On Episode 819 of The Core Report, financial journalist Govindraj Ethiraj talks to Nikhil Dubey, senior research analyst, refining and modelling at Kpler. We also feature an excerpt from our India Energy Week conversation with Kamal Kishore Chatiwal, Managing Director of Indraprastha Gas Limited (IGL).

SHOW NOTES

(00:00) Stories of the Day

(01:00) Markets rebound on falling gas prices and likely relief on Iran war

(04:31) Indigo CEO resigns at a difficult moment

(05:41) An insight into India’s ambitions of piping gas to homes

(16:46) Why oil is less of a challenge for India despite the Strait of Hormuz shutting down

(23:03) Apple is now producing 25% of its iPhones in India now

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

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Good morning, it's Wednesday the 11th of March and this is Govindaj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Our top stories and themes in a somewhat energy-heavy edition today…

The markets are rebounding on falling gas prices and a likely relief on the Iran war

An insight into India's ambitions of piping gas to homes.

Why oil is less of a challenge for India despite the Strait of Hormuz shutting down

Apple is producing 25% of its iPhones in India now

And Indigo's CEO resigns at a very difficult moment.

Markets

The second order impact of oil and gas shortages is being felt downstream as well.

It's not just homes and restaurants across India which are feeling the pain, if not the stress of what might come. Remember, you need oil and gas to power petrochemical plants which make raw materials for plastics, for instance. And then there are power generation plants and other manufacturing plants that need gas that are just too many kinds.

So what is the impact of all of this looking like right now on the economy? A note from Elara Securities says that at Brent crude prices of $100 per barrel, the fiscal year 27 current account deficit widens to about 2% of GDP versus 1% previously. They also say remittances should be monitored as Gulf Cooperation Council countries or West Asia countries account for about 38% of inflows, as we've mentioned earlier as well. And upside current account deficit risks could push USD INR towards $94.95. On the inflation front, Elara says upside risks emerge not only from oil prices but also from gas chemicals and overall supply chain disruptions or the second order effects that we referred to earlier.

The pass through to retail prices is complicated. They say if they assume oil marketing companies and excise duty cuts absorb the rise in crude prices and the government extends subsidies then the upside on consumer price inflation could be minimal. However, there could be a 14 basis points upside in consumer price inflation in the near term because of retail LPG price hikes of Rs 60 per cylinder which has already happened over the weekend.

If government does not hike LPG subsidy, an increase of Rs 592 for a 14.2 kilogramme per cylinder would be needed which would lead to a 140 basis points jump in consumer price inflation. Similarly, if the government decides to hike petrol and diesel prices to offset under recoveries and not cut excise duty, we are looking at a direct impact of 70 basis points on consumer price inflation, says Elara. Well, all of this could happen or at least some of it could happen but let's see.

Much of it depends on the war coming to an end and the sentiment changing at the same time and that itself could do a lot to prices. Meanwhile, speaking of sentiment, the markets turned after a two-day losing streak as risk sentiment improved after US President Donald Trump signalled the war with Iran could end The nifty ended about 233 points higher at 24,261. The census was up 639 points up at 78,205.

While Trump said the war with Iran may be resolved, he also gave out some contradictory signals and there are many people who've been trying to now glean which of those signals were the most important or the critical or could actually lead to some resolution. Iran on the other end is not signalling anything at this point. The broader markets also outperformed the benchmark indices, the nifty mid cap and nifty small cap were up 1.6 and 2.1 percent each.

The rupee was strong having gained from the beginning of the trading session and dollar selling intervention by the reserve bank reinforced the move according to traders quoted by Reuters which said the rupee ended at 91 rupees 80 paise that's almost up 0.6 percent from the previous lows and off its record low of 92 rupees 34 paise. Gold was also up on Tuesday after a pause in the dollar's rally and was up about 1.2 percent at 5200 dollars per ounce as of Tuesday morning according to Reuters. There's a war going on and airlines are particularly hit including the Indian airlines like Air India and India's largest airline that's Indigo.

Remember that Indian airlines cannot fly over Pakistan and of course with the additional routings now in place it's become particularly challenging for them to run their international routes and then of course there's a problem of oil prices which are rising steadily which will impact the financials of airlines and airline companies and then Indigo said on Tuesday that its CEO Peter Elbers had resigned from the position with immediate effect for personal reasons. In December as I'm sure you remember Indigo had earned passenger and regulatory wrath after mass flight cancellation that left tens of thousands of passengers stranded across the country. The airline said its managing director Rahul Bhatia would manage the company in the interim until a replacement was hired.

Bhatia's Interglobe Enterprises is the largest shareholder in the company Interglobe Aviation with a roughly 36 percent stake as of December. He was also conspicuously absent during the December crisis.

Gas For Everyone

A gas crisis has hit India as we had predicted though not hoped for a few days ago.

