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IGL SWOT Analysis-IV - Views on News from Equitymaster
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IGL SWOT Analysis-IV
Dec 4, 2007

In the previous articles on SWOT analysis of Indraprastha Gas Limited (IGL), we looked at its strengths, weaknesses and the opportunities available. In this article, we conclude our analysis with a study of the threats confronting IGL. Competition from rival players: The newly set up Petroleum and Natural Gas Regulatory Board (PNGRB) has received over 100 applications from domestic and foreign companies interested in supplying gas to domestic households and vehicles in various Indian cities. Reliance Industries Ltd, Indian Oil Corporation and GAIL are planning a pan-Indian presence. In fact, RNRL, via its affiliate Reliance Fuel Resources, has applied for city gas distribution license specifically for the NCR of Delhi.

Changes in the prices of natural gas: The Government of India intends to move to a market-determined price for natural gas, away from the administered pricing regime. Under a market driven determination of pricing of natural gas, the price would be influenced by the policies of the union as well as the state government, demand of natural gas, domestic supply, quantum and price of imports, price of alternate fuels, taxes and duties. If IGL is unable to pass-on any such increase in price to its consumers, as and when it takes place, it will have an adverse impact on the company.

Changes in transportation charges: IGL pays GAIL for the transportation of natural gas from Hazira to Delhi at a certain administered price, which is not dependent on the distance. In the future, if transportation charges payable to GAIL become determinable based on the distance, there may be an increase in the transportation charges as IGLís operations in NCR of Delhi are located at a significant distance from Hazira. If the company is unable to pass-on any such increase in price to its consumers, as and when it takes place, it will have an adverse impact.

Competition from alternate fuels: CNG competes with petrol, diesel and auto LPG. PNG competes with LPG and LDO. These alternate fuels are currently widely used. Though CNG and PNG offer several advantages over these alternate fuels, significant efforts and costs might be required to create awareness about such advantages. Moreover, while CNG and PNG are currently priced competitively against these alternate fuels, a reduction in the prices of the alternate fuels could have an adverse impact on IGLís profitability and financial condition.

Expanding IGLís infrastructure requires statutory approvals: IGL requires approvals from a large number of governmental departments/authorities for setting up its CNG stations and expanding its pipeline network. Several approvals for lease of land by government bodies/government authorities, laying underground pipelines, approval from the Department of Explosives, right of way, etc might get delayed or may not be received at all.

Changes in taxation policies: Statutory taxes and other levies affect the cost of production and prices of IGLís products. Any increase in any of these taxes or levies, or the imposition of new taxes and levies in the future, may have an adverse impact on the company.

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Feb 21, 2018 03:35 PM


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