GAIL(India) Ltd (GAIL) Q1 FY23 Earnings Concall Transcript

GAIL(India) Ltd (NSE:GAIL) Q1 FY23 Earnings Concall dated Aug. 04, 2022

Corporate Participants:

Probal Sen — Vice President Equity Research

Rakesh Kumar Jain — Director (Finance)

Analysts:

Maulik Patel — Equirus — Analyst

Sabri Hazarika — Emkay Global — Analyst

Unidentified Speaker —

Pinakin M. Parekh — JPMorgan — Analyst

Krati Sankhlecha — Credit Suisse — Analyst

Sujit Lodha — Birla Sunday Life Insurance — Analyst

S. Ramesh — Nirmal Bang Securities — Analyst

Kirtan Mehta — BOB Capital Markets. — Analyst

Vipul Kumar Shah — Sumangal Investments — Analyst

Vishnu Kumar — Spark Capital — Analyst

Varatharajan — Limited — Analyst

Yogesh Patil — Centrum — Analyst

Vikash Jain — CLSA — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the GAIL India Limited Q1 FY ’23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] [Operator Instructions]

I now hand the conference over to Mr. Probal Sen. Thank you, and over to you, sir.

Probal Sen — Vice President Equity Research

Thank you, Seema. Thank you, everyone, for making the time to attend this post Q1 ’23 financial results call of GAIL India Limited. We are pleased to have senior members of GAIL India’s management led by Mr. Rakesh Jain, the CFO, with us.

I will hand over to him immediately for some opening remarks and a belief on the numbers, and then we can move into the Q&A. Sir, over to you.

Rakesh Kumar Jain — Director (Finance)

Thank you, Probal. Good afternoon, Mr. Probal, from ICICI Securities and my dear friend, from investors and analyst community. A very warm welcome to GAIL’s Earnings Call for Q1 Financial Year ’23. We are thankful to you all for showing keen interest in this earnings call. The results for first quarter have been declared earlier today, and I’m sure that you would have gone to this. Before I give insights on the financial performance, I’m happy to inform you that our company has received [Indecipherable] from on the account, on the financial year ’21-’22, the 13th consecutive occasion when the company has been able to achieve this year.

Now let me take you through financial highlights. GAIL achieved gross turnover of INR37,536 crores in the current quarter as against INR26,909 crores in Q4 financial year 2022. This is an increase of almost 39%, and the increase is mainly due to higher natural gas market and transmission volume, higher gas prices both domestic and RLNG, higher LST prices, LST prices are higher by average almost INR12,000 per metric ton; higher petrochemical prices, this is higher approximately by INR18,500 per metric ton. Our this hike is partly offset by lower PC sales quantity in Q1 ’23, due to shutdown of petrochemical plant in the current quarter, that is quarter one.

And asset before tax increased to INR3,894 crore in current quarter as against INR3,546 crores in Q4 financial year 2022. This is an increase of 10%, and the increase is mainly due to, as I said, with restructure revenue. The improved performance of Gas Marketing segment. However, this was partly set up due to reduced profitability in gas transmission, Liquid Hydrocarbon segment due to increase in price of domestic gas used in internal consumption that increase is well known to you. There is $2.9 per MMbt to $6.10 per MMBtu. profit also reduced in spite of higher prices and realization. And this reduction is due to lower production, as I said in Q1 ’23, and sales and higher cost of input gas during this quarter. Profit after tax increased to INR2,915 crores as against INR2,683 crores in Q4 ’22, financial year ’22, and this is an increase of 9%, and on similar accounts, as I stated with respect to PVD. Segmental performance for the current quarter versus previous quarter.

Our gas marketing volume stood at 100.84 MMSCMD in the current quarter as against 94.69 MMSCMD in previous quarter. And the increase in volume is driven by higher LNG sales and also overseas sales. The natural gas transmission volume stood at 109.47 MMSCMD in the current quarter as against 107.56 MMSCMD in the previous quarter. The capacity utilization for pipeline is 53% as compared to 52% in last quarter. Polymer production stood at 132 TMT as against 194 TMT in last quarter. And this INR132 million is almost same if we compare with the Q1 ’22 because we had and was shutdown in both the Q1 ’22 and ’23.

However, if you compare it with the Q1 of last year, sorry, we have experienced very high PC prices, as I said, in current quarter, we average PC prices is 1,26,000 metric tons. With respect to LSC, the production stood at 227 TMT as against 212 TMT in previous quarter, we apart utilization was 64%. Electric hydrocarbon price increased significantly, and the average realization in the current quarter was INR74,100 per metric ton cost of input gas for LFC segment is primarily driven by domestic gas prices. From April ’22, the cost of input gas prices increased to $6.10 per MMBtu from $2.90 per MMBtu, which led to increase in cost of production.

In respect of LPG transmission, transmission was 1,055 TMT against 1,065 TMT in previous quarter, almost the same. The capacity utilization was at 110%. Coming back to the consolidated financials of Q1 ’23 as compared to Q4 ’22, financial year ’22, the consolidated turnover in the current quarter stood at INR37,901 crores versus INR27,263 crores in previous quarter, almost 39% up. The PBT in the current quarter is INR4,230 crores versus INR4,375 crores in Q4 financial year 2022, down by 3%. The PAT is INR3,253 crores versus INR3,454 crores in Q4 financial 2022, down by 6%..

With respect to gear CGD. That is a six CGD we are operating in, And in terms of infrastructure, we have 121 CNG stations in terms of, connection, we have 18,000 PNG collections. And during the quarter Q1 ’23, one new CNG station and 17,000 new PNG collections were added. And now with respect to GAIL Gas, during the current quarter, the gross turnover to INR2,658 crores as against INR2,102 crores in Q4 financial year 2022. This is an increase of 26% and again, mainly driven by increase in average gas price. The PBT was marginally down at INR97 crores in current quarter as against INR103 crores in previous quarter.

