ONGC Shares Jump 5% After Government Cuts Royalty Rates — Why Oil PSU Stocks Are Back In Focus

If you are tracking PSU oil stocks, ONGC has suddenly become the centre of attention on Dalal Street.

Oil & Natural Gas Corporation (ONGC) shares gained momentum on Tuesday after the Indian government slashed royalty rates on crude oil and natural gas output from a few classifications of oilfields. These include those in deepwater and ultra-deepwater blocks. Companies from the upstream oil sector, including ONGC, have seen gains, as a decreased royalty payout might let the firms improve their retained profits and cash flow.

ONGC Share Price Today

The stock was up ₹15.75, or 5.60%, at ₹297.60 on the NSE around 11:51 am. Shares opened at ₹286.90 and touched an intraday high of ₹299.90 with VWAP at ₹295.55.

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Why Is The Market Excited About Royalty Rate Cuts?

The Ministry of Petroleum and Natural Gas notified the revised royalty framework on May 8 as part of broader reforms aimed at making India’s upstream oil and gas sector more stable and investor-friendly.

And the market is responding positively because royalty is essentially a fee paid by oil and gas companies to the government for lifting petroleum and natural gas from India’s reserves.

Think of it like this – if ONGC produces crude oil worth ₹100 and the royalty rate is 10%, ₹10 goes to the government. Reduce the rate, and the company makes more money.

That directly improves profitability.

The government has now reduced:

Onshore crude royalty to 10% from 16.66%

Offshore royalty to 8% from 9.09%

Natural gas royalty to 8% from 10%

For investors, that means lower operational burden for companies involved in domestic exploration and production.

Why Does This Matter Right Now?

Timing is everything in the oil business — and this move comes when global energy markets are already under pressure.

West Asia is tense, and India is feeling the pinch of high fuel prices and fears of disruption of supplies through vital routes like the Strait of Hormuz.

India imports almost 85% of its crude oil requirements. Any increase in global crude prices affects the economy, as this adds to import bills and puts pressure on the rupee and foreign exchange reserves.

This is how the government can boost local production and lessen dependence on imported energy. Prime Minister Narendra Modi also appealed to people to cut down on fuel consumption, use public transport more, avoid non-essential international travel and not buy gold for discretionary purchases for a year to ease pressure on the economy and save forex reserves.

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What Did Hardeep Singh Puri Say on Royalty Rate Cut?

Petroleum Minister Hardeep Singh Puri described the move as a major structural reform for India’s upstream sector.

“This landmark decision will be a major step toward regulatory clarity. Following the historic 2025 amendments to the ORD Act & PNG Rules, the Government has rationalized royalty rates & methodologies for Crude Oil, Natural Gas, and Casing Head Condensate,” the minister posted on social media platform X.

In a big boost for the country’s Upstream Sector, rationalization of royalty under the ORD Act marks a new era for our Oil & Gas regimes by eliminating inconsistencies and driving growth in the upstream sector under the leadership of PM Sh @narendramodi Ji.

This landmark… pic.twitter.com/xb60UNyalH

— Hardeep Singh Puri (@HardeepSPuri) May 11, 2026

According to the minister, the revised framework aims to create a “stable, predictable, and investor-aligned framework” for India’s upstream energy sector.

What Should Investors Watch Now?

The market will now closely monitor whether lower royalty costs translate into stronger earnings visibility for ONGC and other upstream players like Oil India.

Investors are also expected to track:

Global crude oil prices
Government energy policies
Domestic production growth
West Asia geopolitical tensions
Impact on PSU oil sector profitability

For now, Dalal Street appears to be betting that the royalty cuts could improve the long-term economics of India’s upstream energy business.

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(Disclaimer: This article is for informational purposes only and should not be considered investment advice. The views, opinions, and recommendations expressed herein are those of the respective experts. Readers are advised to consult a qualified financial advisor before making any investment decisions.)