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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
WRIT PETITION (PIL) No. 47 of 2011WITH
WRIT PETITION (PIL) No. 54 of 2011
For Approval and Signature:
HONOURABLE THE CHIEF JUSTICEMR.BHASKAR BHATTACHARYA
ANDHONOURABLE MR.JUSTICE J.B.PARDIWALA
=========================================================
1Whether Reporters of Local Papers may beallowed to see the judgment ?
2 To be referred to the Reporter or not ?`
3Whether their Lordships wish to see the fair copyof the judgment ?
4Whether this case involves a substantial questionof law as to the interpretation of the constitutionof India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
=========================================================WRIT PETITION (PIL) No. 47 of 2011
DHRANGADHRA PRAKRUTI MANDAL THROUGH VICE PRESIDENTVersus
UNION OF INDIA THROUGH SECRETARY & ORS.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
WRIT PETITION (PIL) No. 54 of 2011
GUJARAT RAJYA AUTORICKSHAW FEDERATION & ORS
versusUNION OF INDIA THROUGH SECRETARY & ORS.
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=========================================================
Appearance :
WRIT PETITION (PIL) No. 47 of 2011
MR AMIT M PANCHAL for PETITIONER for petitionerMR PS CHAMPANERI, ASST. SOLICITOR GENERAL for RESPONDENT : 1,MR PK JANI, GOVERNMENT PLEADER with MR RASESH RINDANI,ASSISTANT GOVT. PLEADER for RESPONDENT : 2 - 3.MR RITURAJ M MEENA for RESPONDENT : 4,MR UDAY JOSHI with MR. ABHISHEK MEHTA for M/S TRIVEDI & GUPTAfor RESPONDENT : 5, 8,
MR SUDHIR NANAVATI, SR COUNSEL for MS ANUJA S NANAVATI forRESPONDENT : 6,MR ASPI M KAPADIA for RESPONDENT : 7, 9,MR NEERAJ SONI for RESPONDENT : 10,MS MINOO A SHAH for MR GN SHAH for RESPONDENT : 11,
WRIT PETITION (PIL) No. 54 of 2011
MR. ASPI KAPADIA for PETITIONER for petitionerMR PS CHAMPANERI, ASST. SOLICITOR GENERAL for RESPONDENT : 1MR PK JANI, GOVERNMENT PLEADER with MR RASESH RINDANI,ASSISTANT GOVT. PLEADER for RESPONDENT : 2.=========================================================
CORAM :HONOURABLE THE CHIEF JUSTICE MR.BHASKARBHATTACHARYA
and
HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 25/07/2012
CAV JUDGMENT
(Per : HONOURABLE THE CHIEF JUSTICE MR.BHASKARBHATTACHARYA)
1. These two Public Interest Litigations were heard analogously as
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the subject-matter of these petitions are, to some extent, similar.
2. In writ petition No. 47 of 2011 [PIL], the writ-petitioner prayed
for the following relief:
9. In the premises aforesaid and considering
what is stated above, the petitioner, most humbly and
respectfully prays that this Honourable Court be pleased to
issue a writ of mandamus or a writ in the nature of mandamusor any other writ, direction or Order:
(A) Directing the Government of India to allot additional
quota of Natural Gas for domestic and vehicular usage for
the benefit of the general public and environment to the
State of Gujarat at the APM rate at which rate the Natural
Gas is being supplied to the cities of Delhi and Mumbai;
(B). Your Lordships may be pleased to direct the Government
of India to prioritise and diversify the unutilised Natural
Gas from non-priority sector to the CGD for their
domestic and vehicular usage, as directed by the
Honourable Supreme Court of India in the cases of M. C.