Profit after tax also declined marginally to INR72 crores at against INR74 crores in previous quarter. The physical volume during the quarter remained flat at approximately six MMSCMD. GAIL Gas allow, subsidiaries has an infrastructure of eight lakh PNG collections and 341 CNG stations. During the quarter two, new CNG stations and 21,000 new PNG connections were added. In terms of capex, GAIL assume capex of approximately INR1,975 crores during the current quarter. This is mainly on account of pipelines, petrochemical, projects, operational capex, equity contribution and E&P.

We have planned to spend approximately INR7,500 crore in current financial year, and mainly on again, pipeline, petrochemical, equity. With respect to project performance, 121-kilometer of Bokaro-Angul mainline Commission on 30th June 2022, 412-kilometer was commissioned until March 2022. So Bokaro-Angul Pipeline, now is making total 533 kilometer. This was elaborated by honorable CM on 12 July 2022.. We work along various projects, PV projects at PV HBP [Indecipherable] is going on as per sure. That’s all from my side regarding the overview of performance and projects. The management, the team of, directors from all the segments that are available here. And will be glad to clarify on any questions that you may have.

Now over to you, Probal.

Probal Sen — Vice President Equity Research

Thank you very much, sir. Seema, we can open up the floor for the Q&A.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We take the first question from the line of Maulik Patel from Equirus. Please go ahead sir.

Maulik Patel — Equirus — Analyst

Hello. This is regarding the LNG volume. For the quarter, can you see how much of the cargoes you received from the U.S. and…

Rakesh Kumar Jain — Director (Finance)

Q1?

Maulik Patel — Equirus — Analyst

Yes.

Rakesh Kumar Jain — Director (Finance)

See, cannot give the exact breakup of the Q1 cargoes, but overall, we did purchase some both the U.S. and other suppliers from the, which are Brent-linked contracts. And we did also purchase some smart cargoes to meet our spot gas requirements in the market.

Maulik Patel — Equirus — Analyst

Is with respect to this news in the media that Gazprom has declared the force measure, and this a 2.5 million tonne of contracts, they are not supplying the cargo since month of June, I think. So what can the impact of that? I wanted to know that have you sold out of this 2.5 million tonne, how much of the volume has been sold to the customers? And in those contracts, it was mentioned that it is on the Gazprom volume. And the first mover from the Gazprom will also applicable to the customers or not?

Sabri Hazarika — Emkay Global — Analyst

Yes. Let me take this question. As you know, that we have total portfolio of 14 MMTPA of LNG. And for current year, Gazprom is supposed to supply 2.5 MMTPA of LNG. That if work out, it will, they actually are supposed to supply almost 36 cargoes during this calendar year because LNG contracts are on a calendar year basis. And, but there has been certainly supply disruptions and it has happened since late May 2022. When I’m saying so, it means till almost May the cargoes were coming. And if you talk to me till date, till date Gazprom has not supplied almost eight cargoes, eight cargoes. eight number of cargos, if you talk to me till today, okay. Those supply disruption started sometime in May, but the grain between also gave on cargo to us in June. So this is what about the current situation, the portfolio what we have gotten the contract we have with Gazprom and the supply situation till date

Maulik Patel — Equirus — Analyst

So Gazprom has not declared the force measure. It is that they are not able to supply the cargoes?

Rakesh Kumar Jain — Director (Finance)

Yes, Gazprom what they have said, basically, their regulatory, basically, this has now become a company based out of Germany because we had a contract with Gazprom interview in the constitution of our parent change. So in order to secure the supply for Europe, they are not certain about supplying LNG under this contract. They are not sped no, that they will not surprise, but they are not churning at the moment.

Maulik Patel — Equirus — Analyst

Sir, how are we doing with because the eight cargoes are not a small number. I think it has impacted our, the volume, and we have probably sold a large part of this 2.5 million tonnes to the customers. So will, are we obliged to make this volume on those sources of gas from the go? Or how is the situation with customer? And how are you dealing with that?.

Unidentified Speaker —

Yes, you’re right. The situation is certainly an area of concern, if I talk to you today. I cannot say what will happen in future. If I talk to you right now when I’m talking to certainly, it’s a concern. So what GAIL is doing, GAIL is actually honoring its contract. What we are doing in order to honor the contract, contract all contracts have take-or-pay levels. Relatively. So take-or-pay levels are normally for the user. They are below level also supply, So we have started supplying our volumes at the take-or-pay level. Okay. So that take-or-pay level is enabling us, that is one solution I’m telling you right now how we are meeting it. The take-or-pay level enabling us to deal the situation partly. Secondly, we ourselves has cut down the load for our part of petrochemicals. So that is also helping us.

Thirdly, what we have done, we have started, though we were otherwise doing this as a course of risk mitigation or bringing cargo in advance or taking later. So we have been doing some time steps. So we are advancing our cargoes through swaps, which are supposed to come stay in ’23. We have done some of the transactions, there is fourth, not third. Fourth, what we have done, we had some unallocated cargoes at United States. So we are, we have higher shifts for that, so that the unallowed cargo, which we were thinking at that point of time, we can use the arbitrage, sell in the international market. We are thinking that with those ships, we will bring the cargoes to domestic market in order to mitigate the situation. And lastly, if we still feel that there is some shortage, we’ll go for a spot purchase for requirement.

Maulik Patel — Equirus — Analyst

So does this impact our profitability in a significant manner, given that we are the dotcom contract that whatever 3% of the oil price. And you are buying some of this volume, which is in the spot market, which is substantially higher, will this impact our profitability in a significant manner, Mutual base business?

Unidentified Speaker —

Yes. So again, we are talking as of today. So you can say that profitability certainly will hit not significantly, let me again explain it. Certainly, there will be an impact on profitability. Nobody can deny if the situation remains like what we are talking today. And we, that’s how we are mitigating this situation or overcoming situation through various measures. We are avoiding, by doing these measures, we are avoiding purchased cargoes.

