The Gujarat Gas Tragedy

In 2001, the Gujarat government passed the Gujarat Gas (Regulation of Transmission, Supply and Distribution) Act, 2001. Consequently, the state Top of Form empowered itself to regulate transmission, editor@expressin supply and distribution of gas, as well as promote the gas industry, lay pipelines etc. The Gujarat Gas The Act also created a regulatory authority with powers to impose fines and imprisonment and the exclusive right to issue licences. The Centres perception was that the state had usurped the exclusive powers of the federal government under the Constitution. To avoid adversorial litigation, a reference was made under Article 143(1) of the Constitution by the President for the Supreme Courts opinion on whether natural gas, including LNG, was a Union or state subject. The Union and states have locked horns on earlier occasions on legislative competence, particularly in fiscal matters. In relation to natural resources, the landmark was the Cauvery dispute, and the Supreme Court had held that interstate river water disputes cannot fall within the competence of the state legislature. The Court conceded rights of a state to legislate on regulation and development of river water, and not on its use, distribution and allocation. Basically, the various Entries in the three Lists of Legislation to the Seventh Schedule of the Constitution demarcate the areas of legislative competence. The Courts have Bottom of Form held that the language of these Entries should be liberally construed; the logic behind this being that executive action should be validated. Conflicts between the Lists are decided by the application of the doctrine of pith and substance in other words, an in-depth study of the nature and content. The Union of India had at all times enacted various laws in the field of oil and natural gas under Entry 53 of List I. The Association of Natural
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Gas Consuming Industries of Gujarat had challenged the Unions legislative competence in this field in a writ petition; hence the Presidential reference. Interestingly, and this has been observed in the Judgement, while Parliament cannot legislate on the Entries with the State List, it may do so incidentally while essentially legislating on a Union List subject. The converse is applicable to state legislatures. The Unions main line of argument was that natural gas is included in the entry petroleum and products and mineral resources under Entry 53 of List I and various legislations supported this interpretation. Entry 25 of the State List, under which the Gujarat Act claimed legislative competence, deals with gas and gas works which includes manufacture of synthetic gas used for various industrial purposes. The Unions protest was that the state government had encroached upon its domain in a bid to take over the mineral oil fields exclusively. The Gujarat government, supported by other affected states like Assam and the Association, submitted that any legislation related to gas and gas works would cover the areas sought to be covered in the Act. Reliance was placed on various commercial and industrial parlance to establish that natural gas and LNG are quite distinct from petroleum and petroleum products. The judgement is peppered with the descriptions of various types of natural gas e.g. wet gas, dry gas, sour gas etc which seem ostensibly different from petroleum products. The ostensible trump card in the State Counsels armoury was the reliance on an earlier decision in the Calcutta Gas Company (CGC) case. Oriental Gas Company (OGC) was registered in England and empowered to lay pipelines in Calcutta. It was acquired by an Indian firm whose affiliate CGC was appointed as the manager of OGC. The West Bengal legislative passed an Act vesting the management and control of OGC in the state government. The state governments justification of its legislative competence came under the same Entry 25 of List II. The Supreme Court upheld the state governments stand, on the ground that Entry 24 in List II, at its widest, dealt with all industries including the gas industry. The issue arose whether Entry 25 which dealt with gas and gas works would then become redundant. If industry is interpreted to include gas and gas works, Entry 25 has to cover industrial trade, product and supply aspects. But the Apex Court has bypassed this interpretation of Entry 25, holding that it cannot be extended to uphold the validity of the Gujarat Act, as it did not consider whether gas and gas works conflicted with the expression petroleum or petroleum products. Thereafter the Court has proceeded on an investigative study of the various authoritative materials submitted before it geological, technological and chemical, without the benefit of any expert committee.

The final call is taken on the basis that the entire country has a stake in such natural resources, disregarding the states plea that in a federal structure, states should not be denied the right to exploit the same. No comment on merits but the erudition of interpretation of Calcutta Gas is missing.