THE OILFIELDS (REGULATION AND DEVELOPMENT) ACT, 1948

An Act to provide for the regulation of ^[1] * * * oilfields and for the development of               ^[2][mineral oil resources].

WHEREAS it is expedient in the public interest to provide for the regulation of ²* * * oilfields and for the development of  ³[mineral oil resources] ^[3]*  *  *;

It is hereby enacted as follows:—

1. Short title, extent and commencement.—(1) This Act may be called The ^[4][Oilfields] (Regulation and Development) Act, 1948.

^[5] [(2) It extends to the whole of India ^[6]*    *    *].

(3) it shall come into force on such date ^[7]as the Central Government may, by notification in the Official Gazette, appoint in this behalf.

2. [Declaration as to expediency of control by Central Government.] mitted by the Mines and

Minerals (Regulation and Development) Act, 1957 (67 of 1957), s. 32 and the Third Schedule                 (w.e. f. 1-6-1958).]

3. Definitions.—In this Act, unless there is anything repugnant in the subject or context, —

   1. the expressions “lessor” and “lessee” respectively include a licensor and licensee;

   2. “mine” means any excavation for the purpose of searching for or obtaining ³[mineral oils] and includes an oilwell;

   3. ³[“mineral oils”] include natural gas and petroleum;

   4. “mining lease” means a lease granted for the purpose of searching for, winning, working, getting, making merchantable, carrying away or disposing of ³[mineral oils] or for purposes connected therewith, and includes an exploring or a prospecting license;

   5. “oilfield” means any area where any operation for the purpose of obtaining natural gas and petroleum, crude oil, refined oil, partially refined oil and any of the products of petroleum in a liquid or solid state, is to be or is being carried on.

4. No mining lease to be valid unless it is in accordance with this Act. —(1) No mining lease shall be granted after the commencement of this act otherwise than in accordance with the rules made under this Act.

(2) Any mining lease granted contrary to the provisions of sub-section (1) shall be void and of no effect.

5. Power to make rules as respects mining leases.—(1) The Central Government may, by notification in the Official Gazette, make rules for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any ^[8][mineral oil] or in any area.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: —

5. 1. the manner in which, the ¹[mineral oils] or areas in respect of which and the persons by whom, applications for mining leases may be made and the fees to be paid on any such application;

   2. the authority by which, the terms on which, and the conditions subject to which, mining leases may be granted;

   3. the maximum or minimum area and the period for which any mining lease may be granted, and the terms on which leases in respect of contiguous areas may be amalgamated;

   4. the fixing of the maximum and minimum rent payable by a lessee, whether the mine is worked or not.

6. Power to make rules as respects mineral development.— (1)The Central Government may, by notification in the Official Gazette, make rules for the conservation and development of  ^[9][mineral oils].

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: —

²*                                       *                                         *                                          *                                             

1. 3. the development of any  ^[10][mineral oil resources] in any area by prescribing or regulating the use of any engines, machinery or other equipment;

   4. the regulation of drilling, re-drilling, deepening, shutting down, plugging and abandoning of oil wells in an oilfield and for the limitation or prohibition of such operations and for the taking of remedial measures to prevent waste of or damage to oil;

   5. the regulation of the methods of producing oil in any oilfield, and the limitation or prohibition of such methods;

   6. the compulsory notification of all new borings and shaft sinkings, and the preservation of boring records and specimens of cores of all new bore-holes;

   7. the taking of samples from mines and new bore-holes;

   8. the regulation of the arrangements for the storage of ²[mineral oils] and the stocks thereof that may be kept by any person;

^[11][(i) the collection of royalties, and the levy and collection of fees or taxes, in respect of mineral oils mined, quarried, excavated or collected;]

(j) the submission by the owners or lessees of mines of special or periodical returns and reports, and the forms in which and the authorities to whom such returns and reports shall be submitted.

^[12][6A. Royalties in respect of mineral oils.—(1) The holders of a mining lease granted before the commencement of the Oilfields (Regulation and Development) Amendment Act, 1969 (39 of 1969) shall, notwithstanding anything contained in the instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral oil mined, quarried, excavated or collected by him from the leased area after such commencement, at the rate for the time being specified in the Schedule in respect of that mineral oil.

2. The holder of a mining lease granted on or after the commencement of the Oilfields        (Regulation and Development) Amendment Act, 1969 (39 of 1969) shall pay royalty in respect of any mineral oil mined, quarried, excavated or collected by him from the leased area at the rate for the time being specified in the Schedule in respect of that mineral oil.