But what has happened, this volume, which is not coming from Gazprom is almost 7% to 8% of our total portfolio, correct? So to that extent, in order to meet that, we have started using take-or-pay levels. So suppose because there are different take-up levels in different contracts. Suppose we are reducing to 90%. So to that extent, the marketing volume and transmission volume has come down as of, and if situation persists, certainly will be there lower in tomorrow. Tomorrow, I cannot say what will happen, but I’m only hypothetically supporting this situation. But as of today, yes, we have cut down the supplies to take-or-pay levels. So it is, to that extent, there is an impact.

Maulik Patel — Equirus — Analyst

I mentioned it is 7% to 8%. It is actual at 14%, 15%, right? You have a 14 million tonnes of LNG commitment and 2.5 million tonnes. So approximately 15% kind of a number?.

Unidentified Speaker —

Yes. Yes. Yes. Let me tell you I said in terms of total volume, if you go over RLNG, yes, it’s 15%. So if it is 15%, 10%, we are cutting through take-or-pay that we are doing other major which I explained to you in detail.

Maulik Patel — Equirus — Analyst

Sure. Got it. Got it, sir. Sir, one more question, if you allow me, so how do you see this international prices, which has gone through the roof spot? And country is also having the consumption is also coming down, particularly the volume at CGDs are under pressure, given that the brand has gone down to, gone up to around INR105 per MMBTU. So industries are not able to afford this kind of. How do you see this overall gas demand in the country? And also in the context of upcoming the NGF auction, which Reliance probably will do in the next couple of months. In that context, how do you see this LNG demand or LNG important the country’s view?

Rakesh Kumar Jain — Director (Finance)

Okay. If you talk of today’s spot LNG price, nobody is going to come up. As far as the new convergence certainly will take a hit. But the plants which are already on gas will somehow are taking because they are on a long-term basis, they have some spot contracts. But if you talk of new convergence, new certainly there will be an impact on new convergence until the situation improves.

Operator

We take the next question from the line of Pinakin from JPMorgan. Please go ahead.

Pinakin M. Parekh — JPMorgan — Analyst

Sir, just to continue the previous point, you mentioned implementing take-or-pay in lieu of the lost gas from cargo. So what does that mean that you are paying the consumer the differential in price?

Rakesh Kumar Jain — Director (Finance)

The take-or-pay level, [Foreign Speech] Take-or-pay level is for consumer first. If consumer does not take that quantity, we have right to put take-or-pay gas price. But there is one more level supply-or-pay, which is normally below or value. So in terms of contract, we are complying the contract. We are paying even more, we are supplying the quantity more than the contrary required to comply the contract. So there is no question that com will pay for differentials.

Pinakin M. Parekh — JPMorgan — Analyst

Understood. So sir, [Foreign Speech] if for assuming the 2.5 million tonne Gastrom cargo is not available through the course of F23, the quarter one trading gas marketing EBITDA should sustain, sir, for the rest of the year on a quarterly basis, around INR2,500 crores?

Rakesh Kumar Jain — Director (Finance)

So quarter one EBITDA will have some concern if you talk of quarter two. Let me tell you very frankly. Because quarter one did not help that impact again on basis of hypothesis that Gazprom cargo will not come in Q2. If we continue with that hypothesis, so certainly, more number of cargoes will not come in Q2. And to that extent, our marketing and transmission volume, we have an impact and certainly will have an impact on our marketing EBITDA and marketing spend whatever you call.

Pinakin M. Parekh — JPMorgan — Analyst

Okay. Sir, sir, in marketing EBITDA will turn lower versus Q1 because of the lack of gas from volume. But to give you a sense, sir, last year second quarter marketing EBITDA was INR1,100 crores. This year, it is INR2,400 crores. So it’s fair to say that the second quarter should be somewhere in between, even without the loss of gas…

Rakesh Kumar Jain — Director (Finance)

Again, it’s a very, very tough or very, very difficult question to answer. We said in one of the earnings calls for yearly earnings call we had in Mumbai and also, Mumbai, yes, or investors meet that on a yearly basis, we said we will be able to or INR2,500 crores at least on marketing margin, that we said. But if we talk of Q2, certainly INR1,100 crores, we should achieve. But again, it depends on what will happen on all those accounts because we don’t know the way the LNG prices are behaving really, it is tough, tough to give you any number.

Pinakin M. Parekh — JPMorgan — Analyst

Sure, sir. My last question is at this point of time till the Gazprom cargoes don’t normalize, we should expect petrochemical utilization to remain low because that is one area where you’ll be cutting down consumption?

Rakesh Kumar Jain — Director (Finance)

Yes. As of date, yes, that’s our plan that if Gazprom cargo does not come and we are not able to source alternatively or then certainly, we will continue to keep the quota plant production at the current level or around that

Operator

We take the next question from the line of Sabri Hazarika from Emkay Global. Please go ahead.

Sabri Hazarika — Emkay Global — Analyst

Yes. Good afternoon sir, and congratulations on good numbers for Q1. So I have two questions. First relates to the Gazprom. So you mentioned that the hit will mostly be on the transmission, marketing and pet chem volumes. So compared to Q1 run rate, what is the current rate? I mean what side of the decline are we seeing, say, as of now, as of today?

Rakesh Kumar Jain — Director (Finance)

In transmission volume, marketing volume and also impact of chemical, you are asking, everything?

Sabri Hazarika — Emkay Global — Analyst

Yes, all three of them, yes.

Rakesh Kumar Jain — Director (Finance)

So let me tell you, if we have supplied on an average basis, 100, transmitted 100, marketed 100 MMSCMD in Q1. So the state RLNG cut by 10%, six million cut we have already done. So out of 100, five million or six million, so almost 95 million, 90 million to 95 million, we may be marketing, exact number difficult, but certainly be shared because we have cut down by five million or so. And in terms of transmission, also similar cut will come. And apart from that, not only that cut will come and Pata petrochemical congested two million if we keep it continue at current level. So that will be at seven million as compared to marketing because that transmission includes the consumption as well.

Sabri Hazarika — Emkay Global — Analyst

So as Pata, I didn’t get it. You said that we — I mean, how much of Gazprom was being supplied in Pata earlier?