Gas unlike oil cannot be stored that easily or very difficult to and runs on a more just-in-time basis. Moreover while curtailing liquefied natural gas or LNG supplies to factories may not be felt immediately, curtailing liquefied petroleum gas or LPG which is a mix of propane and butane and used primarily for cooking and which also comes from refineries as opposed to LNG which comes from the oil fields will be as in there will be an impact of that curtailment. Now the piped gas many of us get in India is actually from LNG that's the liquefied natural gas and also includes some additives.

Protests from various restaurant associations in different parts of the country are already being seen as LPG cylinders for commercial use are being curtailed. Restaurants run through tens if not hundreds of cylinders a day. Meanwhile Reuters is also reporting that India will try and ramp up its coal capacity to meet peak power demand this summer as liquefied natural gas supplies tighten according to officials who spoke to them.

I don't know where you are listening to this at this point but Mumbai has seen or is seeing more warm days or rather hot days and we have already been talking about heat waves this month. In recent years Reuters says the government has nudged power plants to ramp up generation during the April to June summer months including gas fired generation which costs more but to meet surging electricity demand and subsidises the cost for companies to shield customers from higher prices. So coming back to LPG India consumes about 31 million tonnes of it every year of which 87 percent is used in homes and the rest by commercial establishments like hotels and restaurants.

Around 62 percent of the country's LPG demand is met through imports according to a business standard article and a large part of those imports about 85 to 90 percent traditionally comes through the state of Hormuz. Now what the government is doing is asking state run oil companies like Indian oil, Bharat Petroleum and Hindustan Petroleum to increase LPG production and prioritise supply for households and essential sectors and it's also asked them to divert their entire output of propane, butane and propylene and butene for LPG production. So while the supply issues have highlighted the challenges of gas-based economies, it's worth revisiting India's efforts to take natural gas to consumers whether mobile or stationary in homes.

I had spoken about eight weeks ago to Indraprastha Gas Managing Director Kamal Kishore Chattival who had explained to me how IGL the company that also runs Delhi's auto and piped gas connection networks was rolling out gas connections beyond the main cities. IGL supplies natural gas as compressed natural gas for four-wheelers primarily that is domestic and commercial sectors where it goes as piped natural gas or PNG. I began by asking him to talk about IGL's city gas distribution or CGD network.

INTERVIEW TRANSCRIPT

Kamal Kishore Chatiwal: IGL as you know today is the largest CGD company in the country and we have close to around 23-24 percent total volume sold in CGDs through IGL. So we are present in 12 geographical areas. You know the India is divided into 307.

So we are present in 12. I mean we started 26 years back. So one of the early CGD entities, so that's the advantage with IGL that we have more than 25-26 years of experience and we have built a robust network.

If you compare our network close to 30,000 kilometres of pipeline, both steel and MDP, close to 1,000 CNG stations. We'll be touching 1,000 closed very shortly. 5,000 INC customers.

So entire NCR region, you know most of the NCR major towns, Delhi, Gurugram, few zones of those areas, Noida, Greater Noida, Ghaziabad, part of Faridabad also is assigned to us. I would say NCR is not one city but it's a cluster of 6-7 major cities, major industrial cities and that's the advantage that IGL has. And due to that we have been able to I mean demonstrate our capability, technical capability and all.

And one of the biggest trend I would say is the domestic connections that we have. You know we have close to 30 to 33 lakhs. One of the highest in the industry.

Domestic PNG is not very very lucrative but we have been able to turn it around. You know in the sense that there is a initial pain when you do domestic connections but once you have laid the network, you can reap the benefits and that's the biggest monopolistic advantage. And with our customer focus and our network strength, we have been able to I mean satisfy our customers and we find that now especially in Delhi, the public representatives are coming to IGL with request that to bring it to other you know technically non-feasible areas also that you find out a solution and give us the connection there.

So in a nutshell now we are into expanding beyond Delhi NCR. So we have some of the rural areas in Haryana other than Gurugram. We have Rewadi, Karnal and Kaithap.

And in UP we have Meerut, Muzaffarnagar, Shamli in the western part. Then we have Kanpur, Chitrakoot, Mahoba, Amirpur, Banda. These are some of the Bundelkhand region you know some of the very very developing regions of the country.

And if we are able to promote I mean gas-based economy in those regions that will be remarkable for India. Because we feel that gas has some inherent advantage in the sense that the domestic production not only the domestic production but also the biogas space, compressed biogas, waste to energy, waste to gas. These projects can be easily integrated with the existing network.

So that's the biggest trend I would say.

Govindraj Ethiraj: So I'm going to come to international and technology in a moment. But one of the things that I understand that you've been doing is also setting up pipeline networks in villages. Which being a city dweller like me seems very new and unusual because villages are obviously dispersed geographically far away and the economics would always be at question.

