**Executive Summary**
This document is the response to Unstarred Question No. 157 in Lok Sabha, to be answered on January 29, 2026. The question was raised by Shri Rao Rajendra Singh regarding oilfield regulation and state royalties, specifically addressing amendments to the Oilfields Regulation and Development Act, subsidies, and revenue sharing mechanisms. The Minister of State in the Ministry of Petroleum and Natural Gas, Shri Suresh Gopi, provides the answers.
**Key Points / Main Content**
* **Oilfields Regulation and Development Act, 2025 and PNG Rules:**
* The Union Government has enacted the Oilfields Regulation and Development (Amendment) Act, 2025, under Article 246 of the Constitution of India, read with Entry 53 of List I (Union List).
* The Government has notified the Petroleum and Natural Gas Rules, 2025 (PNG Rules).
* Under Rule 6(1)(b) of the PNG Rules, State Governments shall grant petroleum leases with prior recommendation from the Central Government in the prescribed format.
* **Subsidies and Royalty Payments:**
* The government does not provide subsidies for the production of crude oil or gas.
* Royalty on production of mineral oil is paid per the statutory provisions of the ORD Act, based on the wellhead price.
* Certain expenditures for the production of mineral oils from the well are deductible from the sale price to arrive at the wellhead price, as per a Gazette Notification dated 20.08.2007.
* **Royalty Distribution:**
* The entire royalty on production from on-land areas is paid to the respective State Governments.
* The royalty on mineral oils produced from offshore areas is paid to the Central Government.
* The existing royalty determination mechanism is statutory and uniformly applicable across all States.
**Impact Analysis**
**State Governments**
* **Impact:** State Governments must grant petroleum leases with the prior recommendation of the Central Government. They receive royalties from on-land oil production.
* **Action Required:** Comply with Rule 6(1)(b) of the PNG Rules when granting petroleum leases.
**Oil and Natural Gas Corporations / Oil India Limited**
* **Impact:** No longer receive subsidies for production of crude oil or gas. They are affected by regulations governing royalty payments based on the wellhead price of mineral oil and allowable deductions.
* **Action Required:** Adhere to royalty payment structures as defined by the ORD Act, PNG Rules, and relevant notifications.
**Central Government**
* **Impact:** Receives royalty payments from offshore oil production.
* **Action Required:** Ensure proper enforcement of the Petroleum and Natural Gas Rules, 2025.
Key Entities Referenced
Oilfields Regulation and Development (Amendment) Act, 2025: Law regulating oilfields and state government claims over petroleum leases.
Petroleum and Natural Gas Rules, 2025 (PNG Rules): Rules governing petroleum leases.
Rajasthan: Oil-producing state where companies operate.
Ministry of Petroleum and Natural Gas: The central ministry responsible for petroleum policies.
ORD Act: Statutory provisions related to royalty payments.
LOK SABHA
UNSTARRED QUESTION NO 157
TO BE ANSWERED ON 29th January, 2026
Oilfield Regulation and State Royalties
157. Shri Rao Rajendra Singh:
पेट(cid:332)ोिलयम और (cid:366)ाकृ ितक गैस मं(cid:361)ी
Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:
(a) whether the amended Oilfields Regulation and Development Act, 2025 provides that the
regulation of oilfields falls under Entry 53 of the Union List and that the State Governments
have no claim over petroleum leases, if so, the details thereof;
(b) whether the Union Government provides subsidies such as the Post Well Head Cost
(PWHC) and Fixed Allowance to companies like Oil and Natural Gas Corporation and Oil
India Limited operating in oil-producing districts of Rajasthan, including Barmer and Sri
Ganganagar, if so, the details thereof;
(c) whether these allowances are deducted from the basic sale price before calculating
royaltiespayable to the State Governments, if so, the details thereof; and
(d) whether the Government proposes to review this mechanism to ensure a fairer share of
revenue for oil-producing States, if so, the details thereof?
ANSWER
पेट(cid:332)ोिलयम और (cid:366)ाकृ ितक गैस मं(cid:361)ालय म(cid:336) रा(cid:475) मं(cid:361)ी
((cid:373)ी सुरेश गोपी)
MINISTER OF STATE IN THE MINISTRY OF PETROLEUM AND NATURAL GAS
(SHRI SURESH GOPI)
(a) Yes, the Union Government has enacted the Oilfields Regulation and Development
(Amendment) Act, 2025 pursuant to powers conferred under Article 246 of the Constitution
of India read with the Entry 53 of List I (Union List) of the Seventh Schedule.Subsequently,
the Government hasnotified the Petroleum and Natural Gas Rules, 2025 (PNG Rules). Under
Rule 6(1)(b) of the PNG Rules, the State Government shall grant petroleum lease withprior
recommendation of the Central Government in the format prescribed in the Schedule-II of the
PNG Rules.
(b) to (d) The Government does not provide subsidy for production of crude oil or gas.
Royalty on production of mineral oil is paid in terms of statutory provisions of ORD Act.
Royalty is payable on the wellhead price of the mineral oil. As per Gazette Notification dated
20.08.2007, certain expenditure for production of mineral oils from the well is allowed to be
deducted from the sale price to arrive at wellhead price.
In terms of the provisions of the ORD Act and the Petroleum and Natural Gas Rules, 2025,
the entire royalty on production from on-land areas is paid to the respective State
Governments and the royalty on mineral oils produced from offshore areas is paid to the
Central Government.
The existing royalty determination mechanism is statutory and uniformly applicable across
contractual regimes to all States.
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