(Financial Express)
The Indian government has announced a 4% increase in the price of natural gas produced from older, legacy fields, known as APM (Administered Price Mechanism), effective April 1st. This price adjustment, detailed in a notification from the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry, will impact the cost of CNG, electricity generation, and fertiliser production.
The APM gas price has been raised to $ 6.75 per million British thermal units (MMBtu), up from $ 6.50 per MMBtu. This gas, primarily produced by state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), is crucial for supplying piped cooking gas to households and manufacturing CNG for vehicles.
First hike in two years
This price hike marks the first increase in APM gas prices in two years and aligns with the government’s established roadmap. In April 2023, the Union Cabinet approved a new pricing formula, linking domestic natural gas prices to 10% of the monthly average import price of crude oil, with a floor of $ 4 per MMBtu and a ceiling of $ 6.5.
Initially, the government had considered annual increases of $ 0.50 per mmBtu until full deregulation in 2027. However, the Cabinet modified this, opting for a two-year freeze followed by annual increases of $ 0.25 per mmBtu.
According to PPAC, the APM gas price for April 2025 should have been $ 7.26 per MMBtu based on the crude oil indexation. However, the government has exercised its ceiling price, raising it to USD 6.75 per MMBtu. This new ceiling will remain in effect until March 2026, with another $ 0.25 per MMBtu increase planned for April 2026.
Price revision
Prior to April 2023, APM gas prices, which cover 70% of domestic gas production, were revised semi-annually based on international gas trading hub prices. The new monthly revision system, subject to floor and ceiling prices, aims to provide more stability.
The price of gas from more challenging fields, such as Reliance Industries’ KG-D6, has been set at $ 10.04 per MMBtu for the six months beginning April 1st, a slight decrease from the previous six-month period’s $ 10.16.
The government’s decision to raise APM gas prices is expected to have ripple effects across various sectors, impacting consumers and industries reliant on natural gas.
