The Ministry of Petroleum and Natural Gas has raised the maximum price ceiling for natural gas produced from deep-water, ultra-deep-water and high-pressure-high-temperature (HP-HT) fields to USD 9.89 per million British thermal units (MMBtu), up from the earlier ceiling of USD 8.90 per MMBtu.
In rupee terms, the ceiling has increased from around ₹930 to approximately ₹1,030 per MMBtu. The revised price will remain applicable from October 1, 2026, to March 31, 2027.
The revised pricing framework covers gas produced from offshore fields where extraction and production costs are considerably higher than those of conventional gas fields. Major offshore production areas, including KG-D6 in the Krishna-Godavari Basin, fall under this pricing mechanism.
The increase in the ceiling is expected to provide producers with greater pricing flexibility and improve the commercial viability of extracting natural gas from technically challenging offshore fields.
Possible impact on CNG, PNG and fertiliser sector
Natural gas is a key input for several important sectors of the economy. It is supplied as compressed natural gas (CNG) for vehicles and as piped natural gas (PNG) to households through city gas distribution networks.
Gas is also a major feedstock for the fertiliser industry and is used as a fuel for power generation.
The increase in the domestic gas price ceiling could therefore affect the input costs of these sectors. However, the revised ceiling does not necessarily mean an immediate or proportionate increase in retail prices.
The eventual impact on CNG and PNG prices will depend on the actual price at which gas is supplied to downstream consumers, as well as how city gas distributors absorb or pass on the additional cost.
Similarly, the impact on fertiliser and power generation costs will depend on the extent to which higher gas prices are reflected in their overall operating expenses.
What the price hike means
The government’s decision is aimed at supporting production from difficult offshore fields while maintaining a regulated pricing framework. For consumers, the effect on CNG, PNG and other gas-dependent products will depend on market conditions, supply costs and the pricing decisions of downstream companies.
In short, the higher ceiling gives offshore gas producers more pricing flexibility, but it does not automatically translate into an immediate rise in consumer prices.