The past few days have seen a flurry of policy announcements to cut pollution levels in Delhi, many of which pertain to vehicles. While most of these are preliminary and experimental, it will be practically impossible to implement a few. Though it is too early to gauge the impact of these policies on Indraprastha Gas (IGL), we provide some perspective on 2 key potential developments—ban on diesel vehicles in New Delhi and oddeven numbered cars on alternate days. More importantly, CNG is a green fuel and we believe eventually the net impact of policy developments on IGL is likely to be positive.
Odd-even cars to ply on alternate days from January 2016: Could impact 15% of GL’s volumes. However, the requisite upgradation of public transport could limit the potential impact to ~5-10% (buses consume 15x more CNG than cars.High Court has mandated that all cabs should compulsorily switch to CNG, with effect from March 2016 could be a potential 4% upside to our FY17E volumes.
IGL will benefit from further (16%) expected reduction in domestic gas prices for H1FY17, which will enhance CNG’s competitiveness vs petrol and diesel (currently 55% and 20%).