Rakesh Kumar Jain — Director (Finance)

No, no, we are not very specific to any particular supply to Pata. We have always been maintaining that we are a portfolio holder. We used to supply Pata out of our portfolio, Gazprom was part of our portfolio. Gazprom is not coming. So therefore, there are issues in overall portfolio, but that’s how we have stopped or reduced the supplies to Pata because overall availability is less. But there is, there was no specific location per day to Pata.

Sabri Hazarika — Emkay Global — Analyst

Right, sir. And sir, second question is on your petrochemical actually, the realizations versus the South Korean benchmarks have expanded significantly in Q1. So is this some specific grade you are selling or something of that sort? Or is it like normal line of business.

Rakesh Kumar Jain — Director (Finance)

Just hold on because this is very, very specific questions.

Unidentified Speaker —

I didn’t get your question, sir. Can you will you recut it please?

Sabri Hazarika — Emkay Global — Analyst

I mean if I compare the petrochemical realization, which is the revenue divided by sales volume. So that number we compare with the South Korea benchmark. I think it comes from Bloomberg. So the potential used to be 15%, it has gone up to more than 30% now. So I mean your products are being sold at a premium versus the Korean benchmark. So any reason behind that?

Unidentified Speaker —

Thing is that during June and this thing, there are domestic plant shutdowns for there. And the domestic prices are not in line with the industrial plots report. So we, the domestic charge a reasonable price. And today, now slowly this marketing is cresting and now is taking the adjustments.

Sabri Hazarika — Emkay Global — Analyst

Okay. The domestic prices were at a premium during Q1?

Unidentified Speaker —

Yes, during that period, yes.

Operator

Thank you. We take the next question from the line of Krati Sankhlecha, Credit Suisse. Please go ahead.

Krati Sankhlecha — Credit Suisse — Analyst

Hello, am I audible?

Rakesh Kumar Jain — Director (Finance)

Yes.

Krati Sankhlecha — Credit Suisse — Analyst

Sir, two questions. One, PNGRB has not fixed any tariff for Phase two of Urja Ganga. So right now, whatever volume that’s flowing to Phase two, what the tariff is being charged by them?

Rakesh Kumar Jain — Director (Finance)

So yes, you are right. What has happened in sometime in 2019, PNGRB fixed the tariff Urja Ganga for considering the capex of around INR1,600 crores crore and capacity of 7.44 MMSCMD. So it was based on that, and that is the tariff available to us for charging with the customer. So we are continuing to charge the tariff as approved by PNGRB. Then we have, in terms of contract, we have a close that once the tariff is revised by PNGRB, we’ll charge the revised tariff. That means in order to you explain in further detail that this pipeline has a capex of almost INR15,000 crores, if we reduce the capital grant of INR5,000 crores, almost INR10,000 crores on broad basis. So that pipeline tariff has to be worked out considering the differential capex of almost INR8,000 crores in capacity addition of from seven to 16, that is almost nine. If you, I’m talking of total capacity not, So the tariff is significantly going to go up because on NPV basis, it has a further impact. So tariff will be around 140 or 150 subject to review and approval by TNGRP. So those tariff once approved by PNGRE, we’ll available to it. Until then, we are charging the tariff for Phase one.

Krati Sankhlecha — Credit Suisse — Analyst

Okay. And sir, in the transmission segment, the profitability was very big this time. The volume was higher. The realization is also higher in, the absolute EBITDA was lower [Indecipherable] seems to be higher opex, I did not understand by higher operations…

Rakesh Kumar Jain — Director (Finance)

It’s not due to higher opex, I tell you, you must know that, the GTD we use for running the compressors, gas turbine generator. It has an allocation of APM gas. APM gas used to be at a price of $2.90 per MMBtu, which has gone up to $6.1 per MMBtu. So we are booking the cost at a higher level. And the same is available through tariff destine it announced, it then that is announced. So our opex certainly will be higher. And therefore, even though revenue increases, the margins will be lower.

Krati Sankhlecha — Credit Suisse — Analyst

Okay. And sir, just last one question on the LPG volumes. The LPG volumes have been consistently big for many quarters now. Till FY ’21, the FY ’20, actually, we will be used to be 300,000 million tonnes per quarter. Now we are hardly 200,000, 250,000. What has changed here?

Maulik Patel — Equirus — Analyst

Yes. nothing changed. That’s the availability of gas, gas.

Krati Sankhlecha — Credit Suisse — Analyst

Okay. So can you help me with what gas was allocated in [Indecipherable] gas?

Rakesh Kumar Jain — Director (Finance)

1.75 MMSCMD.

Operator

We take the next question from the line of Sujit Lodha, Birla Sunday Life Insurance. Please go ahead sir.

Sujit Lodha — Birla Sunday Life Insurance — Analyst

First question would be regarding going back to the Gazprom volume. So what are the terms with both Gazprom and your customers in case if they have to deliver the promised holdings, how will they make a product? Is it over the course of time, they have to make up for the savings deals? And similarly, how do you make up the fall short of supplying the volumes to your customers?

Rakesh Kumar Jain — Director (Finance)

Actually, your voice is not coming that clearly. I’m sorry, you have to repeat once again.

Sujit Lodha — Birla Sunday Life Insurance — Analyst

Am I audible now?

Rakesh Kumar Jain — Director (Finance)

You are audible, but it was not coming so clearly.

Sujit Lodha — Birla Sunday Life Insurance — Analyst

Should I repeat my question?

Rakesh Kumar Jain — Director (Finance)

Please.

