Mahanagar Gas Ltd (MGL) Q3 FY23 Earnings Concall Transcript

Mahanagar Gas Ltd (NSE: MGL) Q3 FY23 Earnings Concall dated Feb. 03, 2023

Corporate Participants:

Ashu Shinghal — Managing Director

Rajesh Wagle — Senior Vice President, Marketing

Rajesh Patel — Chief Financial Officer

Analysts:

Yogesh Patil — Centrum Broking — Analyst

Abhilasha Satale — Quantum AMC — Analyst

Amit Rustagi — UBS — Analyst

S. Ramesh — Nirmal Bang Equities — Analyst

Harman Khanna — Nomura — Analyst

Kirtan Mehta — BOB Capital Markets — Analyst

Maulik Patel — Equirus — Analyst

Somaya V — Spark — Analyst

Nitin Tiwari — YS Securities — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day and welcome to the Mahanagar Gas Limited third Quarter FY 23 earnings conference call hosted by Antique Stock Broking. As a reminder, all participant lines are in listen-only mode and there will be an opportunity to ask questions after the presentation concludes. [Operator Instructions] I would now like to turn the conference over to [Indecipherable] from Antique Stock Broking. Please go ahead.

Unidentified Participant — — Analyst

Thank you, Rachael. Very good evening, everyone. I would like to welcome all the participants as well as the management of Mahanagar Gas represented by Mr. [Technical Issues] Managing Director; Mr. Rajesh Patel, Chief Financial Officer; Mr. Rajesh Wagle, Senior Vice President, Marketing.

I’d like to request Mr. [Indecipherable] to provide a brief, and then we can move on to the [Technical Issues] again. Over to you sir.

Operator

Thank you [Technical Issues]. Before we begin, I would like to mention that some of the statements made in today’s discussion may be forward-looking in nature and we believe that the expectation contained in the statements are reasonable. However, these statements involve a number of risks and uncertainties that may lead to different results. The risk and uncertainties related to these statements are included but not limited to fluctuation in sales volume, fluctuation in foreign exchange or the cost and ability to manage growth. I urge you to consider the quarterly numbers are not a reflection of long-term trends or an indication of full year results. They should not be attempted to be extrapolated or interpolated into a full-year number. Thank you and over to you, sir for your opening remarks.

Ashu Shinghal — Managing Director

Thank you. I’m Ashu Singhal, Managing Director, Mahanagar Gas Limited, a very good afternoon to all of you joined through the call. And I once again welcome you all on this thought Q3 of the financing Year 2022 and ’23. And I would like to thank all of you for attending our todays earnings call.

Due to continuing geographical situation and supply shortages across the world with respect to the natural gas, third-quarter of this. here also remained challenging for MGL and the entire CGD industry because of the high gas input which we all have faced during the quarter. As per the domestic gas pricing policy, the price of domestic as for the period of October ’22 to March ’23 is around $8.57 per BTU, which is around 40% higher than the previous half year, that is April ’22 to September ’22. The present pool gas allocation that is pooling of APM, CGD, and [Indecipherable] gas is approximately 81% — 91% percent of CGD requirements of the total priority sector which has marginally reduced compared to the previous quarter. So Gas allocation shall be revised on quarterly basis depending upon the total domestic available for the CGD sector.

One of the good development is that Kirit Parikh Committee has recommended deregulation of India’s administrative prices for natural gas by 2027 and they have announced floor and ceiling rates and several other reforms, which is aimed at boosting the investors investments in the [Indecipherable]. The panel suggested for linking of APM gas of ONGC and Oil with import price of Indian crude basket, which is a deviation from the existing policy.

Further, in order to bring balance between producers and consumers dynamic ceiling of $6.5 per MMBTU and an increment of $0.5 per MMBTU every year for the next five years and a floor price of $4 per MMBTU is also proposed in the report. The recommendation is under review by Ministry and it is expected that max by end of this financial year, they will come up with the revised natural gas pricing notification and they may be slightly earlier than that also.

Recently Ministry has also notified that HPHT that has high-pressure, high-temperature areas gas will be allocated to CGD entities for domestic gas CNG and CNG consumption on priority. And that means that the priority will be first given to CGD, followed by fertilizer, LPG and power. This is a good action of Government of India, which helps CGD entities in replacing costlier LNG — RLNG which is being used in CNG and domestic CNG segments with HPHT gas. Because HPHT gas is much cheaper as compared to the spot gases. This will help in reducing overall gas cost of the CGD entities, which also reduces the CNG and re-CNG [Phonetic] prices, which will further boost consumption in CGD sector.

MGL continues to create CGD infrastructure, that cost its business segments in the licensed areas. During the quarter 87,845 domestic households were connected, and thus we have established connectivity for nearly 2.08 million households. We are at 82.36 kilometer of steel and PE pipeline thereby taking the aggregated pipeline length to over 6,407 kilometers. We have also added five new CNG stations and with this, we have 301 CNG stations as of the end-of-quarter. We have 82 industrial and commercial customers during the quarter, and thus on the quarter-end, we have 4,465 industrial and commercial customers.

In respect of our new our Raigad geographical area, we have collected 263,509 domestic households, and 24 CNG stations are currently operational. During this quarter, we laid 8 kilometers of pipeline in Raigad, thereby taking the total length of the pipeline to 373 kilometers. This expansion of our pipeline network is created very good ecosystem for CNG PNG in the Raigad area. The first CGF, and first mother filling stations in Savroli, GSE that is Raigad, ending near Savroli is technically ready and we are awaiting some statutory approvals to commence the commercial operations. This will enable expeditious unlocking of the demand in the Raigad area.