So how is that effort been like?

Kamal Kishore Chatiwal: I think this is one of the transformation that India under the leadership of Prime Minister that is happening that his vision of making piped gas available to every village is just like gel-cinal. Similarly he has spoken in many forums that I want that gas to flow similar to gel-cinal. And we are seeing that villages also now wherever the affordability is there they are switching to pipe natural gas because due to the inherent advantages of PNG that convenience and anxiety of empty cylinders is gone, need not store cylinders and all those things.

So people are switching to that and yesterday only as a part of national PNG drive we commissioned some gas in a very very remote household I would say. Near Rewari, a very small village where you know we found 70 people have converted to pipe natural gas. Now you are right that initially the issue would be there that if you take one or two connections then the per unit cost would be high but if the entire villages gets converted to say PNG then we will be able to reduce the per household cost because the network cost is the main cost and the last mile if you connect the houses so that cost is still there but if you have the network then the cost per household is slightly less. And it could obviously keep reducing as more people get in.

Yes the selling and distribution cost as we call S&D costs that will keep on reducing as and when more people join plus our network capacity utilisation that is one of the most important parameter for you know the return on asset. So that will improve overall. On top of that the advantage is that we get 105% of the domestic cheapest gas in the country.

Govindraj Ethiraj: Yeah I mean that's really my sort of next question. So they are actually paying less for your pipe gas than they would for a cylinder which they were maybe subscribing to earlier.

Kamal Kishore Chatiwal: Yes right now the economics is that recently the tariff order from PNGRB has come. So where they have given us some relief as far as the tariff is concerned. So we have passed that to the consumer.

Now with this change the cost of gas just to give an example that 46.1 is the per SCM cost in Rewardi and each household consumes on rough calculation is that 0.4 per day so in a month 12 SCM and if you multiply that it comes to around 550 rupees in a month. Now compared to that subsidised cylinder if we assume that one cylinder per month then 500 rupees is that. So it is comparable with the subsidised Ujjwala cylinder of 500 rupees 550 per month is the cost and with respect to 850 there is a drastic advantage.

Govindraj Ethiraj:

And there's no subsidy in your effort in doing all of this. Other than the APM allocation there is no subsidy. And suppose we were to look 10 years ahead or 5 or 10 years ahead where could this go?

I'm talking about the length and breadth in terms of gas distribution to homes.

Kamal Kishore Chatiwal: So what we are seeing is that 32 crore total connections are there so we are confident that next 10 years around 12 crore would be on PNG. So rest 20 could be Ujjwala or some remote very very remote villages but major cities and towns they would be I think many of the households would have PNG connection and there I think the option would be there that you have all the options available to you that you can go for LPG or go for PNG. And even in PNG 10 years down the line we find that there may be competition that you have two three entities just like in electricity you have option.

So those are the kind of scenario but 12 crore is the minimum that we are seeing and going forward if more and more domestic gas is available we don't know that if we are able to find some field that where huge domestic is there if we can bring down the cost. Because India as you know it's a huge demand of chemicals would be there. Now LPG burning is the last I would say the easiest use or the not so efficient use of LPG that it can go into many many different chemicals which India would be needing if you have to develop by 1947.

Those requirements would be there and LPG can be diverted to that chemical use and this methane molecule can be fed to the homes.

Govindraj Ethiraj: Right if you say that let's say 12 crore or 120 million could be piped gas to homes and that's substituting what is currently LPG cylinders. What could be the knock-on effects of that? For example clearly logistically we'll have to transport that many less cylinders or even produce so many cylinders.

Kamal Kishore Chatiwal: What are the other? I think that would be diverted to you see the industrial consumers because again the cost of cylinder is also very high that is there the OMCs are subsidising those cylinders and the requirement would not there but again the use of LPG would anyway be there in the industrial segment. So that would be there.

I mean that is the advantage of pipe gas that we have to lay once and then the logistics goes away you know for the rest of the life. So that is the inherent advantage but a lot of investment is also gone into the bottling and logistic network. So that would I think continue.

Oil Trends

Oil prices fell over five percent on Tuesday after hitting a more than three-year high in the previous session after US President Donald Trump predicted the war in the Middle East could end soon. Brent futures were roughly around $92.30 a barrel on Tuesday afternoon and trading volumes in Brent according to Reuters had dropped to about 284,000 contracts the lowest since February 27th. On Monday oil had hit almost $119 a barrel which was its highest since mid-2022.

Prices also fell after Russian President Vladimir Putin had a call with President Trump and shared proposals according to reports aimed at a quick settlement to the war. To get a sense on where India stood right now in terms of oil demand and supply and more importantly supply to get a sense on where India stood right now in terms of oil supplies or other crude oil supplies I reached out to Nikhil Dubey senior refinery analyst at Kepler the data and analytics firm that tracks physical commodity markets and I began by asking him to give us a sense of the overall supply numbers per day including from West Asia.