Sujit Lodha — Birla Sunday Life Insurance — Analyst

Yes. Sir, so basically on the Gazprom contract, what are the conditions with Gazprom fail to deliver. So how do they make up for it? Is it on the balance tenure of the contract that they have to make up for the volume? And also wise, how do you make up in case it’s you to more of a sort of supplying your volumes, the minimum take out the volumes also to the customers, how would you make up for that? And what are the terms…

Rakesh Kumar Jain — Director (Finance)

So with respect to Gazprom contract, so it is not actually right at the moment for me to give a very integrity of the contract. So they are, I will tell you on our basis, if they don’t supply the penalty provision. So we’ll pick up that and how we will take up that how they will supply and what are the major, those are matters of taking up a negotiation so it’s not right on my part to move into the details of those provisions with respect to customers. So let me tell you, it’s not in most of the cases of back-to-back contracts with Gazprom. We have a portfolio of contracts. So it’s not that when Gazprom is not supplying or supply. So we have made portfolio contracts and still that we are not going below the contractual provisions which we are supposed to supply. So therefore, there is no question as one arising that we have to make up for gas.

Sujit Lodha — Birla Sunday Life Insurance — Analyst

No, no, that I understood that you have a contract based on portfolio and they don’t care whether it’s coming from Gazprom or any other source. But, so basically, at the price you will be able to supply, that’s what you’re saying, the minimum contracted volumes will be a bit…

Rakesh Kumar Jain — Director (Finance)

Yes, yes. if it is more than minimum contracted volume, we are supplying as I explained to other…

Sujit Lodha — Birla Sunday Life Insurance — Analyst

That would continue in future also, irrespective of where the supply goes?

Rakesh Kumar Jain — Director (Finance)

Yes. Yes. We hope to do so because there are not many major because this situation has happened all of sudden. So certainly, when we get, we are getting now time to overcome those situations, and we are working on that.

Sujit Lodha — Birla Sunday Life Insurance — Analyst

Okay. Sir, while obviously, you cannot divert details on the customer side, but which would be the biggest sector which we’ll consume in which we’ll be consuming this gas?

Rakesh Kumar Jain — Director (Finance)

Sorry, we get factor…

Sujit Lodha — Birla Sunday Life Insurance — Analyst

Which will be the consumer for this gas?

Rakesh Kumar Jain — Director (Finance)

Again, there is no specifics. That’s what I told you, because any biggest customer, one of the biggest customer is fertilizer.

Operator

We take the next question from the line of S. Ramesh from Nirmal Bang Securities.

S. Ramesh — Nirmal Bang Securities — Analyst

If I just add a couple of thoughts. One is on the full gas purchase for the CGD sector, if you can tell us what is the volume you would have purchased on behalf of the CGD companies? And what is the kind of margin you would have earned? Are you need included in your gas marketing segment in terms of the volumes and margins? And what is the kind of volumes you would have purchased on security companies? And would the margin on that be comparable to your average margins in gas marketing?

Rakesh Kumar Jain — Director (Finance)

So last question first. Our marketing margin, which we normally add is the margin we charge, okay? There is no any significant delta or anything, we as a standard marketing margin, which we charge. And with respect to what kind of volume we are purchasing for supplying to CGD, it is around 11%, 12%.

S. Ramesh — Nirmal Bang Securities — Analyst

10%, 12% of?

Rakesh Kumar Jain — Director (Finance)

Total volume being consumed by…

S. Ramesh — Nirmal Bang Securities — Analyst

Total volume. So how much would, what is the volume in MMSCMD which you have included in your marketing volume, I may understand?

Rakesh Kumar Jain — Director (Finance)

Sorry.

S. Ramesh — Nirmal Bang Securities — Analyst

So how does that translate to in terms of the…

Rakesh Kumar Jain — Director (Finance)

You can say it actually depends month-to-month because CGD demand is ever increasing to 2.5 to three MMSCMD.

S. Ramesh — Nirmal Bang Securities — Analyst

2.5 to three. And secondly, how much of that gas is procured from spot market because obviously, the APM gas education is falling short. So what proportion of that are you buying from the spot market?

Rakesh Kumar Jain — Director (Finance)

So this is what we are buying through spot market. That’s what I was telling to 12%, 13%, whatever ratio comes. 2.5 depending on the forecasted demand or last consumption based on the pattern we are at. So that is the volume we are marketing as a spot or volume, which we are blending.

S. Ramesh — Nirmal Bang Securities — Analyst

So the entire thing here on spot volume. Okay. So if you look at your segment EBITDA, which you’ve shared with us, LPG, it’s very interesting to see that you have been able to maintain the LPG EBITDA at slightly less than fourth quarter and similar to last year, first quarter, in spite of the fact that your APM gas price has gone up from [Indecipherable] So would like to know how you have been able to achieve the sort of EBITDA numbers for…

Rakesh Kumar Jain — Director (Finance)

I explained in the opening remarks that the LPG prices are significantly higher as compared to Q4. There is around INR12,000 per metric tonne higher as compared to Q4. So you are right that the input cost has increased, but it has been offset by the higher LPG prices..

S. Ramesh — Nirmal Bang Securities — Analyst

So INR12,000, sir, is not that big compared to the original price. I see because the gas prices have almost doubled even if you take the fourth quarter from 2.9 to 6.1 double?

Rakesh Kumar Jain — Director (Finance)

So, the impact of dollar increase is around INR4,000. So almost it is offsetting. There may be some, because if you consider $4,003, it’s $12,000.

S. Ramesh — Nirmal Bang Securities — Analyst

Okay. Okay. So if I may ask you, how do we reach the trend for LPG and agent margins for the rest of the year, assuming that the current prices, would you be able to maintain the same sort of EBITDA?

Rakesh Kumar Jain — Director (Finance)

So it is difficult to predict future oil and gas prices. So I can only say, based on the current prices, what we are doing will be able to do, but there will be a likely increase in October of APM gas prices, to that extent whatever price increase, our margins will go down.

S. Ramesh — Nirmal Bang Securities — Analyst

Okay. So if you were to take a slightly philosophical view on the gas sector, we are seeing very significant pain because of the high gas prices and a lot of the volumes are being sucked by Europe. And if you look at the numbers being quoted by consultants, most of the LNG projects are all tied up with long-term contracts. So how are we approaching the process of negotiating for our future contract volumes because the due for renewal of the Qatar Gas contract. So what is your reading in terms of being able to line up future gas supplies from LNG projects, long-term contracts on contract prices? And to what extent will we continue to be exposed to having an increase per share of our gas requirements coming from the spot market. You can share your..