Mehta versus Union of India, reported in (2002) 4 SCC
356, which in turn would reduce the pollution and the
cost of living;
(C). Your Lordships may be pleased to direct the State of
Gujarat to take steps to reduce air pollution in the State
of Gujarat by converting the private and public vehicles
from petrol and diesel to Natural Gas;
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(D). Your Lordships may be pleased to pass such other and
further Order/s, grant such other reliefs as may be
deemed just and proper in the facts and circumstances of
the present case;
3. The case made out by the writ-petitioner in this application may
be summed up thus:
3.1 The petition has been filed with the interest of improving and
preserving the environment and the ecology and for the benefit of the
residents of the State of Gujarat. The petitioner has resolved to file
the present petition with the object of getting more allocation of
natural gas to the State of Gujarat at the Administered Price
Mechanism (APM) rate of City Gas Distribution (CGD), and at rate on
which the natural gas is being supplied to the cities of Delhi and
Mumbai. The said action would be in conformity with Article 14 of the
Constitution of India as it would lead to the Government of India, and
its instrumentalities allocating the National Asset Natural Gas,
without meting out any discrimination to the State of Gujarat, vis-a-vis
the price. The said action would consequently, reduce the level of
environmental/air pollution in the State of Gujarat and also reduce the
cost of living of the citizens with more natural gas for the use of the
residents in the State of Gujarat, which in turn could also facilitate
better supply of domestic LPG gas of which there is an acute
shortage.
3.2 The petitioner is a society duly registered under the Societies
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Registration Act, 1980, and is a Mandal, which comprises of members
who are public-spirited citizens and are concerned with protecting the
wildlife and environment by taking necessary steps in that behalf.
The Mandal has been established in the year 1991. The petitioner
has taken various steps to protect the eco-system and the Wild Ass
Sanctuary of the Little Rann of Kutch. The petitioner had earlier filed
Special Civil Application Nos. 8487 of 1996 and 1922 of 2002, wherein
this Court had issued directions for the protection and preservation of
the eco-system and the Wild Ass Sanctuary. The petitioner has also,
in the year 1996, addressed letters to various authorities for the
protection and betterment of the eco-system in the Little Rann of
Kutch. The petitioner had filed Special Civil Application Nos. 8118 of
2004, 14819 of 2004, MCA No. 1630 of 2004, 447 of 2005, 5532 of
2005 and 15436 of 2008, before this Court seeking compliance of the
Environment Protection Act, 1986, and the Rules framed there under,
compliance of the Environment Impact Assessment Notification 1994
and the Order of the Court in connected matters in public interest.
The petitioner has also preferred Special Leave Petitions in the
Supreme Court of India challenging the C.A.V. Judgment and Order
passed by this Court in SCA No. 14819 of 2004 and connected
matters, preferred by the petitioner and other persons. The petitioner
has taken interest in protecting and preserving the environment and
ecology in the State of Gujarat and has a locus-standi to file this
Public Interest Litigation.
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3.3 The respondent nos. 1 to 4 are discharging public duties by
virtue of their holding public offices and are State within the
meaning of Article 12 of the Constitution of India, and are, therefore,
amenable to the writ jurisdiction of this Court under Article 226 of the
Constitution of India. The respondent Nos. 5 to 11 are Gas/CGD
companies, which distribute and supply Natural Gas in the State of
Gujarat and considering the issues involved in this petition, they
have, therefore, been impleaded as party respondents.
3.4 By way of this Public Interest Litigation filed under Article
226 of the Constitution of India, the petitioner challenges the
arbitrary, high-handed, unreasonable and irrational action of the
respondents Nos. 1 to 4 -
[a]. In not taking urgent and advance action to tackle the
acute problem of rampant growth of vehicular pollution
and toxicity in the air due to increase in the number of
vehicles in the State of Gujarat, despite there being
various directions passed by the Supreme Court of India
in M.C. Mehta versus Union of India & Others, reported in
(1991) 2 SCC 353, (1998) 6 SCC 63, (2000) 9 SCC 519,
(2001) 3 SCC 756, (2001) 3 SCC 763, (2001) 3 SCC 767,
(2002) 4 SCC 356, (2002) 10 SCC 191, with regard to
introducing adequate supply of Natural Gas as an
alternative fuel in the public transports and in private
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vehicles;
[b]. In not taking adequate steps to allot more Natural Gas
under APM to the State of Gujarat at the rate at which the
Natural Gas is made available to cities of Delhi and
Mumbai and thereby putting the entire burden on the
citizens who are residents in the State of Gujarat;
[c]. In not taking steps to identify the priority sectors and
allocating the requisite quantities in accordance with the
needs of the said sector and diversify unutilized Natural
Gas under City Gas Distribution System, to meet with the
demand of Natural Gas for vehicular and domestic usage,
which would in turn reduce pollution and also bring down
the cost of living of the citizens who are residents in the
State of Gujarat in compliance with the principles
enunciated by the Supreme Court of India in the case of
M. C. Mehta versus Union of India & Others, reported in
(2002) 4 SCC 356, wherein the Supreme Court of India
was pleased to issue the following observations and
direction -
Lack of adequate supply of CNG has been a causeof concern and has been referred to in the various
orders by this Court from time to time. In theabsence of proper response from the governmentalauthorities, there is no alternative but to issue the
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following directions:
The Union of India will give priority to transportsector including private vehicles all over India with
regard to allocation of CNG. This means that firstthe transport sector in Delhi, and in the other air
polluted cities in India, CNG will be allocated andmade available and it is only thereafter if any CNGis available, that the same can be allocated to theindustries, preference being shown to public sectorundertakings and power projects.
