India has raised prices of domestically produced natural gas for the first time in two years, indicating that a CNG price hike is around the corner.
Effective April 1, the APM gas price has been raised to $6.75 per million british thermal units from $6.50 per MMBtu, according to a notification of the petroleum planning and analysis wing of the Ministry of Petroleum and Natural Gas.
APM gas is the natural gas produced by Oil and Natural Gas Corp. Ltd. and Oil India Ltd. from fields alloted to them on a nomination basis. This gas is then sold to customers at “administered pricing mechanism”.
This gas is supplied as piped natural gas to household kitchens and turned into compressed natural gas for automobiles.
The hike, a first in two years, is in accordance with the roadmap that was laid out by the government.
In April 2023, the Union Cabinet accepted an expert committee report to price the bulk of domestically produced natural gas at 10% of the monthly average import price of crude oil with a floor of $4 per million British thermal unit and a cap of $6.5.
In doing so, the government had tinkered with the recommendation of a $0.50 per mmBtu annual increase till full deregulation in 2027. The Union Cabinet decided that rates will not change for two years and will be increased by $0.25 annually thereafter.
The hike announced on Monday is in line with that decision.
According to the Petroleum Planning and Analysis Cell, the APM gas price for April 1 to April 30, 2025, should have been $7.26 per MMBtu, going by the 10% indexation to the crude oil price. But this was subject to the ceiling price. The ceiling price has been raised from $6.50 per MMBtu to $6.75. This ceiling will be effective from April 2025 to March 2026 and will rise by another $0.25 per MMBtu in April next year.
Prior to April 2023, the price of gas produced from fields covered under the APM regime, which accounts for 70% of domestic gas production, was determined semi-annually based on formula that benchmarked it to average international prices at four gas trading hubs.
Subsequent to the April 2023 decision, APM gas prices are revised on a monthly basis but are subject to ceiling and floor prices. The ceiling price now is $6.75 per MMBtu.
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.
According to the key recommendation of the committee accepted by the government, the APM formula is now revised and determined as a 10% slope to crude oil prices, but with a floor and ceiling price of $4 per mmBtu and $6.5, respectively.
Two different formulas govern rates paid for gas produced from legacy or old fields of national oil companies like ONGC and OIL and for newer fields lying in difficult-to-tap areas like deepsea.
The rate for difficult fields like KG-D6 of Reliance Industries Ltd. has been set at $10.04 per MMBtu for six months beginning April 1 compared to $10.16 in the preceding six-month period, according to the PPAC.
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