3. Notwithstanding anything contained in sub-section (1) or sub-section (2), no royalty shall be payable in respect of any crude oil, casing-head condensate or natural gas which is unavoidably lost or is returned to the reservoir or is used for drilling or other operations relating to the production of petroleum, or natural gas, or both

^[13][(4) The Central Government may, by notification in the Official Gazette, amend the Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral oil with effect from such date as may be specified in the notification and different rates may be notified in respect of same mineral oil mined, quarried, excavated or collected from the areas covered by different classes of mining leases:

Provided that the Central Government shall not fix the rates of royalty in respect of any mineral oil so as to exceed twenty per cent. of the sale price of the mineral oil at the oilfields or the oil well-head, as the case may be.

(5) If the Central Government, with a view to encourage exploration in off-shore areas, is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally, either absolutely or subject to such conditions as may be specified in the notification,      mineral oil produced from such areas from the whole or any part of the royalty leviable thereon.]

7. Power to make rules for modification of existing leases.—(1) The Central Government may, by notification in the Official Gazette, make rules for the purpose of modifying or altering the terms and conditions of any mining lease granted prior to the commencement of this Act so as to bring such lease into conformity with the rules made under sections 5 and 6:

Provided that any rules so made which provide for the matters mentioned in clause (c) of                sub-section (2) shall not come into force until they have been approved, either with or without modifications, by ^[14][the House of the People].

(2) The rules made under sub-section (1) shall provide—

7. 1. for giving previous notice of the modification or alteration proposed to be made thereunder to the lessee, and where the lessor is not the Central Government, also to the lessor, and for affording them an opportunity of showing cause against the proposal;

   2. for the payment of compensation by the party who would be benefited by the proposed modification or alteration to the party whose right under the existing lease would thereby be adversely affected; and

   3. for the principles on which, the manner in which and the authority by which the said compensation shall be determined.

8. Delegation.—The Central Government may, by notification in the Official Gazette, direct that any power exercisable under this Act shall be exercised, subject to such conditions, if any, as may be specified therein by such officer or authority as may be specified in the direction.

9. Penalties.—(1) Any rule made under any of the provisions of this Act may provide that any contravention thereof shall be punishable with imprisonment which may extend to six months or with fine which may extend to one thousand rupees or with both.

(2) Whoever, after having been convicted of any offence referred to in sub-section (1), continues to commit such offence shall be punishable for each day after the date of the first conviction during which he continues so to offend, with fine which may extend to one hundred rupees.

^[15][10. Laying of rules and notifications.—Every rule made under this Act and every notification issued ^[16][under sub-section (4) or sub-section (5) of section 6A] shall be laid, as soon as may be after it is made or issued, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or notification or both Houses agree that the rule or notification should not be made or issued, the rule or notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or notification.]

11. Power of inspection.—(1) For the purpose of ascertaining the position of the working, actual or prospective, of any mine or abandoned mine or for any other purpose mentioned in this Act or the rules made thereunder, any officer authorised by the Central Government in this behalf shall have the           right to—

1. 1. enter and inspect any mine;

   2. order the production of any document, book, register or record in the possession or power of any person having the control of, or connected with, any mine;

   3. examine any person having the control of, or connected with, any mine.

(2) Any officer authorised by the Central Government under sub-section (1) shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860).

12. Relaxation of rules in special cases.—The Central Government may, if satisfied that it is in the public interest so to do, authorise in any case the granting of any mining lease, or the working of any mine on terms and conditions different from those laid down in the rules made under sections 5 and 6.

^[17][13. Act to be binding on the Government.—The provisions of this Act shall be binding on the Government.]

14. Protection of action taken in good faith.—No suit, prosecution or other legal proceeding whatever shall lie against any person for anything which is in good faith done or intended to be done under this Act.

