According to the India Ratings and Research’s (Ind-Ra), city gas distribution (CGD) entities have witnessed a steep decline in the sales volume from March 25, 2020 as the key end users of compressed natural gas (CNG) segment, namely buses, autos and cars have seen limited movement. Ind-Ra had projected a decline of 15-20 per cent in sales volume in the first quarter of 2020-21 provided the lockdown was lifted after the first phase i.e. April 14, 2020. However, the delays in the lifting of lockdown have resulted in further decline in sales volume. Besides, there has been a significant reduction in volumes for industrial and commercial petroleum natural gas segment as the key end-user industries, including tiles, petrochemicals, refineries and chemicals, have either completely shut or have lowered their capacity utilisations. Further, given the demand slump, most CGD players are unlikely to pick up the volumes earlier envisaged as per Ind-Ra. This is expected to result in downward volume flexibility being exercised by the end customers. The ongoing work on the new geographical areas (GAs) has also been halted temporarily given the limited availability of manpower, component supplies and imported products. Additionally, the setting up the trunk pipelines or the spur pipelines has also seen a timeline pushback, thus delaying the overall project execution by at least three months. Even after the lockdown is entirely lifted, Ind-Ra expects the mobilisation of the resources to take time as the ability of the company to get resources in a time-bound manner would determine the ultimate delay.
Ankur Rustagi, Senior Analyst, India Ratings and Research Private Limited assesses the impact of the lockdown on city gas distribution (CGD) companies in his article, “COVID-19 Lockdown to Curb Short-Term Growth of CGD Players” which can be downloaded here.