New Delhi, May 14 -- The Centre's move to lower royalty rates on oil and gas produced in the country is a sharp contrast to its decision to impose a windfall tax during the earlier bout of oil price surge in 2022, when the Russia-Ukraine war began. The West Asia war is causing sharp volatility in oil prices, besides exposing supply-chain vulnerabilities, and seems to have prompted the government to provide greater incentives to encourage domestic production.

The share prices of state-owned producers Oil India Ltd (OIL) and Oil & Natural Gas Corp. Ltd (ONGC) have jumped 14% and 7.5%, respectively, over the last three days after the news.

The royalty rate on onshore fields is down to 12.5% from 20%, while it remains steady at 10% for offs...