Government Proposes Major Overhaul of Petroleum Regulations: What You Need to Know

Significant Changes to Petroleum Regulations

New Delhi: The government is considering a significant reform in the petroleum sector by decriminalizing certain regulatory violations, such as breaches of licensing terms, and introducing a civil penalty system. However, it aims to maintain or enhance criminal penalties for serious offenses that threaten public safety or involve unauthorized petroleum activities.

The Ministry of Petroleum and Natural Gas has released a draft for public and industry feedback regarding amendments to the Petroleum Act of 1934, which governs various aspects of petroleum operations including import, transport, and refining.

The proposed changes aim to decriminalize regulatory infractions, allowing for civil penalties to be imposed through an administrative process. The ministry is seeking input on these draft amendments.

According to the draft, violations of licensing terms would be addressed through an administrative adjudication process instead of criminal prosecution. An adjudicating officer could impose civil fines of up to Rs 2.5 crore for initial breaches and Rs 5 crore for subsequent violations.

The adjudicating officer would also have the authority to instruct license holders on necessary actions to prevent or rectify breaches, and could recommend the suspension or revocation of licenses to the relevant authorities.

Criminal liability would still apply in cases where licensing breaches pose a risk to public safety or result in serious injury or death, with such cases continuing under existing laws.

The draft also suggests stricter penalties for serious violations. Engaging in licensed petroleum activities without the necessary license could lead to imprisonment for up to three years, fines up to Rs 25 crore, or both. Ongoing violations could incur additional fines of up to Rs 10 lakh for each day they persist.

Obtaining a petroleum license through fraudulent means could result in imprisonment for up to five years, fines, or both.

Acts of damaging petroleum facilities, stealing petroleum, or endangering safety could lead to imprisonment for up to five years or fines of up to Rs 15 crore for first offenses, with harsher penalties for repeat offenses.

The draft proposes a maximum of 10 years imprisonment for causing damage to designated critical petroleum infrastructure, along with fines up to Rs 25 crore or the cost of the damage incurred.

The central government would have the authority to designate areas or infrastructure critical to petroleum operations.

Additionally, the amendments would impose penalties for obstructing authorized inspections and failing to report petroleum-related incidents, with repeat offenses attracting increased penalties.

For breaches involving false information in documentation, civil penalties would be enforced following an inquiry based on natural justice principles.

The Petroleum Act, which was last updated in 1970, originally set penalties at a maximum fine of 1,000 rupees or one month of simple imprisonment for first offenses.

The ministry noted that while these penalties were significant in the 1970s, they are now outdated, especially considering the rise in petrol prices from Rs 0.90 per liter to between Rs 95 and 105 today.

The ministry emphasized that the proposed fines are in line with similar laws, such as the 2006 Petroleum and Natural Gas Regulatory Board Act, which imposes jail terms of up to three years and fines of up to Rs 25 crore for unauthorized activities.

The civil penalty model is inspired by the Telecommunications Act of 2023, and the new offenses draw from international precedents in countries like the United States, Japan, Australia, Germany, and Singapore.

These changes are expected to enhance the ease of doing business in the sector.

The ministry aims to strengthen the legal framework governing offenses under the 1934 law while reducing the criminalization of regulatory issues.

The draft suggests replacing sections 23 and 25 of the Petroleum Act and adding new sections 23A to 23E, along with amendments to section 24.

It also proposes that lower courts would not handle offenses under the Act unless specifically authorized by the central government, with proceedings governed by the Bharatiya Nagarik Suraksha Sanhita, 2023.

The ministry has invited public and industry feedback within 30 days of the notice's publication.