INTERVIEW TRANSCRIPT

Nikhil Dubey: If you see that India consumption is of the crude approximately 5.5 thousand barrels per day. Out of this number approximately 5 million barrels India is importing from outside and out of this 5 million barrels 40 percent earlier it was coming through that narrow passage straight up Hormuz but from the past three months this percentage has picked up from 40 to 50 percent because post EU sanction Indian refiners are curtailing the volumes which are coming from the Russia so this percentage has checked up from 40 to 50 percent so total volume which was coming till last month it was 2.5 thousand barrels per day from that passage now from the past 10 days what we are seeing on the Kepler terminal we have not seen that any tanker which was supposed to come India has transited through that passage of course there's a lot of news is there in the media and what we are seeing on the from tanker tracking site that some of the volumes Indian refiners are picking up those are Russian barrels which are near the Armenian sea but those volumes till February they were Russian barrels India was importing around 1 million barrels per day now it has been increased coming up approximately 1.2 thousand barrels per day this is the volume which we are seeing as of now it is supposed to change as Indian refiner will place more orders or more tankers transponder start responding to the Indian port supposed to change but we have already surpassed that volume which it was in February by 200 to 50 kbd now you see some of the barrels India is supposed to receive from the west coast of Saudi Arabia so there is the east-west pipeline the Saudi Arabia which transfers some of the crude from the east coast to the west coast of the Saudi Arabia so that volumes we are seeing somewhere around 600 kbd kbd is thousand thousand barrel per day so if you see the overall math for the Indian crude oil import out of that 2.5 million barrel per days let's say we start we go again at those levels importing of Russian barrels of 2 million barrels which were 2.2 million barrels which were peak during the 2025 when we were importing from or maybe for 500 600 kbd more from the Saudi Arabia west coast still we will be in sort of something around 800 to 1000 barrel per day numbers when you say 800 to 1000 it's in million barrels how much is that 0.8 to 1 million barrel per day out of the five will be still at four you're saying after all of this after all this math so it means that India again has to secure some of the barrels they will be hunting those barrels from some of the west African countries but you see the problem is this is the supply chain in the supply chain if there is a dent at the one point then we will see the effect it may be a lag effect now even if we are securing some of the supplies from the west African countries let's say so those barrels will take time to reach Indian coast and because of the middle east gulf it was very near to India taking four to five days when the barrels are coming from the west western African countries or maybe from the Atlantic region they are taking approximately one month transit time so for that period if India has to run at that processing level of 5.5 million barrel per day they have to consume some of the inventories commercial inventories which the refiners have at their refining site so or there's the other option that they can bring down the operating level so but what we are hearing because government has not put any kind of a restriction so I think that they are running at their own level whatever they were earlier running so it means they have already secured some of the supply which is the whole calculation is telling this as of now.

Govindraj Ethiraj: right and so on a more simple note I mean there is oil available somewhere or the other as you said either it will come from the west coast of Saudi Arabia that's the Saudi Arabian oil or west Africa or I guess North America or South America it's the only issue is price

Nikhil Dubey: I mean would that be a fair point of course the problem is earlier 15 million barrel per day it was passing through so there's only two countries which have a capability to reroute some of the barrels one is the UAE other one is the Saudi Arabia but still this capacity is finite they cannot 15 out of the 15 million barrel they cannot reroute all the volumes from these two pipelines maybe approximately 6 to 7 million barrels they can reroute still on supply demand perspective you see on the whole world there's an acute shortage of approximately 6 to 7 million barrel per day it is coming as of now what I'm seeing today and this is the same thing which is getting reflected on the price there's a shortage of physical oil barrel in the market which we are seeing that it's getting reflected in the market of course I mean India will somehow secure some of the barrels maybe they will not reach at that importing level which they were importing earlier but they are trying their best to get the barrels and one of the good thing is this because India has Indian refineries earlier optimised to processing Russian barrels and they are nearly available to the Indian source so that's one of the buffer kind of a or before you can say sort of inventories in other terms India has.

Govindraj Ethiraj: Right that's useful to hear Nikhil thank you so much for joining us.

Nikhil Dubey: Thank you Govindraj.

India’s iPhone Production

Apple has increased its iPhone production in India by about 53% in the last year and now makes a quarter of its iPhone devices here reflecting its efforts to avoid tariffs on China according to a Bloomberg report.

Apple assembled about 55 million iPhones in India in 2025 up from 36 million a year earlier and it makes about 220 to 230 million iPhones a year globally with India share increasing. Apple has accelerated its expansion of iPhones in India thanks also to the government's production linked incentives which have helped offset some of the structural cost disadvantages that manufacturers face in India including the lack of a China-like robust supply chain and logistics challenges according to that Bloomberg report.