The central government is considering charging royalties on natural gas produced by oil and gas producers from domestic fields, people familiar with the matter said, amid concerns that the fuel equivalent to more than 800 megawatts of power generation is being wasted every day, while India imports half the gas it consumes.
The move could revive a long-running dispute over whether the flare-up was “avoidable” and therefore subject to royalty payments under existing rules. While rules made by the Directorate General of Hydrocarbons (DGH) require operators to pay royalties on avoidable flaring, companies have traditionally argued that most of the gas burned during production falls under the category of “unavoidable” losses and is exempt under the law, the people said, requesting anonymity.
India is grappling with energy supply pressure following conflicts in West Asia and the issue has assumed significance due to Prime Minister Narendra Modi’s recent appeal for energy conservation and reducing dependence on imports.
According to satellite-based projections from the World Bank, 1,484.33 million cubic meters of gas was released from Indian fields in 2024, equivalent to about 4.07 million metric standard cubic meters per day (mmscmd). Sector estimates suggest the volume could generate more than 800 MW of power.
The debate over royalty payments has already come under parliamentary scrutiny. A report of Parliament’s Committee on Public Undertakings tabled on December 11, 2025, recorded that state-run Oil and Natural Gas Corporation (ONGC) said no royalty was payable on flared gas as such flaring was unavoidable and therefore covered under Section 6A (3) of the Oil Fields (Regulation and Development) Act, 1948.
The committee examined the issue after the Comptroller and Auditor General (CAG) in Report No. 14 of 2021 highlighted operational deficiencies in ONGC’s Mumbai High field, which resulted in high pressure-linked gas prices. ₹816.08 crore between 2012-13 and 2019-20.
During his statement before the parliamentary panel, then Petroleum Secretary Pankaj Jain said royalty should be recovered against flaring. According to the committee report, he said: “If they have not paid, the issue is that the amount is due. If they have not paid, we will recover that amount.”
India’s dependence on imported gas has increased the urgency of the issue. According to Petroleum Planning and Analysis Cell (PPAC) data, the country consumed 68,542 million metric standard cubic meters (MMSCM) of natural gas in 2025-26, of which almost half came from imports. India imported 34,216 MMSCM of liquefied natural gas worth $13.3 billion during the year.
The PPAC data also shows that while gross domestic gas production in 2025-26 was 34,776 MMSCM, net production after flaring and other losses was 34,326 MMSCM.
The petroleum ministry, DGH, ONGC, Oil India Ltd, Vedanta Oil & Gas and Reliance Industries did not respond to emailed queries on the issue.
Industry experts said reducing flares is technically possible but often requires substantial investment in infrastructure and gas extraction systems.
“Flaring can be reduced but developing appropriate technology and infrastructure will come at huge costs,” said one expert, speaking on condition of anonymity. He argued that current gas pricing policies often make such gas recovery commercially unattractive.
Another expert in the field said incentives could be more effective than strict regulation in reducing flare-ups. “Although some efforts have recently been made to reduce 0.5% of total monthly production in a region, this is still difficult to monitor. Financial incentives, rather than regulatory pressure, would be successful in saving precious natural resources, especially in light of the ongoing energy crisis caused by the war in West Asia,” he said.
Beyond energy security concerns, flaring contributes to greenhouse gas emissions and global warming. According to the World Bank’s Global Gas Flaring Tracker, India ranks 19th among the top 30 gas flaring countries in the world in 2024. The report said nine countries – Russia, Iran, Iraq, the US, Venezuela, Algeria, Nigeria, Libya and Mexico – account for 76% of global flare volumes despite producing less than half the world’s oil.