Coming to MGL operations, average gas sales for the nine months ending December 31, 2022 is 3.439 million standard cubic meter per day. [Indecipherable] clocked 2.944 for MMSCMD in the corresponding period last year, an increase of 16.8%. Sales volumes in case of CNG has also increased from 2.06 million standard cubic meter per day to 2.518 MMSCMD, which is an increase of 22.1%. In case of industrial and commercial sales volumes have increased from 0.409 MMSCMD, to 0.441 which is an increase of 5.3%. The sales volume for domestic PNG has also increased from 0.464 for MMSCMD to 0.48 which is an increase of 3.37%.

During this quarter, overall average gas sales volume growth was flat at 3.412 MMSCMD, as compared to previous years — previous quarters volume of 3.459 MMSCMD. Sales volume mainly is at 2.474 MMSCMD, as compared to previous quarter of 2.541. In the case of industrial and commercial sales volume is at the 0.5439 MMSCMD as compared to previous quarter of 0.447. Sales for domestic PNG is 0.449 line as against previous quarter of 0.471. The current Nine-Month quarter EBITDA, EBITDA is INR790 compared to previous year’s nine months EBITDA of INR739 crores [Phonetic]. The current quarter’s EBITA is INR256 crores as compared to previous quarters EBITDA of INR253 crores. Net profit-after-tax for the Nine-Month is INR521 crores compared to the net profit-after-tax for the previous year’s nine months of INR465 crores. Net profit-after-tax or PAT is INR172 crores for the quarter as compared to INR164 crores in the previous quarter. I’m have also happy to announce that the Board of Directors has approved an interim dividend of INR10 per equity share for the current financial year ’22 to ’23.

With this, I would like to conclude my opening remarks and open the floor to questions. I will hand it over to the Operator, please.

Questions and Answers:

Operator

Thank you. Sir. Ladies and gentlemen, at this stage, we will begin the question-and-answer session. [Operator Instructions] The first question that we have — the first question that we have is from Yogesh Patil from Centrum Broking. Please go ahead.

Yogesh Patil — Centrum Broking — Analyst

Thanks for taking my question, sir. Sir my question is related to your PNG, industrial and the commercial volume. Could you please provide the volume breakup of 0.4 MMSCMD? How much is PNG, industrial and how much is PNG commercial?

Ashu Shinghal — Managing Director

You are talking about this quarter’s volume, right?

Yogesh Patil — Centrum Broking — Analyst

Current quarter, yeah sir, Q3 FY ’23.

Ashu Shinghal — Managing Director

Total PNG volume including domestic of 1499 MMSCMD and industrial plus commercial is 0.439 and so… Sorry.

Yogesh Patil — Centrum Broking — Analyst

So sir, I’m asking you breakup between the PNG commercial, how much was the PNG industrial and how much was the PNG commercial? If we get it, that would be really helpful.

Rajesh Wagle — Senior Vice President, Marketing

Okay, industrial was about 0.315 and commercial would be about 0.121, [Technical Issues] 0.31 is industrial not 0.315.

Ashu Shinghal — Managing Director

I would like to add, no, generally these categories may keep on changing depending on the customer side requirement and sometimes. So it’s not very important to have a breakout because many a times and in the last few months, there has been lot of change. So they are not comparable with the earlier period numbers. Okay, that’s what I just wanted to make a note of it. Hello?

Operator

Thank you, sir. The next question we have is from Prabhav Sen [Phonetic] from ICICI Securities. Please go ahead.

Unidentified Participant — — Analyst

Thank you for the opportunity. Sir, first question was, you mentioned about the pool allocation requirement. Just wanted to understand if you can give us some color on what is the sourcing mix exactly…

Ashu Shinghal — Managing Director

I can’t hear you…

Unidentified Participant — — Analyst

Is this better sir?

Operator

Thank you. If you can’t speak please can you come through to the list? Please come back into the question line. [Operator Instructions] Prabhav [Phonetic] if you could go ahead, sir?

Ashu Shinghal — Managing Director

I think we are not able to…

Unidentified Participant — — Analyst

Sir, am I audible now. Because I can hear you clearly. That’s fine sir, I’ll come back in the queue.

Operator

Operator

The next we have question is from [Technical Issues]. Please go ahead.

Unidentified Participant — — Analyst

Yes, thanks for the opportunity, sir. The first question is on the long-term contracts that you have on the supply contract, can you just help us out with those, the three contracts that you have and the pricing that you have for those contracts, volume, and [Technical Issues]

Ashu Shinghal — Managing Director

There is no voice coming up, is this some problem at your end? There seems to be some problem at our end because, management, you seem to be in a room, and the other guys room seems to be hearing that. And we are not able to hear them. Can you just check?

Unidentified Participant — — Analyst

No, we are able to hear your voice…

Ashu Shinghal — Managing Director

Who is talking?

Unidentified Participant — — Analyst

Yes sir, just the three of us we seem to be connected.

Ashu Shinghal — Managing Director

So the participant’s voice is not coming at all.

Rajesh Patel — Chief Financial Officer

Yes, the participant’s voice is not coming, Roopa please check.

Operator

Of course, the next session we have is from Subash Naik [Phonetic] from [Technical Issues]. Please go ahead.

Unidentified Participant — — Analyst

Hello.

Ashu Shinghal — Managing Director

Yeah Subhash [Phonetic], yes, we can hear you.

Unidentified Participant — — Analyst

Yeah, yeah thank you for taking my question. Sir can you please give me the number for conversion of vehicles for the quarter?

Ashu Shinghal — Managing Director

Yeah. Total vehicles during the quarter is roughly 16,900.

Unidentified Participant — — Analyst

16,900 and from the LCV?

Ashu Shinghal — Managing Director

LCVs number is roughly 1,700 plus.

