You are here: HomeCorporateCGD volumes impacted by second wave of Covid-19 induced lockdowns; however, drop is less severe than the first wave: ICRA

CGD volumes impacted by second wave of Covid-19 induced lockdowns; however, drop is less severe than the first wave: ICRA

Published in Corporate Thursday, 10 June 2021 15:34


    While industrial activities have reduced, the drop in PNG consumption is relatively lower, additionally, commercial volumes have been severely impacted however, domestic volumes have remained resilient

 

    The slump in demand has resulted in deferment of cargoes and lower capacity utilisation of LNG terminals and pipelines

India’s City Gas Distribution (CGD) demand has slumped as a result of the second wave of Covid-19. The states with the highest penetration of city gas such as Gujarat, Maharashtra, Uttar Pradesh and the NCR region have been severely hit by the second wave of Covid-19 and have imposed lockdowns to curb the spread of infections. Accordingly, Compressed Natural Gas (CNG) volumes have declined as transportation and passenger mobility segments have been severely hit. Industrial consumption has also been adversely impacted owing to weaker demand besides which commercial demand has significantly reduced. However, demand from the domestic segment remains resilient due to more at home dining. The weaker demand for natural gas has resulted in LNG cargoes being deferred and capacity utilisation of LNG terminals and pipelines has also dipped.

Giving more insight on the impact on domestic companies, Mr. Sabyasachi Majumdar, Group Head & Senior Vice President at ICRA says, “The impact of the second wave of Covid-19 is unlikely to be as severe as that witnessed in 2020. As expected, lockdowns in various cities and states have adversely impacted CNG demand which has declined by 20-25%. CNG volumes are expected to start recovering from the lows of May 2021 as several states have begun easing restrictions amid a decline in infections. While industrial activities have reduced, they have not halted in a manner similar to that in 2020, resulting in a relatively lower drop in industrial PNG consumption. Additionally, commercial volumes have been severely impacted however domestic volumes have remained resilient.”

Exhibit 1: CGD Sector RLNG Consumption (MMSCMD) Exhibit 2: CGD Sector Domestic Gas Consumption (MMSCMD) Source: PPAC, ICRA research Source: PPAC, ICRA research

The CGD sector domestic gas volumes declined by 12% M-o-M to 15.2 MMSCMD in April 2021 as the transportation and passenger mobility segments were hit the hardest by lockdowns. However, this remains higher than the consumption of 4.2 MMSCMD in April 2020. In May 2021, CNG volumes declined further as the Covid-19 wave intensified and more states imposed lockdowns. While the lockdowns have resulted in reduced industrial activity, the impact has not been as severe as in 2020. Therefore, the drop in RNLG consumption for CGD entities remained lower than that of domestic gas, with volumes remaining roughly stagnant since February 2021. Approximately 49% of the gas required by the CGD sector is sourced from RLNG imports.


 

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