The prices of piped natural gas (PNG) used in household kitchen, compressed natural gas used by motorist among others would come down with the government today approving the new formula for domestically produced gas and placing an upper price cap of $6.5 per mBtu.

The Cabinet Committee on Economic Affairs has approved floor price of $4 per mBtu for APM (Administered Pricing Mechanism) gas, ceiling of $6.5 per mBtu as against current rate of $8.57. Rates will be decided every month instead of current practice of bi-annual revision.

Also, the price range caps will stay for 2 years for nominated fields only and after 2 years, gas price will go up by $0.25 per mBtu. This is departure from the Kirit Parikh panel recommendation of free pricing starting January 2027 for gas produced from these legacy fields and from January 2026 for difficult fields. It had also suggested the ceiling rate for gas from legacy or old fields, called APM gas, will be increased by $0.50 per mmBtu annually before free pricing.

Anurag Thakur, information and broadcasting minister said “the price of such natural gas shall be 10% of the monthly average of Indian Crude Basket and shall be notified on a monthly basis. For the gas produced by ONGC & OIL from their nomination blocks, the Administered Price Mechanism (APM) price shall be subject to a floor and a ceiling. Gas produced from new wells or well interventions in the nomination fields of ONGC & OIL, would be allowed a premium of 20% over the APM price.”

Currently, the pricing guidelines provided for declaration for domestic gas prices for a 6 month period based on the volume weighted prices prevailing at four gas trading hubs - Henry Hub, Albena, National Balancing Point (UK), and Russia for a period of 12 months and a time lag of a quarter.

The earlier guidelines based on 4 gas hubs had a significant time lag and very high volatility, the need for this rationalization and reform was felt. The revised guidelines make prices linked to crude, which is a practice now followed in most industry contracts, is more relevant to our consumption basket and has deeper liquidity in global trading markets, on a real time basis. With the changes now approved, data of Indian Crude basket price from the previous month would form the basis for APM gas price.