Unidentified Participant — — Analyst

[Technical Issues],

Ashu Shinghal — Managing Director

Yeah and taxis and cars, roughly 12,200, 2,900 is around three-wheelers, some small amount of trucks are there, around 33 trucks. These are the numbers.

Unidentified Participant — — Analyst

Okay and my second question was could you please give something about CNG differentials between petrol?

Rajesh Patel — Chief Financial Officer

Currently, CNG has 40 plus percent per our discount to petrol.

Unidentified Participant — — Analyst

Okay, 40?

Rajesh Patel — Chief Financial Officer

It should be about 45 and against diesel it is about 9% now. So after factoring the recent INR2.5 price decrease, which we took…

Ashu Shinghal — Managing Director

And also the better mileage of CNG over Petrol.

Unidentified Participant — — Analyst

Yes, right, right. Okay, thank you. Thank you. Thank you.

Ashu Shinghal — Managing Director

Thank you.

Operator

Thank you. The next question is from Abhilasha Satale from Quantum AMC. Please go ahead.

Abhilasha Satale — Quantum AMC — Analyst

Yeah, thank you for taking my question. Sir, I just wanted to I understand your sourcing in terms of EPM, HCPI [Phonetic], how much would be your slots would be and if Kirit Parikh Committee recommendation is implemented, then what will be the impact on our sourcing cost?

Rajesh Wagle — Senior Vice President, Marketing

Yeah, as far as you know, I think MD covered in his opening remarks last quarter, roughly we have got around 90%, 91% APM Gas and the rest was through SWOT [Phonetic] and other sources, which we have used for catering to CNG and domestic. As for industrial and commercial is concerned, we have our term contracts in place, through which we have been catering to. Coming to the — if Parikh Committee report is implemented as it is, I think the committee has suggested a cap of $6.5 for the coming financial immediately and a floor of $4. So compared to the current price of APL [Phonetic], which is $8.57 per BTU, there is likely to be decrease of $2 per MMBTU, okay.

Having said that, already there is a new notification by Ministry whereby HPHT allocation priority has been given to CGD, okay. So some amount of HPHT gas will be available and we are already using HPHT gas through exchange in this current month, okay. So both these have given us advantages in terms of cost compared to the existing cost. So HPHT is already being used and once Kirit Parikh Committee mostly by this year end or 1st April, if it is implemented, we will also give an advantage of better cost going forward.

Abhilasha Satale — Quantum AMC — Analyst

So currently, how much is HPHT sourcing in that 19%, how much will be HPHT?

Rajesh Wagle — Senior Vice President, Marketing

HPHT it is in the range of around 0.7775 [Phonetic].

Ashu Shinghal — Managing Director

Around 0.3 MMSCMD we can say.

Abhilasha Satale — Quantum AMC — Analyst

Okay, okay. Sure and regarding that capex plan how much we are likely to spend in FY ’24 to ’25?

Rajesh Patel — Chief Financial Officer

Upto December, we have almost spent around INR460 crores to INR475 crores, okay. And we look forward to another INR200 crore, we may end around INR650 crore by this year end. That’s our estimate, of course depending on the available permissions and other things, we should be in a position to touch the figures of INR650 crores odd, this year-end up to by March ’23.

Abhilasha Satale — Quantum AMC — Analyst

Yeah, yeah, even like ’24, we have similar plans of spending?

Rajesh Patel — Chief Financial Officer

Yeah, in fact, for next year, we plan to — we have budgeted for higher number and it should be in this range between INR600 crores to INR800 crores if all the permissions availability of land and other things are in place.

Abhilasha Satale — Quantum AMC — Analyst

Thank you.

Ashu Shinghal — Managing Director

Thank you.

Operator

Thank you. The next question is from Prabal Sen [Phonetic] From ICICI Securities. Please go ahead.

Unidentified Participant — — Analyst

Thank you for the opportunity. Am I audible now sir?

Ashu Shinghal — Managing Director

Yeah, yeah, you are.

Unidentified Participant — — Analyst

Okay, thank you. This was — first question was with respect to this HPHT areas being put — putting CGD on priority. Just wanted to understand sir, since the HPHT, gas sales happened on a bidding process, how will this priority actually work? I mean on bidding prices remaining the same CGD will be allocated the gas or how will it exactly work sir. Just wanted your sense of it.

Rajesh Wagle — Senior Vice President, Marketing

So when it’s purchased from the exchange [Technical Issues] the exchange only opens bidding up for CGD companies first, for that volume. Secondly, what has been observed is everybody bids at the cieling. And since other buyers are not there, whoever CGD has put in his requirement for priority he gets that full volume. Only after that, if any other volume of HPHT is remaining, then the next second priority here [Speech Overlap] followed by LPG and then in that order. This is on the exchange. Now how this Reliance Gas bidding will happen…

Ashu Shinghal — Managing Director

Yeah, actually, just to add to what Rajesh Wagle has said that Reliance has come out with a 6 billion auction but they withdrew that auction at the last moment. So I think this is the development for which the government issued order. So what we expect that is, as and when Reliance or ONGC industry will come out with their next auction, they will follow the guidelines of the Government of India, that whenever everything is at par, then the first priority with breakeven to CGD, followed by fertilizers, followed by LPG and then, followed by power. So that means that whosoever CGD companies are eligible for the priority sector, they will be able to take much quantity, as is required to spending on and expecting that the Reliance and ONGC is expected to come out with good amount of gas and that much of growth is not expected to come in CGD Company, so 10% volume, which is balance and which is currently being used for long-term or spot cashes will be substituted by HPHT for almost all the CGD companies. Once that is exhausted, then it will go to fertilizers, LPG, and then power.

Unidentified Participant — — Analyst

Okay, so the second question, if we can get a sense of how much of spot LNG was consumed by us in total, sir, in Q3, including for priority as well as industrial and commercial segments?

