Union Minister of Petroleum and Natural Gas Hardeep Singh Puri on Monday announced rationalisation of royalty rates for India’s upstream sector in the oil and gas industry.
Calling it a “major step towards regulatory clarity,” Puri said that the government has rationalised royalty rates and methodologies for crude oil, natural gas, and casing head condensate — a light liquid hydrocarbon that separates from natural gas during production.
In a post on social media platform X, Puri wrote, “The revised Schedule removes long-standing inconsistencies across regimes to ensure a stable, predictable, and investor-aligned framework for India’s upstream sector.”
In simple words, this means that the Centre has changed the rules for how companies pay the government for extracting natural resources.
Rate Cuts: Who Benefits
Under the revised framework, the effective royalty rate on onshore crude production will decline from 16.66% to 10%, while offshore royalty will reduce from 9.09% to 8%. Royalty on natural gas has also been reduced to 8% from the earlier 10%.
According to a report by global brokerage CLSA, the decision is expected to provide a significant boost to state-run Oil and Natural Gas Corporation (ONGC) and Oil India.
The effective royalty burden for ONGC’s onshore crude production could decline substantially under the revised framework, news agency ANI quoted from CLSA’s report.
What this means:
In the oil and gas industry, the ‘upstream’ sector refers to companies which look for underwater or underground oil and gas fields, drill exploratory wells, and then operate these wells.
For the extraction of every barrel of oil or every cubic meter of natural gas, these companies pay a ‘royalty’ fee to the government. Until now, the royalty was different for different companies and depended on when the contract was signed.
But now, the Union government has standardised these rates by under the Oilfields (Regulation and Development) Amendment Act, 2025 and Petroleum and Natural Gas Rules, which established new methodologies for royalty on crude oil, natural gas, and casing head condensate.
“This decision is a culmination of a decade-long effort to modernize our regulatory landscape by replacing complexity with consistency to fuel India’s energy future,” Puri wrote.
This comes at a time when crude prices have shot up as a result of the West Asia war — a contributing factor to Prime Minister Narendra Modi’s appeal to Indians to conserve petrol and diesel. The announcement can be seen as an attempt to encourage domestic oil production, reduce import dependence and move towards long-term energy security — as India faces economic uncertainties due to the prolonged West Asia war.