^[18][THE SCHEDULE

(See section 6A)

RATES OF ROYALTY

1. CRUDE OIL:

1. PRODUCTION FROM AREAS OUTSIDE NEW EXPLORATION LICENSING POLICY

(NELP) REGIME

A. NOMINATION BLOCKS

1. 1. from 1.4.1993 to 31.3.1996: @ Rs. 539.20 Per Metric Tonne

   2. from 1.4.1996 to 31.3.1998: @ Rs. 603.95 Per Metric Tonne

B. PRODUCTION FROM AREAS AWARDED ON NOMINATION BASIS TO NATIONAL OIL COMPANIES (NOCs), EXPLORATION BLOCKS AWARDED TO PRIVATE/ JOINT VENTURE CONTRACTORS PRIOR TO NEW EXPLORATION LICENSING POLICY (NELP) AND ONLAND DISCOVERED FIELDS AWARDED TO PRIVATE/JOINT VENTURE CONTRACTORS:

1. 1. 1. from 1.4.1998 to 31.3.2002 : Monthly average rate per Metric Tonne as per Statement

appended;

1. 0. 2. With effect from 1.4.2002:

   1. On land areas: @ 20% of Well Head Price

   2. Shallow water offshore areas (upto 400 Mtr water depth): @ 10% of Well Head Price

   3. Deep water offshore areas (> 400 Mtr. Water depth) : @ 5 % of well head price during first 7 years after commercial production and normal rates as applicable to Shallow water areas (upto 400 Mtr. Water depth) during other periods.

   4. Heavier Crude Oils of 25° API and less : 2.5% lesser than the applicable rates as above

   5. Reduced rates of royalty, as may be notified by the Government from time to time, will be levied on production from fields under Enhanced Oil Recovery (EOR)/ Improved Oil Recovery (IOR).

C. PRODUCTION FROM OFFSHORE DISCOVERED FIELDS AWARDED TO PRIVATE /JOINT VENTURE CONTRACTORS:

At the rates as specified in respective Production Sharing Contracts (PSCs)

2. PRODUCTION FROM AREAS UNDER NELP REGIME:

At the rates determined in accordance with the provisions under respective Production Sharing Contracts (PSCs).

^[19][(3) Production from contracts awarded under Bid Round-1 of Discovered Small Field Policy, 2015:]

1. 1. ^[20][12.5 per cent of the value of crude oil receivable from the buyer in respect of production from  on-shore contracts.

   2. 10 per cent of the value of crude oil receivable from the buyers in respect of production from deep water off-shore (>400 meters water depth) contracts for the first seven years after commercial production in the contract area and normal rates as applicable to shallow water (up to 400 meters water depth) contracts during remaining periods.]

^[21][(4) Production form contracts awarded under Bid Round-II of Discovered Small Field Policy and Hydrocarbon Exploration and Licensing Policy (HELP):

1. 1. for on-land blocks: 12.5%

   2. for shallow water : 7. 5%

   3. for deep water : no royalty shall be payable for the first seven years from the date of commercial production of crude oil from deep water and shall be payable at 5% thereafter.

   4. for ultra deep water: no royalty shall be payable for the first seven years from the date of commercial production of crude oil form ultra deep water and shall be payable at 2% thereafter.]

^[22][(5) Concessional rates of royalty in case of early commercial production from contract areas awarded under Hydrocarbon Exploration and Licensing Policy:

For contract areas awarded under Hydrocarbon Exploration and Licensing Policy in respect of bids invited on or after the coming into force of this paragraph, concessional rates of royalty shall apply if there is early commencement of commercial production as below:

(A) In case of on-hand blocks:

If commercial production is commenced within four years from the effective date as specified in the respective contract:

1. 1. in Category—I Basins: 11.25%

   2. in Category—II Basins: 10%

   3. in Category—III Basins: 8.75%

(B) In case of shallow water blocks;

If commercial production is commenced within four years from the effective date as specified in the respective contract:

1. 1. in Category—I Basins: 6.75%

   2. in Category—II Basins: 6%

   3. in Category—III Basins: 5.25%

(C) In case of deep water blocks;

If commercial production is commenced within five years from the effective date as specified in the respective contract:

No royalty shall be payable for the first seven years from the date of commercial production and shall be payable thereafter as below:

1. 1. in Category—I Basins: 4.5%

   2. in Category—II Basins: 4%

   3. in Category—II Basins: 3.5%

(D) In case of ultra deep water blocks:

If commercial production is commenced within five years from the effective date specified in the respective contract:

No royalty shall be payable for the first seven years from the date of commercial production and shall be payable thereafter as below:

1. 1. in Category—I Basins: 1.8%

   2. in Category—II Basins: 1.6%

   3. in Category—III Basins:1.4%.]