Rajesh Wagle — Senior Vice President, Marketing

It has been ranging from 0.27 to 0.35, depending on the peak requirement [Speech Overlap]. But now with HPHT that quantum is coming down in the current month.

Unidentified Participant — — Analyst

So balance basically shortfall between, let’s say, what is what we are getting from APMs and adding this point 3.35 spots, the other is basically on some sort of term contracts, that we have, plus the HPHT that we are also getting from the exchanges. Is that the correct way to look at it?

Ashu Shinghal — Managing Director

No, HPHT perhaps will not be able to allocate to industry and for commercial. Mostly HPHT will be consumed in priority sector that is domestic PNG and CNG. Once that is exhausted, then the balance will be consumed by fertilizer. So, I don’t think, industrial and commercial will be able to consume HPHT.

Unidentified Participant — — Analyst

No, sir. I was just trying to clarify that for us as a company, we mentioned earlier that we bought about 0.27 from the gas exchange HPHT gas this quarter and we are consuming 0.35 of spot LNG. And 91%, is that correct?

Rajesh Wagle — Senior Vice President, Marketing

For 4Q we were consuming almost 0.27 to 0.35 spot, okay. But now with HPHT coming, see the circular has come on 14th of January. After that has almost — maximum quantity is replaced except if there is anything required for industrial and commercial for our own requirement, suppose my term contract is not sufficient for that I still have to buy spot RLNG, that’s what MD is saying.

Ashu Shinghal — Managing Director

Yeah, and just to add, from 1st February we have started taking HPHT, which was option at the IGS, that is exchange. Reliance had some gas and that was not being auctioned in as per their e-bidding platform. So they have given it to IGS and from we are HPHT gas which was opened only to CGD companies.

Unidentified Participant — — Analyst

Got it. Second question was with respect to volume guidance. We have obviously earlier also mentioned the guidance of somewhere I think between 5% to 6% sustainably. This year, obviously the base was different, so the numbers are sharper. So for FY ’24 on this kind of base should we be still building somewhere around 5% to 6% volume growth or should it be higher, because the gas cost is also likely to moderate a bit? Just wanted your thoughts on that.

Rajesh Wagle — Senior Vice President, Marketing

The 5% to 6% guidance which we gave. Let me again say, it is we always said it a five-year CAGR numbers. It is not that every quarter, or every year it going to be 5% to 6%. It could be 10% in some quarter of the year, it could be do 2% in some other quarter of the year. So it is very difficult predict the consumption pattern of so many customers very accurately.

Ashu Shinghal — Managing Director

But just one thing is there if Kirit Parikh comes up and the prices are reduced, then it is expected that the volumes will grow in the next financial year. Otherwise, as expected in the last year, maybe 5% is a fair estimate to consider the growth.

Unidentified Participant — — Analyst

Got it, so 5% is the upside risk if the Kirit Parikh Committee recommendations are accepted in full, is that a fair way to look at it?

Ashu Shinghal — Managing Director

Yeah, just to add to that, especially for if you look at ’23 and ’24 as he said that our strategic station in GA3, Savroli is also connected so we will be immediately able to connect some of the industrial commercial load in that area and most of the station out of 24 are daughter booster, and we will start slowly laying the pipelines and convert them to online stations. So almost whichever stations, we are able to connect through pipeline from present gas getting transported through LCVs, the sale will almost double from an average of 3,000 to 4,000 to lets say 6,000 to 8,000 KG a day. So especially in Raigad we will see very good growth in the next year be it CNG or be it industrial and commercial. And we seeing good growth in GA2 as well as GA1.

Unidentified Participant — — Analyst

Okay.

Operator

Thank you sir, [Operator Instructions] The next question is from Amit Rustagi from UBS. Please go ahead.

Amit Rustagi — UBS — Analyst

Sir, thanks for taking my question. Sir, I would like to understand that, we had long-term contracts from GAIL. So how much we are getting under those contracts? What are the terms there? And are we seeing the thrift of HPHT being given to us now, when it is going to be decontrolled may be end of 2025. So how are we seeing that situation?

Ashu Shinghal — Managing Director

Okay, coming to first answer your question on contract with GAIL on [Indecipherable]. Currently, we are getting gas at supply or field-level, not the full contracted quantity, okay. With respect to your 25 is still very far off. First of all, Kirit Parikh Committee recommendations have still not been accepted, and we don’t know whether there would be some changes or there may not be some changes. And even if it is accepted what is recommended by the committee, two years on we don’t know what will be the gas prices in spot market or the term contracts or the crude prices and also so many other factors. So we can only wait and watch about what are the — there may be some more changes when — 2025 that closes.

Amit Rustagi — UBS — Analyst

Okay and sir, what about the current contract with GAIL like you are getting at supplier pay level. Do you see that going up anytime soon in 2023 and ’24 because what we hear from GAIL is they’re going to bring the entire volume of U.S. gas to India in 2023 itself.

Ashu Shinghal — Managing Director

So, actually GAIL is trying to make whatever we hear from different sources that trying to source gas, one of the major suppliers defaulted in the last few months. So if that is happening and also the gap between spot and the term — prices were reduced and this is the trend which we have seen in last few months that the spot gases were being traded at maybe $35 per MMBTU has come down to $18 per MMBTU and going-forward since the winters in Europe has also been quite moderate, we expect that prices will soften up, and there will be enough supply of gas. In that case, — I mean, we don’t know what the GAIL is going to do after a few months, but general expectation is that they will increase their supplies from supplier pay level.