3.5 It is a known and admitted fact that the number of vehicles
has increased in the State of Gujarat and with the increase of
vehicles, air pollution has also increased to an alarming level. The
toxicity in the air has increased to a dangerous level and is causing
serious health hazards/threats to the residents of the State of Gujarat.
3.6 Various petitions have been filed before the Supreme Court
of India challenging the inaction of the respective authorities in
reducing the air pollution caused due to vehicles. The Supreme Court
of India in the case of M.C. Mehta versus Union of India & Others,
reported in (1991) 2 SCC 353, (1998) 6 SCC 63, (2000) 9 SCC 519,
(2001) 3 SCC 756, (2001) 3 SCC 763, (2001) 3 SCC 767, (2002) 4 SCC
356, (2002) 10 SCC 191, has been pleased to pass various directions
to the concerned authorities and to the respective State Governments
to take steps to ensure reduction of pollution resulting due to
emissions from the vehicles and to diversify the allocation of CNG
from non-priority sectors to Transport sector in order to reduce
pollution.
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3.7 The Supreme Court of India in the case of M.C. Mehta versus
Union of India & Others, reported in (2002) 4 SCC 356, was pleased to
observe thus
The precautionary principle was elucidatedthus by this Court in Vellore Citizens WelfareForum Vs. Union of India and Others, (1996) 5SCC 647, inter alia, as follows-
The state government and the statutoryauthorities must anticipate, prevent and attackthe cause of environmental degradation. Wherethere are threats of serious ad irreversibledamage, lack of scientific certainty should notbe used as a reason for postponing measures toprevent environmental degradation. ....
The auto policy must, therefore, focus uponmeasures to ...Anticipate, prevent andattack... the cause of environmental
degradation in this filed.
3.8 The cost of living in Gujarat has also considerably increased
due to the increase of prices of basic necessities. The domestically
used LPG also forms a part of these basic necessities, whose price has
increased considerably, in the recent past. It is a well-known fact that
the supply of LPG has decreased in recent times due to decrease in
allotment and there has been a corresponding increase in its demand.
If the allotment of Natural Gas is increased by the respondent no.1, it
would reduce the burden on the Civil Supplies Department, who does
not appear to be in a position to meet and cope with the heavy
demand of Natural Gas. The petitioner, therefore, challenges the non-
allocation of Low Priced Domestic Gas for CNG and Domestic purpose
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by the respondent No. 1 to the State of Gujarat because the
inadequate gas supply to CGD consequentially leads to a higher cost
of living. Therefore, the above action visits the citizens and residents
in Gujarat State with an additional financial burden, which, in turn
increases theper capita cost of living in society. The non-allocation of
sufficient Natural Gas for domestic consumption is in violation of
Article 21 of the Constitution of India, as cooking fuel has become an
important element of everyday life. Due to non-availability of Natural
Gas as a cooking medium, the public is compelled to spend more on
the LPG cylinders, which being high on demand and low on supply is
difficult to obtain, leading to increase in everyday-difficulties for a
common man.
3.9 According to the information gathered by the petitioner from
www.infraline.com and other reliable sources, the petitioner has come
to know that total production and import of Natural Gas in India is
169.03 Million Standard Cubic Meterper diem (hereinafter referred to
as MMSCMD). The Gujarat State is being allotted 63.60 MMSCMD.
