Venture capitalist Rajeev Mantri has sharply criticized India's recent oil and gas royalty rationalization, dismissing it as a mere "fiscal adjustment" rather than a truly transformative reform for the upstream energy sector. Mantri, the founder and managing director of Navam Capital, argued that the policy primarily boosts cash flows for public sector undertakings (PSUs) like ONGC and Oil India Limited (OIL) on existing mature fields, rather than fostering new private investment or significant supply growth.
"Historic" Label Questioned
Mantri highlighted that genuinely historic reforms in India—such as the 1991 industrial delicensing, the 1999 telecom policy, or the 2016 insolvency and bankruptcy law—were recognized as historic after their transformative impact became evident, not by official announcements on day one. He suggested that labeling the royalty schedule as "landmark" upfront indicates a lack of substantive change.
Mismatch: Demand vs. Domestic Supply
A central concern for Mantri is the growing disparity between India's escalating energy demand and its continuously stagnant domestic hydrocarbon production. He pointed to the nation's rapid expansion in infrastructure, manufacturing, and middle-class consumption, which will inevitably lead to a sharp increase in oil and gas requirements over the coming decade. India is actively developing numerous airports, ports, and factories, alongside a burgeoning aviation sector with orders for nearly 1,500 new aircraft, all requiring substantial energy input.
However, domestic crude oil production has declined for eleven consecutive years, falling approximately 22 percent since FY15. India currently imports about 85 percent of its crude oil and roughly half of its natural gas needs, a dependency exacerbated by geopolitical crises. Projections from the International Energy Agency indicate India is set to become the world’s largest source of incremental oil demand in the next two decades.
Call for Genuine India Oil and Gas Reform
Mantri contended that existing policies, including the 2016 Hydrocarbon Exploration and Licensing Policy (HELP), have largely failed to attract meaningful private investment into exploration and production. He attributed this failure partly to a regulatory structure where the government simultaneously acts as policymaker, regulator, owner of major producers, and pricing authority, creating inherent conflicts of interest.
Drawing parallels with the 1999 New Telecom Policy, which catalyzed massive private investment and explosive growth in the telecom sector, Mantri argued that genuine India oil and gas reform would necessitate deep institutional restructuring. Such an overhaul, he believes, would lead to significant private capital formation, robust supply growth, and more accessible energy prices. He cited ongoing disputes, such as the one involving Reliance Industries and BP over the KG-D6 gas block, as evidence of why global energy majors remain hesitant to invest in India's upstream sector, underscoring the urgent need for a comprehensive policy overhaul.