Amit Rustagi — UBS — Analyst

Okay, and sir my second question relates to the new initiatives. So over past three to four years, we have been hearing a lot of new initiatives taken by us. But when we look at the volumes, when we talk about, have they been implemented, actually, we don’t see anything on-the-ground, like we have been talking about buses — this long-distance buses getting converted into CNG. We have been hearing about Port Trust converting their vehicles into that. We have been hearing about LNG, CNG conversion those conversations, those kind of stations, but or upgradation of our own stations. But when we are seeing the volume per station that is being on a consistent decline now. So what are we doing about two addressing the long-term growth and when do you see any of these things will start to pay as any benefit or they will just remain like an initiative on papers?

Rajesh Patel — Chief Financial Officer

Amit, you need to look at these initiatives in context. If you look at the last six months or a year, it has been a difficult time for the whole industry, the gas prices being where they are, etc. So long-distance CNG or Port Trust or anybody going for LNG for that matter, the timing is not really appropriate, but these are the long-term initiatives, which will drive value in the long-run products. So currently CNG is primarily seen [Indecipherable] local kind of fuel for intra-city or that kind of transportation, but there was a huge amount of value lies in intercity or long-distance travel which we are trying in our own way to get.

Now as far as actual movement on-the-ground one positive act, I can tell you is MSRTC has gone ahead with and awarded conversion of 800 of their diesel buses to CNG. And out of those above 600 to 700 are going to come in our lease. They have already given us seven depots and we have signed lease agreements with them to take land in their depots to setup infrastructure.

Now, all this is to fructify over the next six months, one year, two years, etc. And our belief is that in the medium-to-long term, CNG and natural gas will be competitive with all the alternate fuels. And that volume growth will come. Only, thing is the last six months, one year etc, need to be seen as an exception.

Rajesh Wagle — Senior Vice President, Marketing

Our LNG dispensing facility for the liquid at — in Raigad at a place called Savroli, that’s near the toll [Foreign Speech] on the Expressway, that is now mechanically completed and ready for commissioning, we are just awaiting a few, I think one last trajectory permission or something and we’ll be able to commission that. So we will be having the ability to dispense liquid LNG also.

The last point regarding the upgradation of stations, we have been upgrading some of our stations every year and they bring us value. But typically, we would see a spurt in the throughput of that station, once we have upgraded it either by replacing our old compressors, with a higher capacity, new compressor and maybe adding a dispenser hopefully with better space there. That partially mitigates the challenges which we have on [Technical Issues]. Getting new parcels of land in a city like Mumbai, it’s really difficult to get new parcels of land. So whatever we currently have we are trying to maximize those with the upgradations.

Amit Rustagi — UBS — Analyst

Thank you, sir.

Operator

The next question here is from [Technical Issues] from JP Morgan. Please go ahead.

Unidentified Participant — — Analyst

Hello. Just — am I audible?

Ashu Shinghal — Managing Director

Yeah.

Unidentified Participant — — Analyst

Yes, thank you, sir, my first question is on the government notification regarding the reservation of the high pressure [Technical Issues].

Ashu Shinghal — Managing Director

You are not clear.

Unidentified Participant — — Analyst

Sure. Okay, sir just trying to understand the deficiency by recent government, notification [Technical Issues] of the gas for the CNG field. This seems to reverse a Government of India, Cabinet decision of October 2020, which had given marketing freedom to the gas producers in the high-pressure fields and basically have said they have given affiliates good bid for it. So I’m just trying to understand sir, how should we read this, because this is not a cabinet decision, it reverses the previous cabinet decision. So is it something which is — could be in limbo for some period of time, being implemented.

Rajesh Wagle — Senior Vice President, Marketing

I think the answer to that Government is in the best position to give it. But what we’re seeing on-the-ground is yes, and the auction, which happened in the beginning of this month, the CGD got first priority in the auctioning of that it’s HPHT gas. Literally, for the seller or the producer. There is no difference. What was initially happening was everybody was bidding up the ceiling and because the volumes were limited everybody was getting about maybe 2% or 5% of whatever volume they have quoted. So the seller will land up selling…

Ashu Shinghal — Managing Director

Very-high number of buyers, okay, almost [Speech Overlap]. Now, the buyers number will reduce, and it will help, even the producers.

Rajesh Wagle — Senior Vice President, Marketing

And it will reduce the seller’s overhead also. You don’t have to deal with hundreds of assignments…

Ashu Shinghal — Managing Director

Initially, it was growing at the same price, which is the ceiling of HPHT. So the suppliers are not losing in that respect.

Unidentified Participant — — Analyst

Yes, but basically the suppliers will be losing if their affiliates were bidding for it. So now in this scenario the affiliates [Technical Issues] system of auctioning.

Ashu Shinghal — Managing Director

Yeah, but that is their internal matter it doesn’t impact us as a CGD company. What it brings out is that because some of that gas was being resold in the exchange, that was the concern of the ministry, that if the gas, which is being sold at a cap price should not go to the non-priority sector and that’s the correction which the government has done, by bringing in that the first HPHT gas, if it is being sold on the ceiling, should go to the priority sector and that’s a very well appreciated step by the Government of India.

Unidentified Participant — — Analyst

Sure sir, sir, my second question is that, so IGL in last week’s call highlighted that the supply of CNG is 20 MMSCMD and going forward, it will not increase and hence any incremental volume growth for the CNG would have to rely on non-APM gas, now the government has basically, to an extent reserved CNG in the high-pressure fields. Going forward sir, is it fair to say that the incremental growth will not be from APM gas and there is also a risk that if the government is now effectively potentially migrating CNG from APM gas structure to the high-pressure gas structure? If the first priority is given over there?

Rajesh Wagle — Senior Vice President, Marketing

No-no. I think there is two things which are getting mixed up. First that APM gas whatever quantity is there the efforts are being made by ONGC to increase it also although we can’t say whether it will increase or stagnant or come down. So whatever APM gas is being consumed, mostly in the priority sector there are certain uncollected pipelines, which cannot be connected so therefore, that gas is being sold to some other sectors. So basically, APM gas is allocated to CGD, fertilizer and some power companies.

