New Delhi, May 11 — The Indian government is set to gain sweeping powers over the country’s oil and natural gas resources in times of national emergency, under new draft rules framed as part of a revamped oilfields regulatory regime.
According to the proposed regulations, the Centre will hold pre-emption rights over all crude oil and natural gas produced within India, allowing it to take control of these vital resources during emergencies by paying producers the prevailing fair market price.
What Are Pre-Emption Rights?
Pre-emption rights allow a designated party — in this case, the Government of India — to claim priority access to products or assets before they are made available to others. In this context, it gives the government the authority to commandeer crude oil, natural gas, and their derivatives during crises.These provisions are being developed under the Oilfields (Regulation and Development) Amendment Bill, passed by Parliament earlier this year. The legislation replaces the outdated 1948 law and aims to modernize the sector to boost domestic output, attract private investment, and align with India’s energy transition goals.
Emergency Control for National Interest
The draft rules state that during a national emergency, the government can exercise its preemption rights over:- Crude oil and natural gas extracted from leased areas
- Refined petroleum and mineral oil products
However, what qualifies as a national emergency is not clearly defined in the draft. Instead, it explicitly grants the Government of India sole discretion to decide what constitutes a national emergency. Situations such as war, military conflict, or natural disasters are likely examples, according to industry observers.
Fair Compensation and Force Majeure Clause
In return for exercising its pre-emption rights, the government will pay lessees a "fair market price prevailing at the time of pre-emption." This is meant to ensure economic fairness while prioritizing national interest.Additionally, the draft rules introduce force majeure exemptions for oil and gas operators. This clause protects companies from liabilities under extraordinary circumstances beyond their control, such as:
- Natural disasters like earthquakes, floods, or tsunamis
- War, riots, civil unrest
- Pandemics and other unforeseen events
Strategic Move in Evolving Energy Landscape
The new pre-emption policy reflects India’s effort to safeguard energy security, especially as global geopolitical tensions and climate-related disruptions pose increasing risks. It also aligns with the broader agenda to modernize the oil and gas sector and ensure public welfare during emergencies.Stakeholders and experts are now closely watching how these rules will be implemented and interpreted, particularly regarding emergency declarations and price assessments.