Out of the said allocation, 16.42 MMSCMD is of Imported Regasified
Liquefied Natural Gas (hereinafter referred to as the RLNG). The State
of Gujarat has become the highest Natural Gas consuming Industrial
hub, as the overall Industrial Environment is conducive for
development, the consumption of Natural Gas by industries is also
high, leaving almost nothing for domestic and vehicular consumption,
which is in contravention to the observations of the Supreme Court of
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India in the case of M. C. Mehta versus Union of India & Others
[supra].
3.10 The allocation, diversification and price fixation of the
Natural Gas is under the absolute control and powers of the
Government of India and the State of Gujarat has no power and/or
role to play in the said aspect. The Government of India has allocated
about 2 MMSCMD of Low Priced Domestic Gas for CGD, to the State of
Maharashtra, which caters to over 90% of the demand of CNG and
Domestic consumption. Similarly, in the State of Delhi, the
Government of India has allocated 2.5 MMSCMD of Low Priced
Domestic Gas to CGD, which caters to around 90% demand of CNG
and Domestic segment. In contrast to the above, the State of Gujarat
has been allocated less than 0.5 MMSCMD of Low Priced Domestic
Gas to CGD, which can only cater to around less than 40% demand of
CNG and Domestic segment. The said Low Priced Domestic Gas is
allocated to only few cities and therefore, the rest of the cities are
forced to use 100% imported RLNG for CNG and Domestic
Consumption, which in turn leads to an excessive and incessant price
rise of at least 30-40%.
3.11 On a bare perusal of the chart of allotment, it becomes clear
that the Natural Gas allotted to the State of Gujarat is being primarily
allotted to Petrochemicals, LPG and Refineries, Power Sector, Fertilizer
manufacturing units, Steel companies & similar other companies and
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thereafter, the remaining quota is allotted for CGD and other sectors.
The above action compels the general public to use petrol and diesel
as a fuel for their vehicles. As fuel can be easily adulterated, the
fumes arising out of such adulterated fuel causes more air pollution
and spoils the ambient air quality leading to an increase in the
Suspended Particulate Matter (SPM) in the air; consequently, it
causes to increase environmental pollution, leading to degradation of
environment. The usage of such fuels also leads to increase in the
cost of living and creates an additional financial burden on the
general public. Therefore, Natural Gas is required to be diverted for
domestic and vehicular usage at the APM price, which is being
allocated to the cities of Delhi and Mumbai, in the interest of the State
of Gujarat.
3.12 It is evident that in case the Government of India allocates
even 5% of Low Priced Gas to CGD for domestic customers,
(approximately 8.5 MMSCMD), such an allocation would benefit 14
million households. If Government of India allocates 5% more of Low
Priced Gas to CGD for CNG purposes, 2.8 million autos or cars can be
converted to CNG covering 56 medium sized cities each having more
than 5 lac vehicles.
3.13 Therefore, the Government of India needs to give shape to
and implement the Gas Utilization Policy, under which sectoral and
consumer-wise priorities are required to be identified by the
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Government of India. The Government of India is required to take
steps to identify the priority sectors and to locate the requisite
quantities in accordance with the needs of the said sector and
diversify unutilized Natural Gas under CGD System to meet with the
demand of Natural Gas for vehicular and domestic usage. Such policy
would in turn reduce pollution and cost of living, as observed and
directed by the Supreme Court of India in various decisions given by it
from time to time in the case of M. C. Mehta versus Union of India and
others. Hence the application.
4. The application was dealt with by the respondents by filing
separate affidavits-in-reply. Some of the Respondents have supported
the petitioner whereas some have opposed. We propose to indicate
in detail the stance taken by various respondents as well as the
contentions advanced by their respective learned counsel separately.
5. Respondent No.1 has filed affidavit-in-reply and has taken up
the following defence:
5.1 The petition is not tenable in facts as well as in law and
hence, the same deserves to be dismissed.
5.2 The indigenously produced natural gas can be broadly
divided, based on pricing mechanism/blocks, into three major
categories, namely-
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(i) Natural gas produced from nominated blocks
which includes APM gas and non-APM gas.
(ii) Natural gas produced from pre-New Exploration
Licensing Policy (NELP) blocks
(iii) Natural gas produced from NELP blocks.
