies. The agency has projected Brent crude oil prices to average $70–80 per barrel in FY26, with net oil imports expected at around $120 billion, compared with $123.4 billion in FY25. ICRA estimates the CAD to widen to $50–52 billion or 1.2–1.3 per cent of GDP in FY26, from 0.9 per cent in FY25. Marketing margins of oil marketing companies (OMCs) for petrol and diesel are likely to moderate to Rs 6–8 per litre in FY26 due to higher crude prices. Under-recoveries on subsidised liquefied petroleum gas (LPG) may increase to Rs 160 billion. While upstream companies may not see an immediate impact on their earnings at current crude prices, a prolonged surge could affect private investment and macroeconomic stability. ICRA also noted that natural gas prices are likely to rise in the upcoming reset in July 2025. The agency expects the Administered Pricing Mechanism (APM) gas price to revert to USD 6.75 per mmBtu from USD 6.5 per mmBtu. New well gas (NWG) prices are also estimated to increase by 10 per cent. India imports over 20 per cent of its global LNG from Qatar and UAE, with 85 per cent of their LNG exports passing through the SoH. Any extended disruption to shipping lanes could impact LNG supply and pricing in the domestic market. Gas-based power plants, currently operating at plant load factors of less than 20 per cent, are unlikely to see major changes unless domestic gas availability improves. Fertiliser companies may witness higher input costs and elevated subsidy needs, particularly for urea and ammonia. The report said that city gas distribution (CGD) companies and industrial consumers may also face higher spot LNG costs and shipping rates. ICRA further estimates that a 10 per cent increase in crude oil prices could lead to an 80–100 basis points increase in wholesale price index (WPI) inflation and a 20–30 basis points increase in consumer price index (CPI) inflation, depending on how much of the increase is passed on to end-users. India's GDP growth forecast of 6.2 per cent for FY26 could also be revised downward if crude oil prices remain elevated. The Reserve Bank of India's (RBI) April 2024 Monetary Policy Report estimated that a 10 per cent rise in crude oil prices over a baseline of USD 70 per barrel could reduce GDP growth by 15 basis points. ICRA said any extended disruption or closure of the SoH could impact India's LNG import availability and cost, increase domestic gas prices, and alter energy sector trade flows.
Business Upturn
08-06-2025
- Business
- Business Upturn
Nuvama cuts target price for Mahanagar Gas (MGL) after analyst meet; Here's why
By Markets Desk Published on June 8, 2025, 20:43 IST Nuvama Institutional Equities has cut its target price on Mahanagar Gas Ltd (MGL) to ₹1,224 (from ₹1,305 earlier), while retaining its Reduce rating, citing concerns over deterioration in sourcing mix, potential margin pressure, and policy uncertainties in the City Gas Distribution (CGD) sector. Following its recent analyst interaction with MGL management, Nuvama said that while healthy volume growth momentum is likely to continue in the near term, structural headwinds remain. Volume growth to remain strong MGL's management expects double-digit volume growth to sustain, driven by several initiatives: Ongoing expansion of gas infrastructure — targeting addition of 180 km of steel pipelines and 250 new CNG stations by 2030 Marketing incentives for CNG — where MGL is partly covering the capital cost of vehicle conversion to CNG Offering a 10 percent discount to fuel oil prices for new PNG industrial customers for three years CNG price competitiveness — with CNG currently 47 percent cheaper than petrol and 12 percent cheaper than diesel, leaving headroom to cut prices if needed Gradual pickup in LNG fuelling for long-haul trucks, as capital costs decline over time. In addition, MGL sees further potential upside from: The merger of fast-growing UEPL Greater utilisation of exclusive CNG fuelling infrastructure for BEST buses Possible regulatory tailwinds if ICE vehicle phase-out recommendations in Mumbai Metropolitan Region are implemented Development boost from the ramp-up of Navi Mumbai airport. Rising sourcing costs to weigh on margins However, Nuvama cautions that MGL's gas sourcing mix is deteriorating faster than expected: The share of Administered Pricing Mechanism (APM) gas is declining, as more gas gets reclassified under New Well Gas (NWG), which is priced at a 20 percent premium. The shift, previously occurring at 7–8 percent annually, is now expected to accelerate to 10–12 percent per year. As a result, input gas costs will rise, putting pressure on margins. Industry-wide, Nuvama expects greater consolidation as lower profitability forces smaller or non-core players to divest CGD assets. MGL, with its net cash balance sheet, is open to inorganic growth opportunities if valuations are attractive. Valuation de-rating risk due to policy overhang Nuvama further notes that policy uncertainty and ad-hoc government interventions could lead to valuation de-rating across the CGD sector, similar to the trend seen in Oil Marketing Companies (OMCs), which trade at a significant discount. As a result of these headwinds, Nuvama has cut its FY26–27 EBITDA estimates for MGL by 2 percent and lowered its target price to ₹1,224. 'We retain our Reduce rating, as the sector faces margin headwinds, input cost pressures, and policy-related uncertainties,' the brokerage said. Disclaimer: The views and target prices mentioned in this article are as stated by Nuvama Institutional Equities. They do not represent the opinions or recommendations of this publication. Readers are advised to consult their financial advisors before making any investment decisions. Markets Desk at
