The government has approved a 20 per cent premium for natural gas produced from new wells of state-owned Oil and Natural Gas Corp (ONGC), the company said on Monday.

At present, two pricing regimes govern most of the domestic production of natural gas.

Gas produced from legacy fields, or fields given to ONGC and Oil India Ltd on a nomination basis, is priced at 10 per cent of the prevailing price of crude oil that India imports.

This price, subject to a cap of $6.5 per million British thermal unit, is regulated or APM (administered price mechanism) gs.

So, at the current Indian basket price of $77 per barrel, the APM price for gas produced from ONGC's Mumbai High and Bassein fields in the western offshore should come to $7.7 per mBtu, but it is paid the cap price of $6.5.

Gas produced from difficult fields, such as those in the deep sea, is governed by a different formula and paid a higher rate because of the higher cost involved in its production.

The price from difficult fields for six months starting April 1 is $9.87 per mBtu.

When these formulas were adopted last year, it was decided that gas produced from new wells, even in legacy fields, would be paid a premium of 20 per cent over the APM price. Now, that has been notified.