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Oilfields (Regulation and Development) Amendment Bill 2024 | UPSC Editorials

Last Updated on Dec 14, 2024
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On December 3, 2024, the Rajya Sabha passed the Oilfields (Regulation and Development) Amendment Bill, 2024. This marks an important landmark in the pursuit of India to develop domestic fuel production and reduce dependency on imports. The Bill amends the Oilfields (Regulation and Development) Act of 1948 bringing significant changes to encourage private investment, modernize the regulatory framework, and clearly define governance of petroleum and mineral oils. This is made in discourses and debates, especially by parties like the DMK as regards state powers and the regulation of the environmental impact.

Analysis based on 

Editorial How Oilfields Amendment Bill aims to delink petroleum, mineral oil production from mining activities published in The Indian Express on December 5th, 2024

Topics for UPSC Prelims

Oilfields (Regulation and Development) Act 1948, Mines and Minerals (Development and Regulation) Act 1957, Natural resources in India, Mineral resource management, Renewable energy

Topics for UPSC Mains

India's energy sector, Energy security, Measures to reduce carbon emissions, Impact of fossil fuel extraction on the environment, Federalism and Centre-State relations

About the Oilfields (Regulation and Development) Act of 1948

The Oilfields (Regulation and Development) Act of 1948 happens to be one of the landmark enactments brought with regard to regulating the development of, and regulating, oil fields and India's mineral oil resources.

Known originally as the Mines and Minerals (Regulation and Development) Act, 1948, it was later differentiated from the general mining regulation when the Mines and Minerals (Development and Regulation) Act, 1957 was introduced. It is in this Act of 1948 that exploration, extraction, and production of hydrocarbons were addressed. The essential characteristics of the 1948 Act included control and regulation of oil exploration, production, and terms of licenses and leases issued for the said purpose by the government. The Act would result in the scientific and orderly exploitation of petroleum resources with a focus on the development of the economy and safeguarding the national interest. It also took care of the legislation that prescribed laws related to the Central Government concerning matters with respect to oil fields and punishments upon its violation.

Mines and Minerals (Development and Regulation) Act, 1957

The Mines and Minerals (Development and Regulation) Act, 1957 was a landmark legislation for all round regulation of mining activities which excluded the scope of petroleum and natural gas falling within the ambit of the 1948 Act.

Some of the notable features of the 1957 Act are:

  • It provides a regulatory framework for the award of mining leases and licenses for the exploration and extraction of minerals other than petroleum and natural gas.
  • It provides clarity on the collaborative roles of the central and state governments in the regulation of mines and minerals, ensuring federal involvement while respecting state jurisdiction.
  • The Act encompasses environmental safeguards and safety standards with regard to the carrying on of mining activities in an environment-friendly manner.

Read the article on the Supreme Court ruling on Royalty, Tax & Mining Regulations!

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Key Features of the Oilfields (Regulation and Development) Bill 2024

Oilfields (Regulation and Development) Bill 2024 brings about radical reforms in the 1948 Act as it tries to reform the existing framework of regulation to energize the country's indigenous production and inspire private investment.

  • Definition of Mineral Oils: According to the Bill, "mineral oils" refer to hydrocarbons of natural origin in any gaseous, liquid, viscous, or solid form, and thus comprise crude oil, natural gas, and petroleum. However, the following are excluded: coal, lignite, and helium accompanying or associated with petroleum or coal.
  • Petroleum Leases: The Bill substitutes the term "mining leases" with "petroleum leases," which are defined for prospecting, exploration, development, production, and disposal of mineral oils. This would mean the specific regulatory framework applicable to oilfields is made clear.
  • Promoting Private Investment: To promote private participation, the Bill ensures all existing leases would be declared valid and not prejudiced adversely to the lessees. It de-criminalizes violations of the Act, replacing imprisonment by fines, thus making the regulatory environment more business-friendly.
  • Environmental Provisions: Strengthening environmental directives focus on regulating carbon and greenhouse gas emissions while promoting renewable energy efforts on oilfield operations. This is aimed at bringing the oil sector in line with India's commitments to climate.
  • Penalties and Compliance: This Bill provides for hefty amounts as fines for the guilty parties of ₹25 lakh besides that day-to-day penalties continue being accrued with an emphasis towards monetary rather than punitive imposition.

Read the article on the List of Major Minerals in India!

What is Mineral Oil?

Mineral oil is a hydrocarbon, originating from the earth, consisting of crude oil, natural gas, and petroleum. These are the natural occurring substances, basically comprising carbon and hydrogen atoms. They exist in both liquid, viscous, and solid states. Mineral oils play an essential role in the manufacture of fuels, lubricants, and most petrochemical products.

Significance of Defining “Mineral Oils” in the Amended Oilfields Act

Defining "mineral oils" in the amended Act is crucial for several reasons:

  • Legal clarity: It shall indicate what resources fall under what section of the Act in that it diminishes uncertainty
  • Regulatory clarity: It separates hydrocarbons from other minerals, thereby opening opportunities for specific regulations to apply.
  • Attraction of investment: Provides certainty to investors about the legal framework governing their activities.

Defining mineral oils precisely would simplify current regulatory procedures in line with the prevalent practice in industry.

Read the article on the National Mineral Policy!

Significance of the Oilfields (Regulation and Development) Bill 2024

2024 Bill holds significance on account of following reasons

  • Domestic Petroleum Production Increase: This would enhance petroleum production at the domestic front, reducing imports dependency, further fortifying the energy security scenario.
  • Up-gradation in Regulations: Modernizing regulations fit into a new economic as well as a new technological landscape.
  • Investor-Friendly Environment: It helps in creating a more investor-friendly business environment by decriminalizing minor offenses.
  • Environmental Concerns: It contains provisions to address environmental concerns and promote green practices.

The Bill reflects the desire of the government to open up to the shift in the energy landscape but in the same breath promotes sustainability and investment.

Read the article on Carbon Neutrality!

Impact of the Oilfields Bill 2024 on the Power of States

The Bill has caused an uproar over the distribution of power between the Centre and states:

  • State Authority: The opponents feel that classifying leases as "petroleum" rather than "mining" may compromise state authority to collect taxes and revenues on these resources.
  • Revenue Sharing: The reclassification may impact states' ability to collect taxes on petroleum activities, possibly centralizing control.
  • Legal and Constitutional Implications: The Supreme Court's decision reaffirming states' rights to tax mineral rights complicates the issue, requiring careful analysis of the Bill's implications on state autonomy.

The success of the Bill will hinge on addressing these concerns and ensuring equitable revenue-sharing mechanisms.

Read the article on the Federal Features of Indian Constitution!

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UPSC Practice Questions
  1. Discuss the significant amendments introduced in the Oilfields (Regulation and Development) Bill, 2024, and critically evaluate their potential impact on India's energy security and environmental sustainability.
  2. Examine the implications of the Oilfields (Regulation and Development) Bill, 2024, on the federal structure of India, particularly in the context of state and central government relations over revenue sharing and regulatory control of mineral resources.

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