Centre hikes price ceiling for deep-water gas; CNG, PNG, fertiliser costs may be impacted

The Ministry of Petroleum and Natural Gas has increased the maximum price at which natural gas from deep-water, ultra-deep-water and high-pressure-high-temperature (HP-HT) fields can be sold to USD 9.89 per million British thermal units (MMBtu) from the earlier ceiling of USD 8.90 per MMBtu.

In rupee terms, the ceiling has increased from around Rs 930 to approximately Rs 1,030 per MMBtu. The revised price will be applicable from October 1, 2026, to March 31, 2027.

The pricing framework applies to gas produced from offshore fields where extraction costs are significantly higher than those associated with conventional fields. Production blocks such as KG-D6 in the Krishna-Godavari basin fall under this pricing mechanism.

The higher ceiling is expected to provide greater pricing flexibility and improve the economics for companies producing natural gas from technically challenging offshore areas.

Natural gas is used across several key sectors of the economy. It is supplied as compressed natural gas (CNG) for vehicles and piped natural gas (PNG) for households through city gas distribution networks. It is also a major feedstock for fertiliser production and is used as a fuel for power generation.

The revision in the domestic gas price ceiling could therefore have implications for the cost structure of these sectors. However, the increase in the ceiling does not automatically translate into an immediate or proportionate rise in retail prices for consumers.

The eventual impact on CNG and PNG prices will depend on the prices at which gas is actually supplied, as well as how city gas distributors and other downstream consumers absorb or pass on any increase in input costs.