IGL, MGL shares rise up to 3% after PNGRB approves reforms in Natural Gas Pipeline Tariff Regulations

Mumbai, July 4, 2025 — Shares of Indraprastha Gas Ltd (IGL) and Mahanagar Gas Ltd (MGL) surged up to 3% in Thursday’s trading session, following the Petroleum and Natural Gas Regulatory Board’s (PNGRB) approval of significant reforms in the natural gas pipeline tariff structure. The move is widely seen as a game-changer in the gas distribution sector, with analysts predicting a more favorable operating environment for City Gas Distribution (CGD) companies.

Regulatory Overhaul Fuels Optimism

The PNGRB’s greenlight to overhaul the Natural Gas Pipeline Tariff Regulations is aimed at simplifying the tariff structure, enhancing pipeline utilization, and promoting a level playing field for all stakeholders. Under the revised framework, the tariff determination methodology has shifted towards a "unified tariff mechanism", which is expected to benefit downstream CGD players like IGL and MGL by reducing transportation costs and facilitating access to affordable gas.

“The approval of these reforms is a pivotal step towards improving gas affordability and infrastructure utilization,” said an official statement from the Ministry of Petroleum and Natural Gas.

Market Reaction: Stocks React Positively

Reacting to the announcement, IGL shares rose 2.7% intraday to ₹456.20 on the NSE, while MGL shares climbed 2.9% to ₹1,228.50, before closing slightly off their highs.

The Nifty Energy index also gained about 0.6% in today’s session, reflecting broader optimism in the oil and gas sector following the regulatory developments.

Analyst View: A Boon for CGD Companies

Market analysts and brokerage firms welcomed the reforms as structurally positive for CGD firms.

“The shift towards a unified tariff structure reduces cost disparities between regions. This could improve margins for gas distributors and encourage network expansion into new markets,” said Amit Shah, Senior Research Analyst at Motilal Oswal Financial Services.

“We believe the new regulation reduces regulatory uncertainty and supports volume growth for companies like IGL and MGL, especially in underpenetrated areas,” noted Sonal Verma, VP, Energy Research at ICICI Securities.

Brokerages are now re-evaluating their price targets on CGD stocks. Motilal Oswal has a ‘Buy’ rating on IGL with a revised target of ₹495, citing improved visibility on gas pricing and volume growth.

Key Highlights of the Tariff Reform

• Unified Tariff Implementation: This mechanism will ensure a single tariff for transporting gas across multiple pipeline systems, rather than zone-based pricing.

• Encouragement of Cross-Regional Supply: The reforms aim to remove entry barriers and make it economically viable for gas to reach remote and high-demand regions.

• Long-Term Infrastructure Push: The PNGRB’s reforms align with India’s goal of increasing the share of natural gas in the energy mix from 6% to 15% by 2030.

This development also follows other government initiatives like tax rationalization for gas infrastructure and expansion of city gas distribution licenses to more districts.

Sector Context: Growth Potential Remains Intact

India's natural gas consumption is on a steady upward trajectory, supported by policy initiatives aimed at promoting cleaner fuels. The gas sector is also receiving attention under the “One Nation One Gas Grid” project, seeking to create a seamless nationwide gas pipeline network.

Despite recent volatility in global LNG prices, domestic demand for natural gas remains robust, especially in the industrial and transportation segments. City Gas Distribution companies are seen as key enablers in this growth story.

Investor Outlook: Momentum Building

With the regulatory overhang easing, investor sentiment in CGD stocks is turning bullish.

“This is a rerating opportunity. The pipeline tariff rationalization coupled with favorable policy tailwinds can unlock value in CGD stocks,” said Rakesh Menon, Fund Manager at Aditya Birla Sun Life Mutual Fund.

Foreign institutional investors (FIIs), which had been lukewarm on Indian gas utilities in recent quarters, may also return amid clarity on gas pricing and improved transmission economics.

Experts caution, however, that actual benefits will depend on timely implementation and coordination among stakeholders, including pipeline operators and state authorities.

The PNGRB’s approval of reforms in the natural gas pipeline tariff regulations marks a structural shift in India’s gas infrastructure policy. Stocks like IGL and MGL stand to benefit materially from reduced cost structures and wider market access. As the reforms take shape, analysts remain optimistic about sustained volume growth, improved profitability, and long-term shareholder returns in the City Gas Distribution segment.