The state explorers hold petroleum exploration rights on 356 blocks between them, 176 of which are prospective for shale, but the licences did not specify if unconventional exploration was allowed on the blocks.
Government ministers in New Delhi have now decided to allow shale exploration on these existing blocks, Reuters reported.
India could be sitting on as much as 96 trillion cubic feet of recoverable shale gas reserves, equivalent to about 26 years of its gas demand, according to initial estimates from the US Energy Information Administration.
The new policy does not cover contracts for blocks awarded later to non-state explorers such as Reliance Industries, BG Group and Cairn India, the licences for which specify activity related to natural gas and oil.
The oil ministry is proposing a uniform licence for future acreage to cover oil, gas and unconventional resources and has asked for comments from companies in the coming weeks.
Oil India, Gail India and Reliance Industries have all made moves into international shale plays in recent years ahead of the start of shale exploration in India.