Now as and when CGD consumption grows up and if APM doesn’t grow up, that means earlier it was that the allocation was coming down to e-CGD companies now is that. Now to arrest that, the new HPHT gas which is going to be sufficiently available to meet whatever growth is expected from the CGD companies. So, your assumption is right, one that we don’t know what about — what will be the future of APM gas and it is fair to expect that not much APM gas will be allocated to the priority sector except that efforts are being made by other companies to connect unconnected fields to the main grid. If that happens, then more APM quantity will be available for CGD allocation. So there are efforts being made to connect some isolated fields to the main grid. And that will bring some more gas to APL.

The second part is that even HPHT has got its ceiling which is evolving formula and it keeps — which is a fair formula and it will be giving a fair prices going-forward.

Operator

Thank you, sir. The next question is from S. Ramesh from Nirmal Bang Equities. Please go ahead.

S. Ramesh — Nirmal Bang Equities — Analyst

Good evening, and thank you very much. Can you hear me?

Ashu Shinghal — Managing Director

Yes, we can.

S. Ramesh — Nirmal Bang Equities — Analyst

Yeah, so the first thought is, in terms of your depreciation as for the nine months, is it fair to assume that your capital is something of the order of INR800 crores and how would this capitalization help in terms of generating further our revenue and profit say over the next one or two years?

Ashu Shinghal — Managing Director

So whatever new CNG stations we are seeing and so, we have commissioned those and capex about that has been you know added and it starts immediately, giving incremental volumes or at least the compression capacity is available, and depending on the vehicles and the turn-around vehicle, it will have better impact on volumes going forward. As far as some of the steel lines and medium-pressure lines, or low-pressure lines are concerned, so basically that will not immediately be able to add to volumes as and when the customers get converted on these pipeline network, it will add slowly. So it’s a long-drawn process once the steel line or a medium-pressure line is laid, immediately, you know, maybe 40% to 50% percent of the customers in a building or in that area gets hooked up and later on, that process continues over a longer period of time. So that is how this capex will help in the long-run.

And the City Gas Station, which we are likely to commission soon waiting for some statutory approvals once that gets commissioned immediately sale in the GSV through that station as well as the mother station we will be able to cater to the daughter booster station within that geography. So it will reduce the transportation costs, which has been currently incurred from GA2 to GA3, and will also help slowly going forward connecting few more industrial, commercial customers in that region and few more daughter booster stations to be converted on online. Okay, that’s how it is going.

S. Ramesh — Nirmal Bang Equities — Analyst

Sir if you can share your thoughts on how much will be the cost-savings on what you just mentioned? And what is the kind of incremental volume that you can expect in GA3 Raigad, say over the next one or two years?

Ashu Shinghal — Managing Director

Yes, GA3 volume growth will be quite high next year. It should be 20% plus compared to current growth which is there, current volumes, which is there. And as far as cost is concerned, let’s say, even if the connection [Technical Issues] was on an average 40, 50 kilometers, okay, if that gets eliminated so cost for kg of gas transportation straight away goes away and that depreciation takes a replacement of that cost, okay and the depreciation is a very small amount whereas recurring transportation cost is pretty high in these stations, which will also be a saving. And also logistics, manpower management, all that gets eliminated.

Operator

Thank you, sir. The next question we have is from Harman Khanna [Phonetic] from Nomura. Please go ahead, sir. Harman [Phonetic] please go ahead, sir.

Harman Khanna — Nomura — Analyst

Hi, I hope I’m audible.

Ashu Shinghal — Managing Director

Yeah.

Harman Khanna — Nomura — Analyst

Yeah. Thank you for taking my questions. Sir, just wanted to get a sense of what is our current volumes, say in January for what we’re currently doing versus 3.4 that we did in the third-quarter. And the second question or continuation with that is that CVS in the month of January, you’d have to have procured some amount of spot LNG to meet priority sector demand but is it fair to say that from February onwards you will not be having any incremental spot LNG purchases at least for the priority sector.

Rajesh Patel — Chief Financial Officer

No, I think some amount of spot may remain because of you know to cater to the peak, we may need. So completely, you can say that no spot will be required for priority sector. As far as volumes grow, in January also volumes we expect to be flattish because of hi selling prices which are prevailing. But hopefully, now that have started getting some — getting and giving some relief on the high prices we are hoping volumes should pick-up.

Harman Khanna — Nomura — Analyst

Got it.

Ashu Shinghal — Managing Director

The spot will be very-very minimal just to balance the requirement, otherwise, we expect that APM plus HPHT should be able to meet the priority sector requirement.

Harman Khanna — Nomura — Analyst

Got it, sir. Got that. And just to get a sense on the pricing, given the price cuts that we’ve taken in [Indecipherable] is there any view to further bring down the pricing and improve cost advantage versus liquid [Indecipherable]?

Rajesh Wagle — Senior Vice President, Marketing

One, we have already done that 2.5 rupees per kg price it has been introduced with effect from first of February. Next, we will have a wait-and-watch for Kirit Parikh Committee to be accepted by the government. And as and when that comes, we will have a relook at total cost of procurement and also what is the total cost — average weighted cost, and then we will take a call on that.

Operator

Thank you, sir. Ladies and gentlemen at this stage we would be limiting participants to one question per person. The next question we have is from Kirtan Mehta from BOB Capital Markets. Please go ahead.

Kirtan Mehta — BOB Capital Markets — Analyst

Good afternoon, everyone. Thank you for giving me this opportunity. I would want to sort of understand when I look through the data, I understand that the focus of implementation of infrastructure, seems to be sort of emphasized on GA2 and GA3 development. So wanted to understand in terms of the breakup. Is it translating into a higher-growth in GA2 particularly versus GA1? And what is currently the mix of do it what GA1, GA2, and GA3 in your total volumes?

