Gujarat Gas Targets New Industrial Hubs, Launches Propane Strategy to Offset Morbi Losses.

Gujarat Gas Ltd (GGL), one of India’s largest city-gas distributors, is stepping up efforts to counter a prolonged slump in demand from Morbi’s ceramics industry by expanding into new industrial hubs and launching an aggressive propane strategy.

The company outlined plans to tap under-penetrated industrial clusters in Gujarat and Maharashtra through an expanding steel-pipeline network. Areas including Ahmedabad Rural, Dadra & Nagar Haveli (DNH) and parts of Thane are expected to add 2–3 lakh SCMD of industrial gas sales over the next 18 months, the management said during a recent earnings call.

With spot LNG and crude prices softening, Gujarat Gas reduced industrial gas tariffs by ₹3.25 per SCM effective August 1, 2025, to stay competitive. But acknowledging that demand in Morbi may remain weak, the company has complemented its pipeline expansion with a renewed push into propane. The strategy aims not to replace natural gas but to win back customers who shifted to propane amid volatile LNG prices.

Gujarat Gas said it is in advanced negotiations with international propane suppliers and is evaluating both spot and long-term contracts. It is also holding talks with Pipavav and Kandla ports for handling imports, and with fleet operators for last-mile distribution.

Management expects global LNG supply tightness to continue for 18–24 months and views propane as a “bridge fuel” to retain industrial buyers — especially those in Morbi that moved away from natural gas. “The idea is not to market propane to our existing customers. It is to bring in the customers that we have lost with propane,” the company told investors. Even so, Gujarat Gas believes many high-quality ceramic manufacturers will continue to prefer natural gas for better heating control and product quality.

In FY25, Gujarat Gas sold an average of 9.62 MMSCMD of natural gas, including 5.03 MMSCMD of industrial PNG, with clusters such as Morbi, Dahej, Ankleshwar, Vapi, Surat, Valsad and Rajkot driving growth. But Morbi’s weakness persisted into FY26. Sales in the region dropped to 2.13 MMSCMD in Q2 FY26 from 2.51 MMSCMD in the previous quarter, partly due to Janmashtami and continued fuel-switching. Non-Morbi volumes, however, rose slightly to 2.22 MMSCMD.

Despite near-term challenges, Gujarat Gas remains optimistic about a medium-term revival. Management expects a multi-year surge in global LNG supply, supported by increased US exports — including more than 145 cargoes shipped in October — as well as new liquefaction capacity in Qatar by late 2026. The company is also monitoring Europe’s planned 2027 ban on Russian LNG, which could further rebalance markets. By 2027, Gujarat Gas expects LNG prices to return to “reasonable” levels, strengthening the case for natural gas in industrial hubs such as Morbi.