Rakesh Kumar Jain — Director (Finance)

So we have been sharing our thoughts in this regard. We were in the market for sourcing 0.75 MMTP of gas for coming five to 10 years. But unfortunately, because of the current situations, we did not get the response the way we were expecting. So again, we are now scouting the market for various indices, whether it’s the United State Gas or the Middle East gas or any other source of gas. So currently, we are in the market for sourcing long-term gas not only to meet the current crisis, but also to meet the increasing demand of the country. So as of date, I can only share that we are in the market.

Operator

[Operator Instructions] We take the next question from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead sir.

Kirtan Mehta — BOB Capital Markets. — Analyst

Thank you for giving me this opportunity. Just to sort of take the supply question for grow. What is your, you mentioned that you are not able to secure the long-term volume or still under finding the long-term volume. But is there any plan to sort of supplement this volume with a short medium-term volume of 12 to 18 months, which might be available?.

Rakesh Kumar Jain — Director (Finance)

Let me tell you, we are in the market for all kind of short, medium, long. But the market today is such that short-term volumes are not available at the desired price. That’s the challenge we are facing. So though we are there in the market, but that’s the challenge we have.

Kirtan Mehta — BOB Capital Markets. — Analyst

Right. And how do you see the prior LNG price sort of, there could be a possibility that we might see the continued surge in LNG prices during the European winter. So what’s the plan to protect CGD sector against that additional surge?

Rakesh Kumar Jain — Director (Finance)

So plan is that we are scouting the market of what can be the other plans. So you can only source at a quest available price, and that’s what we are doing. It’s difficult to predict what will happen, but we are doing that.

Kirtan Mehta — BOB Capital Markets. — Analyst

Just one more question on the Kochi-Bangalore pipeline, is there any further update in terms of the finalization of the plant, Kochi-Bangalore pipeline?

Rakesh Kumar Jain — Director (Finance)

So there is no further change in that. There is no further change in the status.

Operator

We take the next question from the line of Vipul Kumar Shah from Sumangal Investments. Please go ahead.

Vipul Kumar Shah — Sumangal Investments — Analyst

So sir, what is your volume which is on the long term from Qatar and, What is the long term and what is the short term you’re sourcing?

Rakesh Kumar Jain — Director (Finance)

Can you come back? What is our long-term volume from Qatar, that was the question first you asked?

Vipul Kumar Shah — Sumangal Investments — Analyst

Qatar and Gazprom and every, all long-term contract included.

Rakesh Kumar Jain — Director (Finance)

Yes. We have 14 MMTP of approximate LNG contract. We have almost 4.8 MMTP from Qatar, 5.8 MMTP from United States and then almost 0.42 from Gabon. And then what else, 2.5 from gas Gazprom. That’s around 40%.

Vipul Kumar Shah — Sumangal Investments — Analyst

So right now, only this 2.5 is the problematic area, right?

Rakesh Kumar Jain — Director (Finance)

Right.

Vipul Kumar Shah — Sumangal Investments — Analyst

So similarly, on the sales side also, all your sales fixed price or what percentage is fixed price and what percentage is what?

Rakesh Kumar Jain — Director (Finance)

I also don’t know. So because we have all kind of contracts. We have the back-to-back contracts with marketing margin. We have the contract with the index at which we bought and we have different marketing margins, we sell on a fixed price, not for a longer but for a, short contracts or a month or 15 days, so we have all kinds of contracts. But fixed contract you are talking about is not quite a longer period, it’s only for a smaller period of 15 days or one month or so.

Operator

We take the next question from the line of Vishnu Kumar from Spark Capital. Please go ahead.

Vishnu Kumar — Spark Capital — Analyst

Sir, just to summarize out of your 100 MMSCMD that you’re doing in natural gas marketing, about nine MMSCMD ideally should come from the Gazprom contract, which is roughly 2.69 MMSCMD assembly, of which three or four is roughly getting impacted, is that the right understanding?.

Rakesh Kumar Jain — Director (Finance)

What we said in last three or four what?

Vishnu Kumar — Spark Capital — Analyst

No, no. You have 2.5 million tonnes would be nine MMSCMD roughly.

Rakesh Kumar Jain — Director (Finance)

No, no. Let me tell 2.5, you are arriving at 9%. But actually, out of almost 39 cargoes, 36 we are supposed to supply in terms of contract fee, they have right to supply or not to supply. So we consider that eight to 8.5 MMSCMD of gas, which is supposed to come…

Vishnu Kumar — Spark Capital — Analyst

Okay. On a monthly run rate or if you can just say what is the shortfall that you’re seeing even on a percentage basis?.

Rakesh Kumar Jain — Director (Finance)

Yes. Yes. So in last quarter, we only, we did not receive eight cargoes, okay, since May.

Vishnu Kumar — Spark Capital — Analyst

So roughly almost 80% of the volume that you’re supposed to get you would not get. Because if I take 38%.

Rakesh Kumar Jain — Director (Finance)

In the last quarter, I cannot say what will happen in this quarter.

Vishnu Kumar — Spark Capital — Analyst

Understood, sir. Sir, second question is that really you have some spot allocation out of your overall portfolio. Does this mean that you don’t have any spot for the next couple of quarters, assuming the current situation holds, and you may have to source a little bit of spot gas and supply to a few customers, if required.

Rakesh Kumar Jain — Director (Finance)

We certainly source for export also because the building comes in between whether you talk about fertilizer bidding or whether the spot customer requirement, there are some who are also taking at this price to meet their requirement. So we are there in the market for spot for sourcing and supply both.

Vishnu Kumar — Spark Capital — Analyst

Okay. Can it be said, sir, that out of this 100 MMSCMD earlier, 90%, 95% used to be, you used to say that 80%, 85% to 90% used to be contracted, some 10 MMSCMD or 10% used to be on spot. Now you don’t have any spot. That’s the only question I’m asking.