Rajesh Wagle — Senior Vice President, Marketing

Well, let’s say, on an average we were selling around 3.5. GA1 could be contributing around 1.8 to 1.85. GA2 roughly 1.5 to 1.55, and around 0.12 is being sold currently in GA3. Going forward, our expectation is somewhere between — at least next year GA2, we see a growth of 10% in those volumes. Whereas in GA3, at least 20% plus volumes, we are seeing, whereas GA1 will remain in the range of around 5% to 6%. This I’m talking about, within one or two years till GA3 and GA2 peaks out in terms of the potential available enhancements to geographical areas.

Ashu Shinghal — Managing Director

Yeah, with respect to your question, why we are giving more focus on GA2 and GA3, it is primarily because GA2 and GA3 are more nascent [Phonetic] areas where the — especially GA3 where the network is being raised. As far as GA volume is concerned, there is hardly any space for putting our CNG station and already this deal and MVP network is very robust in GA1. Whereas in GA2 there is still some scope to increase some network and MDP [Phonetic] line and also some CNG stations. So if you see our capex plan for next few years, we will be focusing more on GA2 and GA3. The main constraint in GA1 is there is hardly any land, which is available and whatever area is there is already covered with a very — very integrated network of steel and PE pipeline in GA1.

Rajesh Patel — Chief Financial Officer

Mr. Mehta, atleast in GA1 most of the trunk line, the steel pipeline is already laid. Whatever capex we are doing as far as GA1 is concerned, it is more of a security supply kind of a thing. So we are doing multiple looping. So that if there are any disruption, etc. GA1 area and the older area doesn’t get affected. However, the last mile connectivity and the customer conversion keeps on going and we do incur sizable amount of capex even in GA1 for further branching and reaching out to the customers, okay.

Operator

Thank you, the next question we have is from Maulik Patel from Equirus. Please go ahead.

Maulik Patel — Equirus — Analyst

Yeah, thanks for the opportunity. So just continuing on the earlier question, you mentioned that 1.8 to 1.85 comes from GA1 and you expect around 5% GA1, and GA2 you expect around the 15% growth. So the growth is mainly driven by, as you mentioned that it is assuming [Technical Issues] laid down. How do you see this one along with [Technical Issues] while the remaining pressure of the Thane district is distributed with the Gujarat Gas. Do you say that the Gujarat Gas network will enable you to grow more faster or is it going to be — do we get some volume from your side.

Rajesh Wagle — Senior Vice President, Marketing

So the growth rate in GA2 is a bit higher than GA1. Because it is relatively easier to lay infrastructure as we have more land available in GA2 two for opening CNG stations. And so it’s a much bigger area compared to GA1. GA1 is a very mature market where we have been here for more than 27 years now. GA2 is relatively new. So we started off in about 2005…

Maulik Patel — Equirus — Analyst

18 years old.

Rajesh Wagle — Senior Vice President, Marketing

18 years or so.

Maulik Patel — Equirus — Analyst

And what is the potential for GA3? In five years where do we see this 0.1 to 0.12 heading to what number?

Rajesh Wagle — Senior Vice President, Marketing

GA3 our demand estimation shows about 0.6 MMSCMD. It is the addressable market size there.

Maulik Patel — Equirus — Analyst

Okay, got it. And one more question. Recently, this metro has started in Mumbai. Have you seen any drop in your numbers related to the past, because the general perception is that once the metro starts congestion will come down. The traffic will come down and the car or taxis will spend less time on the roads relatively, so there will be less fuel consumption. Is that thinking, right?

Rajesh Wagle — Senior Vice President, Marketing

Look, the first Metro corridor opened up quite a few years back. The Versova, Andheri, Ghatkopar on. That didn’t have any impact on our volumes. The new one has just opened a couple of weeks back. We know it was inaugurated by the Prime Minister. Now, we haven’t seen any material change in CNG volumes of anything for that matter. But we will watch and see what. But our expectation is even with so many metro lines opening the demand for transportation services is so high CNG will and liquid fuels for that matter will retain their share. Because the number of people traveling will increase.

Ashu Shinghal — Managing Director

Some of them will shift from local to metro also.

Rajesh Wagle — Senior Vice President, Marketing

And when people see less congestion on the roads, some people will bring out their CNG cars to commute also. Today, they will not be doing that. Because it is taking them two hours to commute from home to work. So there are lot of factors at play here. So it’s not necessarily that metros can potentially hit you…

Yogesh Patil — Centrum Broking — Analyst

[Technical Issues] for example, Delhi has one of the best Metro networks, but volumes have been consistently good.

Ashu Shinghal — Managing Director

So what is understood is that there is a space for almost several fields, because commuting will start to increase as Mr. Rajesh mentioned.

Operator

Thank you, sir. The next question we have is from Somaya V from Spark. Please go ahead.

Somaya V — Spark — Analyst

Thanks for the opportunity. Hope I am audible. So the question pertains to — the question pertains to HPHT gas. So you did mention you had 0.3 MMSCMD, close to 0.3 MMSCMD. What was the total available gas at the exchange, the addressable market that was there? That’s one. And how do you see this kind of going up in the next one or two years in terms of HPC volume available for CGD?

