Whalesbook
Industrial gas demand in Morbi has climbed to all-time highs, signaling strong volume growth for Gujarat Gas. Meanwhile, CNG vehicle adoption continues to rise, benefiting players like IGL. Investors are tracking how these trends impact company volumes.
What Happened
City Gas Distribution (CGD) companies are seeing a sharp rise in demand from two key areas: the industrial hub of Morbi and the transport sector. In the Morbi industrial cluster, consumption of Piped Natural Gas (PNG) reached 8.2 million standard cubic meters per day (mmscmd) in June 2026. This is a significant jump compared to previous periods, driven by the resumption of operations in nearly 800 out of 850 ceramic manufacturing units in the region.
Concurrently, the transport sector continues to adopt CNG. In May 2026, CNG vehicle registrations rose by 35% year-on-year for major players like Gujarat Gas and Indraprastha Gas Limited (IGL). While Mahanagar Gas Limited (MGL) reported a 6% year-on-year dip in registrations for the month, it maintains a strong adoption rate comparable to its peers.
Why This Matters For Investors
For CGD companies, volume growth is a primary driver of financial performance. When industrial clusters like Morbi increase their gas consumption, it improves the capacity utilization of the distribution network. This, in turn, can help in better cost absorption and stronger revenue generation. Analysts project that this surge in Morbi could push the total daily gas volumes for Gujarat Gas above 14 mmscmd. The sustained adoption of CNG in the vehicle segment further supports the long-term volume outlook for IGL and Gujarat Gas.
The Morbi Industrial Factor
The surge in demand from Morbi’s ceramic industry highlights why industrial clients are critical for gas distributors. Despite gas prices being somewhat similar to alternative fuels like propane, factory owners prefer PNG. This is primarily because of supply reliability. While propane is a viable alternative, industry units prioritize the assured supply provided by the piped network. As of now, the pricing gap does not significantly favor switching to propane, which helps protect gas volume demand in this cluster. However, the industry is also managing higher costs, with tile prices increasing to adjust for the rise in energy, coal, and freight expenses.
How Investors May Read This
Investors often watch volume growth and network expansion as key metrics for the sector. The high demand from the Morbi cluster suggests that industrial activity in the region is robust, with businesses holding decent order books. However, it is also important to note that the sector faces sensitivity to global gas price fluctuations and competition from alternative energy sources. While PNG remains the preferred choice in Morbi, any significant drop in the price of alternative fuels like propane could, in theory, challenge this preference. Furthermore, the sustainability of industrial volumes depends on the continuous operation of these ceramic units, which can be influenced by broader economic conditions and export demand for tiles.
What Investors Should Track
The most important factor to track is whether these volume levels can be sustained through the coming quarters. Investors may monitor monthly data on CNG vehicle registrations to gauge if the adoption rate remains high. Additionally, management commentary regarding industrial gas volumes and any potential changes in gas sourcing costs will be vital. Other key monitorables include the operational status of the remaining ceramic units in Morbi and whether any significant price changes in alternative fuels impact the competitive advantage of PNG.