ONGC and Other OMC Stocks in Focus as Government Cuts Royalty Charged on Production of Crude Oil and Gas

As per news report, the government has taken a strategic step to reduce royalty rates on crude oil and natural gas production, providing a significant boost to state-run producers, ONGC and Oil India.  

This move aims to improve the financial viability and economic landscape of India's upstream energy sector. 

Details of the New Royalty Structure 

The newly revised royalty structure sees a reduction in the rates applicable to both onshore and offshore crude oil production.  

For onshore crude, the royalty has been decreased to 10% from 16.66%. Offshore crude production now attracts a royalty of 8%, down from 9.09%.  

Additionally, the royalty rate for natural gas has been lowered to 8% from 10%. These changes have been facilitated through the introduction of a new flat deduction formula, designed to streamline the royalty calculation process. 

Impact of the Government's Decision 

The reduction in royalty rates could result in significant economic benefits for ONGC and Oil India.  

By lowering the costs associated with production, these state-run companies might see an improvement in their financial performance and overall market value.  

This adjustment is timely, as fears of heightened upstream taxation had been a concern in recent times. 

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Potential GST-Linked Savings 

Beyond the direct impact of royalty reductions, these companies might experience additional benefits from possible GST-linked savings.  

This could potentially improve the economics of their projects by a further 18%, adding another layer of financial advantage to this government decision. 

Oil and Natural Gas Share Price Performance  

As of May 11, 2026, at 3:30 PM, Oil and Natural Gas share price on NSE was closed at ₹281.00 up by 0.64% from the previous closing price. 

Conclusion 

The reduction in royalty rates for crude oil and natural gas marks an important policy change by the government. This move is expected to enhance the economic landscape for ONGC and Oil India by lowering production costs and contributing to their financial health. The adjustments come at a crucial time, alleviating previous concerns surrounding higher upstream taxation. 

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