Ashu Shinghal — Managing Director

I think the last bidding was for 3 MMSCMD in the exchange. Out of that, we got some 0.27 or close to 0.3. So I mean, what I said earlier, the CGD companies are not expected to grow demand in tandem with what the gas is expected to come from HPHCC, both from Reliance and ONGC. Primarily, Reliance has earlier come up with 6 million and there was news — unconfirmed news that they will come up with another tender of 6 million. So — and also there were news that ONGC will also come out with some more gas on their bidding. So what our estimate is that CGD demand growth for priority sector, will it be a gradual one. It cannot be a sudden thing. As of now, if we see the 10% is around 2.5 MMSCMD which we took two-level of whole all-India basis. So that will be available straight away, in the bidding or second bidding round itself. So post that once CGD companies start consuming more gas than only HPHT will be required. So our assessment is that for MGL also whatever shortfall is there will be met through HPHT.

Operator

Thank you, sir. The next question we have is from Nitin Tiwari from YS Securities. Please go ahead.

Nitin Tiwari — YS Securities — Analyst

Good evening, sir. Thank you for the opportunity. I hope I’m audible. My question is related to capex. Can we give a breakup of the capex spend in terms on GA1, GA2, and GA3 and also in terms of what heads, they’ve gone into broadly. Whether the investment has been on new stations or basically in the pipelines. So if you can give that sort of breakup?

Ashu Shinghal — Managing Director

I don’t have the numbers readily available. If you get in touch with me offline, I will give you these numbers. Or you contact our CFO, Mr. Rajesh Patel and he will be able to help you on that.

Nitin Tiwari — YS Securities — Analyst

Right sir, I’ll do that. And the reason I asked that is perhaps you can help me understand this better because I suppose your [Indecipherable] would be — or actually highest historically and whereas we are not adding as many stations or kilometers in terms of pipeline. So, I just wanted to understand that — I mean INR600, INR700 crores of capex in a year how is that getting spent. That was my primary query. So, I’ll certainly take it up later on and on one-on-one basis.

Ashu Shinghal — Managing Director

Just to give you an idea, around for 25 to 30 new stations and equal amount of upgradations we spend around INR150 crores to INR180 crores in CNG.

Nitin Tiwari — YS Securities — Analyst

Okay.

Ashu Shinghal — Managing Director

Let’s say roughly around INR300 crores-odd is mainly in — this medium pressure line, the last mile connectivity, GI, inside kitchen, inside customer etc.

Nitin Tiwari — YS Securities — Analyst

This is all in GA1 only sir.

Ashu Shinghal — Managing Director

So, GA1 will have a maximum of this last-mile connectivity and medium-pressure line. Whereas steel will be minimum in GA1. Steel will be higher in GA2, followed by GA3. Okay, GA3 has been completed mainly on the CG as in the CNG stations and next year there’ll be — once the syndicate [Phonetic] stations starts, we have plans to lay steel lines and also some more syndicate stations, we are counting land for, so cost of land also will be there in the range of around INR50 to INR60 crores for CNG, as well as new syndicate stations.

Nitin Tiwari — YS Securities — Analyst

Okay. I will circle back for more details. And secondly, sir if you can help me understand the gas sourcing completely like you know once more, because I’m slightly confused over there. You have about 91% of your priority sales as APNs. I suppose, you also had an allocation of 0.3 MMSCMD of HPHT gas which you had bid for. So does that, — yeah that gas this used in priority, or it gets used in INTE segment.

Ashu Shinghal — Managing Director

It is allowed to be used only in priority that is CNG and domestic HPHT gas. Nothing is allowed to be used in industrial and commercial.

Nitin Tiwari — YS Securities — Analyst

Right, sir. So, if I may — some of your APM location and that 0.3 RIL gas that you have, you would not I think require any spot gas, but you said you sourced spot gas as well in terms of HPHT gas from the exchange. So, yeah…

Ashu Shinghal — Managing Director

The demand doesn’t remain same on all days. So for peak you do need some amount of spot gas sometimes. So if the demand goes up suddenly, you may have to put in the spot gas. So let us say around 2.8 is available through APM and 0.3 is available to HPHT that makes to let’s say 3.10 or so but suppose my demand picks up on some days to even 3.15 to 3.2 then I will have to have some type of spot gas. Otherwise, the stations will be out of gas and they will — pressure will fall.

Nitin Tiwari — YS Securities — Analyst

Okay.

Operator

Thank you, sir. The final question that we have is from Iqbal Khan from [Technical Issues]. Please go ahead.

Unidentified Participant — — Analyst

Yeah, hi, thank you for giving this opportunity. It’s a follow-up question on the HPHT gas itself. You mentioned that around 0.3 MMSCMD, HPHT gas allocation was done in the previous quarter. Right, I mean by Q3. [Speech Overlap]

Ashu Shinghal — Managing Director

Six months February.

Unidentified Participant — — Analyst

Okay, so in the previous quarter, was there any allocation of HPHT gas? I mean I got a little confused over here.

Ashu Shinghal — Managing Director

It might be a very small amount through APM only. We did have one HPHT RIL gas, which is a term contract, and another 0.5 HPHT. But we did not [Indecipherable] what has come under the new guidelines of Government of India.

Unidentified Participant — — Analyst

All right. So my understanding is 0.3 MMSCMD, is from 1st February, for 2022, right?

Ashu Shinghal — Managing Director

That’s right.

Unidentified Participant — — Analyst

Okay, thank you, sir.

Ashu Shinghal — Managing Director

Thank you, sir. Ladies and gentlemen, there are no further questions. I would now like to hand the call-back over to Mr. [Technical Issues] for closing comments. Please go ahead, sir.

Unidentified Speaker —

Thank you, Reco. It was a pleasure having you all on this call and thanks a lot to the management for giving us this opportunity to host it. This closes the call. Have a nice day. Unless Mr. Rajesh Patel if you have any anything to add?

Rajesh Patel — Chief Financial Officer

Nothing. Thank you so much.

Ashu Shinghal — Managing Director

Thank you so much. And if any investor has any more further questions you can contract directly. Thank you.

Unidentified Speaker —

Thank you, everyone. Have a nice day.