For the first time in two years, the government has reduced the price of natural gas used to produce CNG (for vehicles) and PNG (for cooking).
This change reflects a drop in global benchmark prices. According to a notification from the Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum, the price of natural gas from old fields given to public sector company ONGC without auction has been reduced from $6.75 to $6.41 per million British thermal units (mmBtu).
This is the first price cut since a new pricing formula for such gas was introduced in April 2023.
The reduction is expected to benefit city gas distributors like Indraprastha Gas Ltd, Mahanagar Gas Ltd, and Adani-Total Gas Ltd, which were facing pressure from increasing input costs.
This type of gas, known as APM gas, is produced by state-owned companies like ONGC and Oil India Limited from oil and gas fields allocated to them on a nomination basis.
It is used to make piped gas (PNG) for homes, CNG for vehicles, as well as for fertilizer production and power generation.
What Is the New Pricing Formula?
In April 2023, the Union Cabinet approved a report recommending that the price of APM gas be fixed monthly at 10% of the average import price of crude oil.
This formula set a price cap between $4 and $6.5 per mmBtu for the first two years. After that, the cap would increase by $0.25 every year. Based on this, the maximum allowed price became $6.75 per mmBtu in April 2025.
Though gas prices under the formula ranged between $7.29 and $9.12 per mmBtu in the first two years, the price cap ensured that customers were charged no more than $6.50.
In April, the calculated price was $7.26, but the rate charged was $6.75 due to the cap. Similarly, in May, although the calculated price rose to $6.93, the cap kept the price at $6.75.
Drop in Global Oil Prices
In May, the average price of crude oil imported by India fell to about $64 per barrel due to uncertain demand in the global market.
Based on this benchmark, the price of APM gas on a gross calorific value (GCV) basis dropped to $6.41 per mmBtu.
PPAC stated that this new rate of $6.41 per mmBtu would apply from June 1 to June 30, 2025, for gas produced by ONGC and Oil India from their allocated fields.
The decline in the benchmark rate also means that the gas produced from new wells in APM fields by ONGC will see a price cut as well.
