The Indian government has raised the pricing ceiling for natural gas produced from challenging deepwater, ultra-deepwater, and high-pressure, high-temperature fields to $9.89 per million British thermal units (MMBtu) for the six-month period spanning October 1, 2026, to March 31, 2027. The upward revision, notified by the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum and Natural Gas, increases the cap from the previous level of $8.90 per MMBtu.
While gas extracted from these complex offshore reserves enjoys marketing and pricing freedom under national energy policy, it remains strictly subject to this government-notified ceiling. The adjustment provides critical economic relief to upstream operators developing technically demanding offshore resources where exploration and extraction costs substantially exceed those of mature onshore fields. Key beneficiaries include Reliance Industries and its partner BP, which operate the prominent KG-D6 block situated in the Krishna-Godavari basin.
Reliance Industries and its partner BP produce gas from the KG-D6 block in the Krishna-Godavari basin, which is one of India's key deepwater gas-producing areas. For New Well Gas Pricing Incentive, ONGC and OIL are allowed a 10% premium for output from new wells in nomination blocks, creating an effective price of up to $7.70 per MMBtu.
In parallel with the deepwater revision, the government has maintained the Administered Price Mechanism (APM) gas price cap at $7 per MMBtu for legacy and nomination fields operated by state-run entities Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL). Although PPAC notified a baseline APM price of $11.22 per MMBtu for October, the actual realization for these older fields remains capped at the $7 threshold to insulate priority domestic sectors.
The ceiling was initially fixed at USD 6.50 per MMBtu in April 2023 and was subsequently raised to USD 6.75 per MMBtu from April 2025 and to USD 7 in April this year. PPAC notified a baseline APM price of $11.22 per MMBtu for October 2026, but actual realization remains capped at $7.00 per MMBtu for state-run nomination fields.
APM gas serves as a vital raw material for priority segments including city gas distribution networks supplying compressed natural gas (CNG) and piped natural gas (PNG), fertilizer manufacturing, and electrical power generation. Maintaining the legacy cap protects these downstream industries from extreme feedstock volatility.
To encourage state-owned producers to invest in new reserve discovery and bring additional production streams online, the government permits a 10% premium over the prevailing APM gas price for output originating from new wells within nomination blocks, subject to the applicable ceiling.
Given that the baseline APM price is capped at $7 per MMBtu for October, the effective ceiling for gas produced from these new wells reaches up to $7.70 per MMBtu. This regulatory distinction separates older depleting assets from fresh investments.
India operates a dual pricing architecture for domestic natural gas, bifurcating legacy fields from difficult frontier discoveries. The framework for legacy fields was overhauled in April 2023, tying valuations to 10% of the monthly average crude oil import price within an established floor and ceiling structure.
The legacy ceiling was initially fixed at $6.50 per MMBtu, frozen for two years, and subsequently adjusted upward by $0.25 annually, moving to $6.75 in April 2025 and reaching $7 in April 2026. This mechanical adjustment replaced a volatile historical regime that saw benchmark-linked prices fluctuate between $1.79 in 2021 and $8.57 in early 2023.
