The central government is considering recovering royalties on natural gas that oil and gas producers flare from domestic fields, amid concerns that fuel equivalent to more than 800MW of electricity generation is being wasted every day even as India imports half the gas it consumes, people familiar with the matter said.
The move could revive a long-running dispute over whether flaring is “avoidable” and therefore subject to royalty payments under existing regulations. While rules framed by the Directorate General of Hydrocarbons (DGH) require operators to pay royalty on avoidable flaring, companies have traditionally argued that much of the gas burnt during production falls under the category of “unavoidable” losses and is exempt under law, the people said, requesting anonymity.
The issue has gained significance as India grapples with energy supply pressures following the conflict in West Asia and Prime Minister Narendra Modi’s recent appeal to conserve energy and reduce dependence on imports.
According to the World Bank’s satellite- based estimates, Indian fields flared 1,484.33 million cubic metres of gas in 2024, equivalent to about 4.07 million metric standard cubic metres per day (MMSCMD). Sector estimates suggest that volume could generate more than 800 MW of electricity.
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) maintained that no royalty was payable on flared gas because such flaring was unavoidable and therefore covered by 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 shortcomings in ONGC’s Mumbai High field that resulted in the flaring of high-pressure associated gas worth ₹816.08 crore between 2012-13 and 2019-20.
During his deposition before the parliamentary panel, then petroleum secretary Pankaj Jain said royalty should be recovered as a disincentive against flaring. According to the committee report, he stated: “If they have not paid, then the issue is that the amount is payable. If they have not paid, we will recover that amount.”
India’s dependence on imported gas has added urgency to the issue. According to data from the Petroleum Planning and Analysis Cell (PPAC), the country consumed 68,542 million metric standard cubic metres (MMSCM) of natural gas in 2025-26, of which nearly half came from imports. India imported 34,216 MMSCM of liquefied natural gas worth $13.3 billion during the year.
PPAC data also show that while gross domestic gas production stood at 34,776 MMSCM in 2025-26, 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 flaring is technically possible but often requires substantial investment in infrastructure and gas evacuation systems.
“Flaring can be minimized but it would involve huge costs in developing appropriate technology and infrastructure,” one expert said on condition of anonymity. He argued that current gas pricing policies often make recovery of such gas commercially unattractive.
Another sector expert said incentives could be more effective than stricter regulation in reducing flaring. “Although some efforts have been made recently to minimize flaring to 0.5% of total monthly output in a field, monitoring the same is still difficult. Instead of regulatory pressure, financial incentivisation would become successful in saving precious natural resources, especially in the light of the ongoing energy crisis because of 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 ranked 19th among the world’s top 30 gas-flaring countries in 2024. The report noted that nine countries — Russia, Iran, Iraq, the US, Venezuela, Algeria, Nigeria, Libya and Mexico — accounted for 76% of global flare volumes despite producing less than half of the world’s oil.
