Why in the News?

The Rajya Sabha passed the Oilfields (Regulation and Development) Amendment Bill, 2024, aimed at boosting domestic petroleum and mineral oil production while encouraging private investment to reduce reliance on imports.

What are the major proposed changes?

• Definition of Mineral Oils: The Bill expands the definition of “mineral oils” to include naturally occurring hydrocarbons such as crude oil, natural gas, coal bed methane, and shale gas/oil. However, it explicitly excludes coal, lignite, and helium from this definition.
• Introduction of Petroleum Leases: The Bill replaces references to “mining leases” with “petroleum leases,” defining these leases as agreements for various activities including exploration and production of mineral oils. Existing mining leases will remain valid under this new framework.
• Decriminalization of Offences: The Bill removes criminal penalties for violations of the Oilfields Act, replacing them with financial penalties. For instance, violations that previously could lead to imprisonment will now incur fines up to ₹25 lakh, with additional daily penalties for ongoing violations.
• Central Government Powers: The Bill empowers the central government to create rules regarding the granting and regulation of petroleum leases, including aspects like environmental protection and dispute resolution mechanisms.
• Encouragement of Private Investment: It includes provisions aimed at attracting private investment into the sector by ensuring stable lease terms and clarifying regulatory frameworks.

What are the criticisms and concerns?

• Impact on State Rights: Critics, including members from the DMK party, argue that the Bill undermines state rights regarding taxation on mining activities. They fear that redefining leases could shift regulatory power away from states to the central government, potentially affecting state revenue from royalties.
• Legal Challenges: There are concerns that framing petroleum operations under a different legal category could lead to conflicts with existing judicial rulings that affirm state powers over mining taxes. A recent Supreme Court ruling emphasized that states have exclusive rights to tax mining activities.
• Environmental Concerns: Opposition members have raised alarms about the potential environmental impacts of allowing greater private sector involvement in petroleum extraction. They advocate for prioritizing public sector companies like ONGC over private entities.

Way forward: 

• Balanced Federal Approach: Establish a collaborative mechanism between the Centre and states to address concerns over taxation and royalties, ensuring equitable revenue sharing while maintaining clear regulatory roles.
• Sustainable Exploration Framework: Mandate robust environmental safeguards and prioritize public sector leadership alongside private investment to balance economic growth with ecological preservation.

Mains PYQ:

Q  “In spite of adverse environmental impact, coal mining is still inevitable for Development”. Discuss. (UPSC IAS/2017)

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