The brokerage noted that among the 4 key states that could hold sway, 3 are under the ruling NDA. The inclusion could potentially reduce natural gas costs by $0.8-0.9 per mmBtu, facilitating quicker adoption and boosting GAIL's transmission and trading volumes in the medium term. Jefferies also anticipated a 2 percent rise in GAIL's consolidated EBITDA, assuming it retains the benefit in the LPG segment. Meanwhile, Gujarat Gas's competitiveness relative to propane could improve by 6 percent, benefiting either volume or margins, and Petronet LNG could experience increased liquefied natural gas (LNG) demand.

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According to Jefferies, media reports indicate a revival of discussions on including natural gas under GST after previous unsuccessful attempts. VAT on natural gas totaled approximately ₹20,000 crore in FY23. The brokerage expects gas companies to pass most of these savings to consumers, aligning with the government's GST objectives. Furthermore, it pointed out that Andhra Pradesh, Gujarat, Uttar Pradesh, and Rajasthan are major beneficiaries of VAT on natural gas, with the first three governed by the NDA could bolster prospects for a breakthrough in discussions.

GAIL: Jefferies expects GAIL to benefit from increased natural gas (NG) competitiveness, driving higher adoption rates and medium-term growth in transmission and trading volumes. The company anticipates gains in its LPG and transmission sectors, planning to pass some savings to consumers. While GST covers tariffs in GAIL's transmission, VAT on NG as fuel remains stranded, estimated at ₹80 crore for FY24, it further said. It added that GAIL offsets VAT in trading by matching purchases and sales, avoiding stranded taxes. LNG used in petrochemicals incurs no VAT. Including NG in GST could boost GAIL's EBITDA by about 2 percent, barring mandates to pass savings to OMCs, estimated Jefferies.

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Gujarat Gas: The brokerage noted that the 6 percent VAT on NG sold in Morbi if subsumed under GST, would improve GUJGA's competitiveness to propane by ₹2.5/kg at current prices. If passed on, this would improve volumes; if retained, it would improve margins, forecasted the brokerage.

Petronet LNG: Jefferies further pointed out that the improved competitiveness of NG, if GAIL passes on the $ 0.8-0.9/mmbtu benefit, should drive volume growth, aiding PLNG's LNG volumes. It expects such benefits to accrue gradually over the medium term.

Overall, the brokerage noted that VAT rates for CNG are currently 0 percent in Delhi, 3 percent in Mumbai, and 5 percent in Gujarat. If CNG is included under GST, CGD players are likely to pass on the benefits to consumers. This could widen the price gap with petrol and diesel, potentially boosting volume growth marginally, it predicted.

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While GAIL has given multibagger returns in the last 1 year, rallying 105 percent, Petronet LNG and Gujarat Gas gained 40 percent and 31 percent, respectively in this period. Meanwhile, in 2024 YTD, GAIL jumped 37.5 percent in 2024 YTD whereas Petronet and Gujarat Gas advanced 45 percent and 36 percent, respectively.