Rakesh Kumar Jain — Director (Finance)

Actually, I also said spot is there. If you talk about PMC contract, we fertilizer supplies, which happens quarterly billing, that is spot. So spot is there, a spot will remain there. It may reduce certainly because some of the volumes may not come off or top-up volumes may not come up at this price, what is the significantly.

Vishnu Kumar — Spark Capital — Analyst

Understood. Sir, in the past, you mentioned that some of the U.S. contracts in 2020, we have logged in on time swaps, and they will likely roll off in a year’s time frame. So next year, I mean, I’m just hypothetically asking that the U.S. contracts which you have kind of entered into in terms of contracts, they will be available to you next year onwards, which will ease or some of the issues that you currently have?.

Rakesh Kumar Jain — Director (Finance)

So number is not there. Certainly, they are available numbers we can give you offline. But yes, that’s there.

Vishnu Kumar — Spark Capital — Analyst

Got it. And sir, if you could just do your internal consumption segment twice gas transmission on a normative basis, LPG, if you could just give the internal consumption of gas, segment wise?.

Rakesh Kumar Jain — Director (Finance)

So I think it’s not, right now, I’m not able to share.

Vishnu Kumar — Spark Capital — Analyst

Okay. And on your…

Operator

May we request you to come back to the question queue. There are participants waiting for We take the next question from the line of Varatharajan from Limited. Please go ahead.

Varatharajan — Limited — Analyst

Thanks for taking my question sir. A couple for one. LPG allocation, you mentioned 1.7 that is here the allocation of that so supplier always meet the allocation? Or does it fall out

Rakesh Kumar Jain — Director (Finance)

Yes, it’s there. Right now, it’s there.

Varatharajan — Limited — Analyst

Right now it is meeting that a little. Secondly, this CGD like the pool pricing, if you can just give us some insight into how the mechanical works. For example, like last 95 is 152 this time around. So when we budget for the increased demand, we place an order in the spot market for the LNG? On a delivered basis, what do you count that? And that is how that this number shifts from month to month? Or like how they involve?

Rakesh Kumar Jain — Director (Finance)

This number changes in month-to-month and the price is based on the availability of domestic gas and the actual consumption and based for best price is calculated with the mix of domestic gas and the other spot sources

Varatharajan — Limited — Analyst

So the requirement is taken on a quarterly basis or on a monthly basis?

Rakesh Kumar Jain — Director (Finance)

So as per the recent guidelines of, the consumption numbers are taken on a quarterly basis and heavy entity is allowed to consume up to 102.5% of UBP gas. And if the consumption is higher than that, they will top up it with their own sourced LNG or whatever, and that will come up in the next consumption, whenever the consumption figures are revived after the quarter, that will be taken as the consumption.

Varatharajan — Limited — Analyst

So if I may, if my understanding is correct. So their requirement is like in the last quarter was consumption was 100. This 2.5 extra is something which you play in order for or with the volume month-to-month based on what you see as the actual intent place with it other options?

Rakesh Kumar Jain — Director (Finance)

As I said, the consumption numbers have to be revised after the end of quarter. So monthly, the consumption numbers are not revised monthly.

Operator

We take the next question from the line of Yogesh Patil from Centrum. Please go ahead sir.

Yogesh Patil — Centrum — Analyst

So both of my questions are related to current higher LNG prices scenario. So in the first case, can you please update on the upcoming fertilizer plan? And do you see any delay in commissioning of fertilizer plants due to the shortfall of LNG?

Rakesh Kumar Jain — Director (Finance)

Now two fertilizer plants, Gorakhpur is already commissioned. Now Sindri both are under pre-commissioning phase, and they have their plans to light up the reformer. And I think the commissioning is due sometime end of August or September. They have few technical, which they will be sorting out during the next one or two months.

Yogesh Patil — Centrum — Analyst

Okay. So you don’t see any kind of a delay in commissioning of fertilizer plants due to the higher LNG prices or shortfall of LNG on the long-term contract loans?

Rakesh Kumar Jain — Director (Finance)

No.

Yogesh Patil — Centrum — Analyst

Okay. So sir, second question is again related to the rising gas prices or LNG prices. Do you see any deferment or postponement of the commissioning of new geographical area for the CGD sector?

Rakesh Kumar Jain — Director (Finance)

Difficult for us to say because if diesel entity will take a call commercial call. As far as gas based on UPP, which is available to all these CGDs will be available to them. But now they will see their commercial viability and they will see alternative fuel price based on the price when they will commission or what, how or when they will supply.

Operator

We take the next question from the line of Vikash Jain from CLSA. Please go ahead sir.

Vikash Jain — CLSA — Analyst

Hi thanks for taking my question.

Rakesh Kumar Jain — Director (Finance)

How are you?

Vikash Jain — CLSA — Analyst

I am very good. So just wanted to understand this Gazprom situation on a Q-o-Q basis. So if last quarter, any way your volumes were much lower, then why, I mean I understand that part of that demand was anyways offset because of your petrochemical plant functioning at a lower level. But if I were to look at that and you maintain the petchem plant at lower utilization, and why would the situation change dramatically this quarter versus 1Q?.

Rakesh Kumar Jain — Director (Finance)

We are also not said. So Vikas, we have also said that One of the, with reference to one of the question that whether you will be able to maintain same marketing and I said, difficult or may not be possible. Then question aware whether you will be able to maintain INR1,100 crores as you maintained last time, I also said it’s really in difficult situations, difficult to say with certainty. So there is a challenge in this quarter.

Vikash Jain — CLSA — Analyst

No. So what I mean is that last quarter, that is 1Q, you did not have Gazprom in any case, okay? So what, I mean, only one cargo was there, right?.

Rakesh Kumar Jain — Director (Finance)

No, no, no. Last quarter, we had full supply until…

Vikash Jain — CLSA — Analyst

1Q. I mean, 1Q, you had full supply?

