The volumes of city gas distribution (CGD) sector entities were impacted up to 30-50 per cent during the Covid-19 induced lockdown, however, these have recovered to almost pre-Covid levels now. The domestic demand for natural gas is expected to grow by approximately 10 per cent Year-on-Year in financial year (FY) 2022. Gas consumption is expected to increase as more CGD geographical areas come up, the initial infrastructure building phase nears completion, and new customers are connected to the gas grid owing to expansion in the pipeline network.

ICRA also expects the CGD entities to report healthy growth in volumes on the back of the Union Government’s push for increasing penetration of CGD networks and provision of domestic gas for the compressed natural gas and piped natural gas segments. Further, capex and investments are expected to be healthy in FY 2022 as companies make up for the time lost due to restrictions and lockdowns in FY 2021. Additionally, a clearer outlook on demand and prices and a greater impetus for local manufacturing under Atmanirbhar Bharat are expected to drive demand over the long term.

ICRA evaluates the trends in volumes across the oil and gas sector for FY 2022, the investment plans of key CGD players for FY 2022 and the impact of government policies on demand for natural gas in the country.