Oil & gas stocks rally after govt slashes royalty rates on crude, natural gas

Oil & gas shares jumped after the government reduced effective royalty rates on crude oil and natural gas production, improving the sector?s profitability outlook.

Oil & Natural Gas Corporation (ONGC) rallied 6% to Rs 298.95 while Oil India surged 8.58% to Rs 495.70 on the BSE.

The government has reduced royalty on offshore crude oil production to 8% from 9.09%. Meanwhile, the royalty rate on natural gas production has been lowered to 8% from 10%. Additionally, royalty on onshore crude oil production lowered to 10% from 16.66%.

Royalty is the fee paid by oil and gas producers such as ONGC and Oil India to the government for extracting crude oil and natural gas from the country?s reserves. This fee is typically calculated as a percentage of the market value of the extracted oil or gas.

The reduction in royalty rates is expected to enhance profitability and support higher investment in domestic exploration and production activities.

Maharatna ONGC is the largest crude oil and natural gas company in India, contributing around 71% to Indian domestic production. The Government of India held a 58.89% stake in ONGC as of 31st March 2026.

Oil India a Maharatna CPSE of the Government of India, is engaged in exploration, development, and production of crude oil and natural gas, transportation of crude oil, and production of LPG. The government of India held a 56.66% stake in Oil India as on 31st March 2026.

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