2. CASING HEAD CONDENSATE:

(1) PRODUCTION FROM AREAS OUTSIDE NEW EXPLORATION LICENSING POLICY (NELP) REGIME

1. NOMINATION BLOCKS

   1. from 1.4.1993 to 31.3.1996: @ Rs. 539.20 Per Metric Tonne

   2. from 1.4.1996 to 31.3.1998: @ Rs. 603.95 Per Metric Tonne

2. PRODUCTION FROM AREAS AWARDED ON NOMINATION BASIS TO NATIONAL OIL COMPANIES (NOCS), EXPLORATION BLOCKS AWARDED TO PRIVATE/ JOINT VENTURE (PRIVATE /JOINT VENTURE) CONTRACTORS PRIOR TO NELP AND ONLAND DISCOVERED FIELDS AWARDED TO PRIVATE/JOINT VENTURE CONTRACTORS:

   1. from 1.4.1998 to 31.3.2002 : Monthly average rate per Metric Tonne as per Statement appended:

   2. With effect from 1.4.2002:

      1. On land areas: @ 20% of Well Head Price.

      2. Shallow water offshore areas (upto 400 Mtr water depth): @ 10% of Well Head Price.

      3. Deep water offshore areas (> 400 Mtr. Water depth): @ 5% of well head price during first 7 years after commercial production and normal rates as applicable to Shallow water areas (upto 400 Mtr. Water depth) during other periods.

      4. Reduced rates of royalty, as may be notified by the Government from time to time, will be levied on production from fields under Enhanced Oil Recovery (EOR)/ Improved Oil Recovery (IOR).

3. PRODUCTION FROM OFFSHORE DISCOVERED FIELDS AWARDED TO PRIVATE /JOINT VENTURE CONTRACTORS:

At the rates as specified in respective Production Sharing Contracts (PSCs).

2. PRODUCTION FROM AREAS UNDER NELP REGIME:

\At the rates determined in accordance with the provisions under respective Production Sharing Contracts (PSCs).

^[23][(3) Production from contracts awarded under Bid Round-II of Discovered Small Field Policy, 2015:]

^[24][(a) 12.5 per cent of the value of condensate receivable from the buyer in respect of production from on-shore contracts.

1. 1. 2. 10 per cent of the value  of condensate receivable from the buyers in respect of production from off-shore shallow water (up to 400 meters water depth) contracts.

      3. 5 per cent of the value of condensate receivable from the buyers in respect of production from deep water offshore (>400 meters water depth) contracts for the first seven years after commercial production in the contract area and normal rates as applicable to shallow water (up to 400 meters water depth) contracts during remaining periods.]

^[25][(4) In respect of production form contracts awarded under Bid Round-II of Discovered Small Field Policy and Hydrocarbon Exploration and Licensing Policy (HELP) all the provisions of royalty on crude oil shall apply mutatis mutandis to condensates.”]

^[26][(5) In respect of early commencement of commercial production from contracts areas awarded under Hydrocarbon Exploration and Licensing Policy in respect of bids invited on or after the coming into force of this paragraph, all the provisions of concessional rates of royalty applicable for crude oil shall apply mutatis mutandis to condensates.] ^[27][3. NATURAL GAS:

2. 1. 10% of the value of the natural gas obtained at well-head.

   2. Production of natural gas from contracts awarded under Bid Round-I of Discovered Small Field Policy, 2015:

      1. 10% of the value of natural gas receivable from the buyer in respect of production from onshore contracts and off-shore shallow water (up to 400 meters water depth) contracts;

      2. 5% of the value of natural gas from the buyers in respect of production from deep water offshore (>400 meters water depth) contracts for the first seven years after commercial production in the contract area and normal rates as applicable to shallow water (up to 400 meters water depth) contracts during remaining periods.

3. Production form contracts awarded under Bid Round-II of Discovered Small Field Policy and Hydrocarbon Exploration and Licensing Policy (HELP):

   1. 1. 1. for on-land blocks: 10%

         2. for shallow water : 7. 5%

         3. for deep water : no royalty shall be payable for the first seven years from the date of commercial production of crude oil from deep water and shall be payable at 5% thereafter.

         4. for ultra deep water: no royalty shall be payable for the first seven years from the date of commercial production of crude oil form ultra deep water and shall be payable at 2% thereafter.

