How Oilfields Amendment Bill aims to delink petroleum, mineral oil production from mining activities

Here is what the Bill says and why some parties, such as the DMK, have criticised it.

What is the Oilfields Bill?

As noted by Minister of Petroleum and Natural Gas Hardeep Singh Puri in the Statement of Objects and Reasons supporting the Oilfields Bill, when the Oilfields Act was first passed it was known as the Mines and Minerals (Regulation and Development) Act, 1948. This sole legislation governed and regulated oilfields, mines and minerals until 1957, when the present-day Mines and Minerals Act came into force.

To demarcate the spheres in which the two Acts would operate, the 1948 legislation was renamed the Oilfields (Regulation and Development) Act, 1948, and its language was amended to replace references to “minerals” with “mineral oils”. However, the Act does not define “mineral oil”, an oversight that the current Oilfields Bill aims to correct.

Other major proposed changes concern:

MINERAL OIL: The Bill defines mineral oils as “any naturally occurring hydrocarbon, whether in the form of natural gas or in a liquid, viscous or solid form, or a mixture thereof” and includes a long list of resources (such as crude oil, natural gas and petroleum) that would fall under this definition.

However, it clarifies that the definition will not include “coal, lignite and helium occurring in association with petroleum or coal or shale”, likely because regulation of coal and lignite is governed by the Mines and Minerals Act.

PETROLEUM LEASE: The original approach of replacing references to “minerals” with “mineral oils” has now been revived in the Oilfields Bill, which replaces references to “mining leases” with “petroleum leases”. It has also been newly defined as a lease granted for “prospecting, exploration, development, production, making merchantable, carrying away or disposing of mineral oils”.

Subsequently, the provisions relating to the grant of mining leases and the Centre’s power to make rules on them would instead govern the granting and regulation of petroleum leases.

PRIVATE INVESTMENT: The Bill includes several provisions for encouraging investment from private players to spur domestic production of petroleum and other mineral oils. It clarifies that mining leases already been granted under the Act will remain valid and none of the leases will be “altered to the disadvantage of the lessee during the period of the lease”.

Further, the Bill scraps criminal punishment for those who contravene provisions of the Oilfields Act, replacing it with fines. As the 1948 Act stands, any violations of the Act or the connected rules passed by the Centre may be punished with up to six months imprisonment and a fine of Rs. 1,000. The Bill would replace this with a penalty of up to Rs. 25 Lakh, with the possibility of a further penalty of Rs. 10 Lakh per day starting from the date of the first penalty if the violations persist.

Criticisms and concerns

Several opposition members raised concerns about how the Bill would affect the rights of states, given that Indian states have the power to tax mining activities.

DMK Member of Parliament N R Elango demanded that the Bill be sent to a select committee for review, stating that the word “mining” is being “replaced only to take away the rights of the states”, as reported by The Indian Express.

On July 25 this year, a nine-judge bench of the Supreme Court held that states had the exclusive power to tax mining activities and collect royalties from mining leaseholders. This power, the court held, stems from Entry 50 of the State List in the Indian Constitution, which gives states the power to impose taxes on “mineral rights”.

However, by reframing the Oilfields Act as providing petroleum leases instead of mining leases, and limiting the operation to mineral oils instead of minerals, it could be argued that the law would fall under Entry 53 of the Union List. It gives Parliament the power to create laws regarding the “Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be dangerously inflammable”.

Union Minister for Petroleum and Natural Gas Hardeep Puri attempted to allay these concerns, indicating that the state government would retain a measure of control as they would hold the authority to grant petroleum leases.

The possible environmental impact of handing the reins to private players was also highlighted by Communist Party of India MP P P Suneer, who said public companies such as the Oil and Natural Gas Corporation should be prioritised instead.

The provisions in the Bill further give private players a certain amount of discretion in how they operate, by removing the possibility of criminal punishment and contracts being modified. The Bill contains provisions addressing this by expanding the Centre’s power to make rules to curtail carbon and greenhouse gas emissions and promote renewable energy projects at oilfields.