India has unveiled a bold initiative to fund half the cost of deepwater exploration wells under the ₹84,084 crore Samudra Manthan scheme. The government plans to recover its investment from successful oil or gas discoveries, but will absorb the loss if explorations fail.
The scheme's operational guidelines, recently released, outline a recovery clause where repayment begins after seven years of commercial production or once operators recover 50% of their exploration and development costs. Repayments will be made in annual installments without inflation adjustments.
The initiative aims to support 60 wells in deepwater and ultra-deepwater areas. Of these, 56 exploratory wells will receive up to 50% of actual costs, capped at ₹675 crore per well. Additionally, four stratigraphic wells, which study rock layers, will receive up to 100% funding, capped at ₹1,350 crore each. Only state-run firms or consortia they lead are eligible to apply.
Funding is milestone-based: 40% is disbursed when drilling reaches 40% of the approved depth, and the remaining 60% upon completion and approval of the well report. The total support for wells could reach ₹43,200 crore, about half of the scheme's total outlay.
Eligibility is restricted to blocks awarded under the Revenue Sharing Contract regime since 2016. Production-sharing and coal-bed methane blocks from earlier rounds are excluded unless otherwise notified. Only exploration wells qualify for the grant, excluding development wells and sidetrack well costs.
The scheme is part of India's strategy to reduce its dependence on imported hydrocarbons. It will run through FY2030-31, with FY2026-27 as a preparatory year and spending from FY2027-28 to FY2030-31 as Phase I. Prime Minister Narendra Modi announced the initiative during his Independence Day speech in 2025, emphasizing the mission to discover offshore oil and gas reserves.
Petroleum Secretary Neeraj Mittal described the scheme as the most ambitious upstream oil and gas intervention in recent times, potentially adding significant reserves to India's oil and gas resources. The government aims to ease the financial burden of exploration while retaining a stake in successful projects.
Operators must cover costs beyond the support caps and risk losing eligibility if they fail to meet work commitments or opt to pay penalties instead of completing drilling.
Infrastructure and Manufacturing Support
A second track of the scheme offers viability gap funding for shared infrastructure, facilitating the integration of small or stranded discoveries into a single production system. This includes subsea manifolds, trunk pipelines, central processing platforms, and shared floating production units. Initial support is planned for the Mahanadi basin, with token funding for Kutch.
These basins have stranded or commercially unviable discoveries due to the high cost of pipelines and processing facilities. The funding supports shared infrastructure for multiple field developments, owned and built by a joint venture or special-purpose vehicle of participating operators. Rivals must agree on equity, ownership, and capacity commitments before construction begins. The hub must provide fair and non-discriminatory access under the PNG Rules, offering unused capacity to others.
Funding is distributed in four equal tranches tied to physical progress milestones. The first tranche requires financial closure, executed construction contracts, and operator commitment agreements. Operators remain responsible for safety, environmental, and decommissioning obligations, with no automatic cost escalation adjustments.
A third track funds oil and gas manufacturing and services zones, aiming to establish India as a global manufacturing-fabrication hub. Developers must secure land and clearances, marketing the zone to tenants. States are encouraged to assist with land, approvals, and utilities. The Infrastructure Appraisal Board will shortlist locations within 60 days of its first meeting.
The scheme can be combined with the BHAVYA industrial-infrastructure initiative, but any shortfall in funding there will not create additional liability for Samudra Manthan. Funding is reimbursed in tranches, and assets built with scheme money cannot be sold or mortgaged without approval. Developers must report occupancy, investment, and job creation annually for five years post-commissioning.
Underlying the scheme is a seismic data program managed by the Directorate General of Hydrocarbons (DGH). Two-dimensional surveys will be fully government-funded, while three-dimensional surveys will follow a multi-client model where contractors co-invest and retain licensing revenue.
