Lower taxes, infrastructure status key to reviving exploration investment
India’s upstream oil and gas sector is looking for targeted policy corrections ahead of Budget 2026, as higher taxes and funding constraints continue to strain an already capital-intensive industry.
“In recent years, economic policy has rightly focused on deregulation and tax optimisation,” said Kapil Garg, Founder and Managing Director, Oilmax Energy. “The ORDA Bill was a meaningful step in deregulating the upstream oil and gas sector by improving flexibility and reducing regulatory constraints. However, this progress has been partly offset by the recent GST rationalisation, which increased GST on oilfield equipment and services from 12 to 18 per cent, significantly raising operating costs.”
Garg said there is a strong case for reducing GST on oilfield services to five per cent and for bringing petroleum products under the GST framework in a phased manner.
“Starting with natural gas and aviation turbine fuel would help correct structural tax inefficiencies, strengthen gas-based industries, and improve viability for segments such as coal bed methane and compressed biogas,” he said.
He also called for infrastructure status for the petroleum sector to ease access to long-term capital. “Improved financing access is critical for exploration-led growth,” Garg said, adding that the government could consider setting up a dedicated petroleum financing fund. “A fund supported by resources from the oil cess development fund could play a vital role in enabling public and private participation in new oil and gas exploration.”
“As Budget 2026 approaches, the industry is looking for focused measures that strengthen domestic exploration and create more attractive investment conditions across oil, gas and allied energy segments,” Garg said.