Rakesh Kumar Jain — Director (Finance)

That’s what I was trying to explain. In last quarter until May, we had normal supply. Then for June, till June month, we got only one cargo and in between, there were introduction. So you can say, and that last quarter was not that greatly impacted. But this in this quarter, there is no certainty as far as whatever communications we have, though we are taking at all levels, including the government to government including we are talking to Gazprom. But as of now, when I’m talking to you, there is no certainty about the availability of Gazprom volume. If it comes, certainly, we will be better off as we were there in Q1, but it’s still difficult to say as of now.

Vikash Jain — CLSA — Analyst

So that was my misunderstanding. So just to understand that, so broadly, you said that your volumes would be down by roughly, what, six, seven MMSCMD both on the transmission side as well as in the marketing side. That is the impact of Gazprom?

Rakesh Kumar Jain — Director (Finance)

Yes. Yes. So currently, we have already reduced almost five million, six million per day of volume from supply side. If transmission you consider because internal consumption is part of transmission, not the marketing volume.

Vikash Jain — CLSA — Analyst

Okay. So basically, whatever is the 1Q average, our current transmission volumes are about six, seven MMSCMD lower than that. And petchem at what level of utilization are you kind of running to manage this situation?

Rakesh Kumar Jain — Director (Finance)

Currently, we are running around 50%.

Vikash Jain — CLSA — Analyst

Around 50%. So basically, the hit is where volume of both marketing and gas transmission about 6, seven MMSCMD and petchem being run at 50% utilization?

Rakesh Kumar Jain — Director (Finance)

Yes or maybe little less than 50%.

Vikash Jain — CLSA — Analyst

Okay. And with, if, since there is the stock of Europe reducing energy imports from Russia by just from, I think, just to December. So if that really plays out, would that free up more gas to be available to us? Or that’s something that’s something that is not…

Rakesh Kumar Jain — Director (Finance)

Which gas, mostly, they are dependent pipe gas. The pipe, free up of pipe gas will not make LNG available.

Vikash Jain — CLSA — Analyst

Okay. So this is simply because of production issues? Or since you said that you contract with the German subsidiary of Gazprom? So what exactly is causing this? Is this a production issue?

Rakesh Kumar Jain — Director (Finance)

So basically, its a portfolio supply, and they are telling that we are not able to supply you because in order to meet the Europe because there are some safe regulatory there in German. They have said that in order to meet the European requirement, we are not able to supply you from portfolio, but they have not said till until they will not supply, how much they will not supply that is the current situation.

Vikash Jain — CLSA — Analyst

So that’s why I asked that because of that if Europe reduces imports. So essentially, even that supply, which is being kept by the German regulator, would also get freed up or no? This is only.

Rakesh Kumar Jain — Director (Finance)

Very difficult, Vikash, very difficult to say what will happen, how it will happen, very difficult terms. So uncertainty is there.

Vikash Jain — CLSA — Analyst

So in the current scenario, automatically versus the 1Q base, we are six, seven MMSCMD down. So basically, how do we see volumes rising from here? Did these fertilizer plants coming in will allow us to get more us LNG into India, and that is how volumes are rising? In a scenario, Gazprom is not addressed?

Rakesh Kumar Jain — Director (Finance)

So we are taking a lot of actions. One is that in order to make new plants availability to Gazprom for new plants, we already have the supply lined up from U.S. that we have already accounted for prints, which are likely to be commissioned. We have kept that in mind. Gas is available from United Sates. We had unallocated cargoes for that, we help already made arrangement for ship chartering. So we’ll be able to bring the volume to, in order to supply that gas to those fertilizer plants for that, we are already, there is no concern about that. And further in order to meet the, further deficit, I was explaining to other participants that we are taking two, three, four actions.

One of the actions which we have been taking for the last one year that we are in the market for contracting the gas on a long-term basis. We had invited tender or 0.75 but there was no good response because of current situation. So we are also discussing with some of other players for sourcing of gas. We are also there in the market United reserves. So volumes are available but only challenge that we are getting volume in ’23 than ’24. Thereafter, the volumes are available, but there are certain suppliers, which are capable of supplying some of the volume in ’23, ’24. So we are working on that. And hopefully, let us hope for best we are working on that.

Vikash Jain — CLSA — Analyst

So just one bookkeeping question. Any reason for corporate to be so much lower? And number two, can you tell me what proportion of your U.S. volumes are not sold out? I mean, are not contracted for selling outside India in ’23 versus ’22?

Rakesh Kumar Jain — Director (Finance)

So I have to check that. ’23, not…

Vikash Jain — CLSA — Analyst

What proportion have you kept for India in ’23? And what proportion did you keep for

India in ’22?

Rakesh Kumar Jain — Director (Finance)

Actually, I think, Vikash, readily it’s not available.

Vikash Jain — CLSA — Analyst

Okay. And on the corporate expense thing, sir? Any reason why expenses are lower corporate expenses the way you reported a segmental

Rakesh Kumar Jain — Director (Finance)

Yes. Actually, corporate expenses has not gone down. If you have gone through our Q4 accounts, we provided a provision for guarantees we have given to our U.S. subsidiaries. So that was around INR170 crores. And second, only that CSR was in December. In Q4, that was the one major INR170 crores.

Vikash Jain — CLSA — Analyst

Okay. So basically, nothing one-off here, but the sequential quarter had, was bloated because of that, that’s what you mean?

Rakesh Kumar Jain — Director (Finance)

Yes. [Foreign Speech] That’s what I explained. So this, actually, in Q4, it out INR170 crores provision, which is not there in Q1 ’23. So that is the one more in Q4 last year, not this year.

Operator

Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments. Over to you, sir..

Rakesh Kumar Jain — Director (Finance)

Yes. Thank you very much. Hopefully, we responded most of the questions. But yes, some of the questions we might have not responded. So participants are free to call us off-line, and we will be able to respond to the questions which we could not respond and which for questions which they have and they could not ask. Thank you very much for taking interest in us. That’s all.

Probal Sen — Vice President Equity Research

Thank you very much, sir, for your time. Thank you to all the participants. You can log-off now. Thank you very much.

Operator

[Operator Closing Remarks]

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