Gujarat Gas Ltd, India’s largest city gas distribution provider, rose roughly 5.6 percent in the first half session on Monday, Company shares jumped after the government hiked import duty on propane for commercial use.
Gujarat gas is engaged in the business of Natural gas that involves distribution of gas from the source to the end customers. The company provides CNG and PNG connections in South & Central Gujarat and Saurashtra, and In the Morbi region, propane is the most economical fuel for Gujarat Gas.
On July 1, 2023, the Indian government raised the import tariff on propane for commercial usage from 2.75 percent to 19.25 percent. Following the increase, the comparable propane price in Morbi is expected to rise by Rs 5-6 scm to Rs 38.6 per scm, up from Rs 32-33 per scm before. As a result, the price rise will wipe out the cost advantage propane previously had over Gujarat Gas.
This announcement was sent in response to the continuous decline in propane prices worldwide and a potential request by City Gas Distribution companies to fix the current taxation disparity between propane and natural gas.
According to Antique Stock Broking, propane and butane fall under the GST regime whereas natural gas is subject to the VAT regime, making it difficult for many buyers to collect input tax credits.
August propane prices are predicted to fall to $400 per tonne, down from $450 per tonne in July 2023. Propane is the most significant competitive fuel for Gujarat Gas in the Morbi region. This decision is anticipated to erode propane’s competitive advantage in Morbi, where it has been gaining market share.
As a result, Gujarat Gas will likely benefit from increased propane import duties since it levels up the competition and may help them to reclaim its market share in the region. At 1:01 pm, the shares of Gujarat Gas quoted Rs 475.60, up 2.06 percent on NSE.
The company’s Revenue climbed modestly year on year, from Rs 16,456 crore in FY 21-22 to Rs 16,759 crore in FY 22-23. Within the stated time range, the net profit increased by 18% from Rs 1,285 crore to Rs 1,525 crore.
Promoters possess 60.89 percent of the company’s stake as of FY 22-23, while domestic institutional investors hold 20.29 percent.
Written by Omkar Chitnis
