India’s recent overhaul of oil and gas royalty “historic” reform is little more than a short-term fiscal adjustment benefiting state-owned producers rather than a genuine transformation of the upstream energy sector, said founder and managing director of venture capital firm Navam Capital, Rajeev Mantri. 

In a detailed article on X, published after the Centre announced the royalty rationalisation on May 11, Mantri said the policy primarily improves cash flows for public sector giants such as Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), whose stocks rallied 6-8 per cent following the announcement. “This isn’t a ‘historic’ or ‘landmark’ reform,” he wrote. “It is a fiscal adjustment that improves PSU cash flows on existing mature fields.”

“Genuinely historic reforms in India - the 1991 industrial delicensing and trade liberalization, the 1999 telecom policy, the 2016 insolvency and bankruptcy law - were not announced as historic. They were called historic afterward, by people experiencing the transformation brought by them and counting the capital that came in on the back of market mechanisms being strengthened. When a ministry has to label a royalty schedule "landmark" on day one, it is one hell of a tell,” he argued.

According to Mantri, the larger concern is the widening mismatch between India’s rapidly rising energy demand and stagnant domestic hydrocarbon production. He argued that India is aggressively expanding airports, ports, aviation capacity, manufacturing and middle-class consumption – all of which will sharply increase oil and gas demand over the coming decade.

“India is building airports, ports, factories, and a consuming middle class at unprecedented speed,” he wrote. “It is doing so on top of a hydrocarbon supply base that has shrunk every year for over a decade.”

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He also pointed to India’s expanding aviation sector, where airlines including IndiGo and Air India have collectively ordered nearly 1,500 aircraft, alongside major port developments under Sagarmala and Maritime India Vision 2030. At the same time, manufacturing incentives under the government’s PLI schemes are expected to significantly raise industrial energy consumption.

Citing projections from the International Energy Agency, Mantri said that India is expected to become the world’s largest source of incremental oil demand over the next two decades.

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However, domestic supply trends are moving in the opposite direction. India imports about 85 per cent of its crude oil requirements and around half of its natural gas. Domestic crude production, the article notes, has declined for 11 consecutive years and is down roughly 22 per cent since FY15.

Mantri argued that existing reforms, including the Hydrocarbon Exploration and Licensing Policy (HELP) introduced in 2016, failed to meaningfully attract private investment into exploration and production. He claimed the current regulatory structure creates conflicts of interest because the government simultaneously acts as policymaker, regulator, owner of major producers and pricing authority.

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Drawing parallels with India’s telecom revolution under former Prime Minister Atal Bihari Vajpayee, Mantri argued that genuine reform would require deep institutional restructuring similar to the New Telecom Policy of 1999, which unleashed private investment and rapidly expanded access.

“What credible reform produces,” he wrote, “is explosive supply growth, massive private capital formation, and a price curve that makes the service universally accessible.”

He also cited the ongoing dispute involving Reliance Industries and BP over the KG-D6 gas block as evidence of why global energy majors remain wary of investing in India’s upstream sector.
 

Published on: May 15, 2026 11:39 AM IST