^[28][(4) Concessional rates of royalty in case of early commercial production from contract areas awarded under Hydrocarbon Exploration and Licensing Policy:

For contract areas awarded under Hydrocarbon Exploration and Licensing Policy in respect of bids invited on or after the coming into force of this paragraph, concessional rates of royalty shall apply if there is early commencement of commercial production as below:

(A) In case of on-hand blocks:

If commercial production is commenced within four years from the effective date as specified in the respective contract:

1. 1. in Category—I Basins: 9%

   2. in Category—II Basins: 8%

   3. in Category—III Basins:7%

(B) In case of shallow water blocks;

If commercial production is commenced within four years from the effective date as specified in the respective contract:

1. 1. in Category—I Basins: 6.75%

   2. in Category—II Basins: 6%

   3. in Category—III Basins: 5.25%

(C) In case of deep water blocks;

If commercial production is commenced within five years from the effective date as specified in the respective contract:

No royalty shall be payable for the first seven years from the date of commercial production and shall be payable thereafter as below:

1. 1. in Category—I Basins: 4.5%

   2. in Category—II Basins:4%

   3. in Category—II Basins: 3.5%

(D) In case of ultra deep water blocks:

If commercial production is commenced within five years from the effective date specified in the respective contract:

No royalty shall be payable for the first seven years from the date of commercial production and shall be payable thereafter as below:

1. 1. in Category—I Basins: 1.8%

   2. in Category—II Basins: 1.6%

   3. in Category—III Basins:1.4%

(5) Additional production from existing Administered Price Mechanism field (APM Fields):

The additional production of gas from APM Fields over and above Business as Usual (BAU) scenario which has been evaluated by third party expert agency and approved by Directorate General of Hydrocarbons shall be eligible in rates of royalty by ten per cent of the existing applicable rates.]

^[29][Note 1:  ^[30][(1) The well head price of crude oil and casing head condensate for nominated blocks shall be determined by making the following deductions from the sale price of crude oil and casing head condensate:

(a) in case of Oil and Natural Gas Corporation Limited.

i. three thousand nine hundred and fifty—five rupees per metric tonne for On share; and ii. two thousand two hundred and twenty—six rupees per metric tonne for Off shares.

(b) in case of Oil India Limited, two thousand eight hundred and twenty eight rupees per metric tonne.]

(2) The amounts specified in clause (1) shall be the post-well head cost which shall be valid for a period of three years with effect from ^[31][1st April, 2021] or such period till the revised rates are notified.

3. Oil Industry Development Cess and Education Cess thereon shall not form part of post well head

cost.

4. Royalty will be calculated on cum-royalty basis as under: Well head price x royalty rate

Royalty amount =  

(100 + royalty rate).]

Note 2: Since consultations with the concerned State Governments took some time, it has become necessary to revise the rate of royalty with retrospective effect. The oil producing States stand to benefit and other States are not likely to be adversely affected.

^[32][Note 3: The post well head cost for the purpose of calculating well head price of crude oil or casing head condensate for cases other than nominated blocks of Oil and Natural Gas Corporation Limited or Oil India Limited and for natural gas in all cases other than Administered Price Mechanism gas of Oil and Natural Gas Corporation Limited or Oil India Limited shall be determined as under:

1. Per unit rate of post well head cost, that is, per metric tonne or barrel for crude oil or casing head condensate and per Million Metric British Thermal Unit for natural gas shall be determined based on actual post well head expenditure reported in previous year's audited accounts.

2. In case of production from a new field under the Production Sharing Contract, the post well head cost for the first year may be provisionally estimated by the lessee and duly certified by the Directorate General of Hydro -carbons and final adjustments shall be made within one hundred twenty days from the end of the first year, based on the audited accounts of the first year.

3. Oil Industry Development Cess and Education Cess, Depreciation expense, Income Tax, surcharge thereon and profit petroleum shall not be allowed as expenditure under post well head cost.

4. Full records shall be maintained and got audited by lesses or procedures to assess the actual post well head cost incurred in previous year.

^[33][(5) Royalty shall be computed on ex-royalty basis :

Provided that for crude oil produced from production sharing contracts signed with private or joint-venture contractors prior to New Exploration Licensing Policy, royalty shall be computed on cum-royalty basis.]

^[34]Note 4. For the purposes of the concessional rates of royalty for crude oil, condensates and natural gas, the categorization of sedimentary basins of India shall be as under:

STATEMENT OF MONTHLY AVERAGE RATES OF ROYALTY PAYABLE AS PER METRIC TONNE ON CRUDE OIL & CASING HEAD CONDENSATE AS MENTIONED AT 1 (1) (B) (i) ABOVE.

Details of Monthly Royalty Rates