New Delhi: The price of natural gas used for producing CNG for vehicles and cooking gas was raised 5 per cent for July, following a surge in oil prices triggered by Israel’s military strike on Iran.
As part of the monthly revision, the price of natural gas from legacy fields operated by state-owned companies was increased to $6.75 per million British thermal units, up from $6.41, according to a notification from the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry.
$6.75 per mmBtu is the ceiling price for gas from legacy fields, known as APM gas, which accounts for roughly half the input used in producing CNG. It is also utilised in power generation, fertiliser production, and piped directly to households for cooking.
A higher input gas price would squeeze margins of city gas retailers. City gas retailers may choose to hike CNG prices if the increase pinches them.
APM gas price is revised on the first of every month, set at 10 per cent of the average import price of crude oil in the preceding month. But this price is subject to a floor or minimum rate and a ceiling or maximum rate. The ceiling price for 2025-26 is $6.75.
According to PPAC, the price of APM gas for the period from July 1 to July 31, 2025, was calculated at $6.89 per mmBtu on a gross calorific value (GCV) basis. However, the rate will be capped at the ceiling price of $6.75.
In the last revision effective June 1, the APM gas price was cut for the first time in two years, dropping to $6.41 per mmBtu from $6.75 in the previous month.
This was the first reduction since the government in April 2023 implemented a new formula to price APM gas.
In April 2023, the Union Cabinet accepted an expert committee report to price on a monthly basis the gas from legacy fields, called APM gas, at 10 per cent of monthly average import price of crude oil with a floor of $4 and a cap of $6.5 per mmBtu.
The cap price was to remain unchanged for two years and rise by $0.25 annually thereafter. In line with this, the cap rose to $6.75 per mmBtu in April 2025.
In the first two years, the price of gas using this formula ranged between $7.29 per mmBtu and $9.12 but the cap ensured that the rate were fixed at $6.50 per mmBtu.
In April, the price according to this formula came to $7.26 per mmBtu but the final rate was $6.75 in line with higher cap.
In May, the price came to $6.93 but was capped to $6.75 for consumers.
Since there has been a fall in international oil prices in view of uncertain demand outlook, the Indian basket of crude oil averaged around $64 in May. Using this as a benchmark, the APM gas price came to $6.41 per mmBtu on GCV basis, according to PPAC.
But oil prices rose after Israel attacked Iran last month. That rise has translated into higher APM gas price as well.
The rise in benchmark also means that the price of gas that ONGC produced from new wells in the APM fields would also go up.
The government had allowed ONGC to charge 12 per cent of the oil price for the gas coming from new wells it drills. The higher price was to make up for the capex incurred in drilling new wells.
As much as 5 million standard cubic meters per day of gas — or a 10th of all gas produced by ONGC — comes from new wells, according to industry sources.
APM gas is one produced by state-owned firms Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) from fields that were given to them on nomination basis. This gas is the input that is used in the cooking gas piped to household kitchens as well as turned into CNG for running automobiles, making fertilisers and producing electricity.
Prior to April 2023, the price of gas produced from fields covered under the Administered Price Mechanism (APM) regime — which accounts for 70 per cent of domestic gas production — was determined semi-annually based on a formula that benchmarked it to average international prices at four gas trading hubs.
APM gas is provided to city gas distributors for supply to CNG and residential PNG segments, which together account for 60 per cent of their sales volume.
Subsequent to the April 2023 decision, APM gas prices are revised on a monthly basis but subject to ceiling and floor price. The ceiling price now is $6.75 per MMBtu and will rise by another $0.25 per mmBtu in April next year.
APM gas prices had seen wide fluctuations in the years running up to the April 2023 decision. From a low of $1.79 per mmBtu in 2021, to a high of $8.57 for the six-month period ending March 2023.
The rate for difficult fields like KG-D6 of Reliance Industries has been set at $10.04 per MMBtu for six months beginning April 1 as compared to $10.16 in the preceding six months period, according to PPAC. PTI
