In November 2022, a committee established by the petroleum and gas ministry to evaluate gas prices provided its suggestions after substantial assessments with numerous stakeholders.
The nation followed lots of rates routines in 2022, depending upon when fields were allocated and under what conditions. ONGC and OIL – producing some 70% of the nation’s gas – were set aside fields. They produced administered cost system (APM) gas, rate of which was repaired based upon the typical cost of 4 global gas fields over 12 mths, with a 3-mth lag.
Utilizing typical rate over 12 mths with a 3-mth lag might weaken the function of relating domestic rate to global rate. A more practical approach would be to utilize rate of a current month with very little lag.
For a couple of years, the APM rate didn’t cover expense of production by ONGC and OIL. The committee advised the cost be repaired on the import rate of Indian crude basket of previous month, and modified on a monthly basis. It likewise advised that a flooring rate of $4.00/ MMBTU and a ceiling cost of $6.50/ MMBTU be repaired, and that the ceiling rate be modified up by $0.50/ MMBTU every year.
The effect of these suggestions appears in the rate of APM gas. In October 2025, the domestic cost was $6.96/ MMBTU, and the ceiling rate, $6.75/ MMBTU. Obviously, PNG and CNG users who get APM gas need to pay a greater cost. It’s more affordable to utilize gas than options such as LPG or diesel. ONGC and OIL make revenues, parts of which accumulate to federal government rather than to customers.
For other gas fields, like high-pressure high-temperature (HPHT) gas fields, the committee suggested giving total rates and marketing liberty by January 1, 2026, through elimination of the ceiling cost. Present market environment provides a perfect chance to get rid of the ceiling cost for gas produced from deep-water, ultra-deep-water and HPHT fields, as global gas rate volatility has actually moderated in line with the committee’s 2022 expectations.
The committee had actually prepared for that international energy crisis and market instability triggered by the Russia-Ukraine dispute would relieve within 3-5 years as brand-new LNG capabilities came online. With worldwide LNG costs now stabilised, this is the correct time to finish the reform by getting rid of the HPHT ceiling and decontroling APM gas rates even ahead of 2026.
All locally produced gas, besides from election blocks, has actually been approved complete prices and marketing flexibility. On the other hand, HPHT fields, which represent about 30% of domestic gas production and produce over 3x gas than other fields with rates liberty, stay based on a various cost ceiling, regardless of being technically complicated and high-cost to establish and run.
Ceiling rate for HPHT fields is figured out on the basis of the most affordable landed rate of alternate fuels – fuel oil, a basket of alternative fuels (coal, naphtha, fuel oil), and LNG, therefore restricting the ceiling to the most affordable of these options at any provided time. As customers in a free enterprise are not most likely to pay more for gas than the expense of alternatives and some premium for benefit of gas usage, the ceiling cost serves little useful function.
Domestic gas from field having complete rates and marketing flexibility has actually regularly been priced listed below imported LNG, and at a considerable discount rate to global LNG rates. This, even throughout severe volatility triggered by the Russia-Ukraine dispute, showing that the marketplace is self-regulating, rendering a government-imposed ceiling cost unneeded.
Decontrolled prices can likewise assist in advancement of a localised rate discovery system, assistance effective usage of gas and development of a competitive domestic gas market. The committee had, for that reason, suggested total liberalisation of gas, besides APM, by January 1, 2026, and of APM from January 1, 2027.
The author is previous member, Planning Commission, and headedthe gas rates reforms committee
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