The Union Cabinet imposed a cap or ceiling price on Thursday, a day after revising the domestic gas pricing guidelines, which can help to reduce CNG and piped cooking gas prices (PNG) by up to 10%. The move may provide some relief to consumers, as CNG and PNG rates have risen by 80% in recent months due to a sudden spike in international markets. Union Minister for Information and Broadcasting Anurag Thakur addressed a press conference after the cabinet meeting and said monthly notifications will be implemented to ensure stable pricing in the regime and offer adequate protection to producers against adverse market fluctuations. What has changed in the pricing method? Earlier, the prices of natural gas produced from legacy or old fields, also known as APM gas was priced based on the benchmark rates of gas in surplus nations like the US, Canada, and Russia. Now, the Cabinet has decided to index the APM prices to the price of imported crude oil. APM will be priced at 10% of the price of a basket of crude oil that India imports. The rate is, however, capped at $6.5 per million British thermal units, with a floor price of $4 per mmBtu Currently, the Indian basket of crude oil is priced at $85 per barrel, so the ceiling is helping to cut the prices from $8.5 (10% of crude oil) to $6.5 and this will lead to an overall reduction in prices of domestic PNG and CNG. The minister further informed that these caps and floor prices will remain the same for two years and will increase by $0.25 per mm Btu per year thereafter. Expected reductions in CNG and PNG prices: The new pricing method will be enforced from Saturday (8 April) and following the decision the prices of CNG in Delhi are expected to reduce from ₹79.56 per kg to ₹73.59, while in Mumbai the CNG is expected to cost ₹79 per kg instead of ₹87. The prices of Piped Natural Gas (PNG) are also expected to reduce with the new indexation method and in Delhi, a cut from ₹53.59 per thousand cubic meters to ₹47.59 is expected while in Mumbai the consumers will have to pay ₹49 per scm instead of ₹54, after the enforcement of new pricing regime. Why these changes? Last year, the government set up a committee headed by Kirit Parikh to examine gas prices and determine a pricing formula that takes into account the interests of both local consumers and producers. The government's aim is to transition to a gas-based economy. The committee recommended a price range for current production from legacy or old fields, which account for about two-thirds of the country's total gas production and are currently regulated under the administered price mechanism (APM). However, the pricing formula for difficult fields was not modified. These legacy or old fields will remain under the APM until the complete deregulation of prices is implemented in 2027.