5.3 The other major gas, which is used in the country, is Re-
gasified Liquefied Natural Gas (RLNG for short) which is
imported from abroad. Chemically natural gas is predominantly
Methane with small but varying proportions of higher carbon
fractions.
5.4 APM GAS:-
APM gas is produced from the nominated fields of National Oil
Companies (NOCs), viz., Oil & Natural Gas Corporation (ONGC) &
Oil India Limited (OIL). The allocation of APM gas is given to
priority sectors in accordance with the cabinet decision of May
2005. Accordingly, natural gas at APM rate/prices is being
supplied only to the following categories of consumers:-
a. Power sector consumers
b. Fertilizers sector consumers
c. Consumers covered under court orders
d. Consumers having allocations of less than 0.05
mmscmd.
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5.5 In order to rationalize the allocation of APM gas among
various priority sectors and regions, Government of India had
constituted Gas Linkage Committee (GLC) in July 1991 to
allocate APM gas. In view of availability of APM gas in the
country falling far short of the demand and the production
projected to decline further in the future, the Government
wound up the GLC on November 9, 2005. No APM gas has been
allocated since then.
5.6 As regards supply of APM gas to Delhi and Mumbai, it
may be stated that Supreme Court in the case of M.C. Mehta v/s
UOI has held that the problem of air pollution was extremely
serious in Delhi and nine other cities, including Mumbai,
necessitating supply of CNG to these cities. Accordingly, APM
gas is being supplied to City Gas Distribution (CGD) entities,
which provide CNG in inter alia Delhi & Mumbai. In Gujarat also
domestic gas is being supplied to Gujarat Gas Company Limited
(GGCL) which supplies CNG in Ankleshwar, Bharuch and Surat.
5.7 As regards the allocation of natural gas to Gujarat, it
may be stated that out of total APM allocation of 119.51 million
metric standard cubic meters per diem (mmscmd) around 26.7
mmscmd has been allocated to Gujarat. Currently, as things
stand, after disbanding GLC, no APM gas is available for
allocation, and therefore the request for allocation of APM gas
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cannot be acceded to.
5.8 PRE-NELP GAS:
The gas produced from pre-New Exploration Licensing
Policy (NELP) blocks is sold by the Contractor in accordance with
the provisions of Production Sharing Contracts executed
between Government and the producers.
5.8.1 From the pre-NELP field of Panna-Mukta-Tapti (PMT),
also, gas has been allocated to GGCL and Gujarat State
Petroleum Corporation Limited (GSPCL) for supply to small
consumers. At present, no spare gas under pre-NELP block is
available for allocation.
5.9 NELP GAS
After the advent of New Exploration and Licensing Policy
(NELP) era, the production of indigenous gas had increased
substantially. The production from KG-D6 block of RIL-NIKO under
NELP was envisaged at a level of 60 MMSCMD. The Empowered
Group of Ministers (EGoM) constituted to decide issues relating
to commercial utilization of Gas produced under NELP, allocated
63.309 mmscmd on firm basis, and 30 mmscmd on fallback
basis, to various priority sectors as below:
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Allocation (mmscmd)Sector Firm Fallback Total
Power 32.677 12 44.677
Fertilizers 15.708 ~ 15.708
CGD 1.222 2.165 3.387
Steel 4.19 4.19
Refineries 5 6 11
Petrochemicals 1.918 1.918
LPG 2.594 2.594
Captive Power 10 10
Total 63.309 30.165 93.474
5.10 However, the production from KG D6 field started
declining from March 2010, and by December 2010, it had
declined to around 50 mmscmd, which was barely enough to
meet the committed/firm allocations to the core sectors in the
order of priority determined by EGoM, i.e., Fertilizer, LPG, Power
and CGD.
5.11 From KG D6 field under NELP, a quantity of 77, 593
standard cubic meters per diem (scmd) has been allocated to
Sabarmati Gas Ltd. for Gandhinagar, Mehsana & Sabarkantha
and 49,383 scmd has been allocated to Hindustan Petroleum
Corporation Ltd for Ahmedabad. An allocation of 2,00,000 scmd
of KG D6 has been made to M/s Adani Energy Ltd., for supply of
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CNG to transport sector in Ahmedabad on provisional basis and
this allocation is subject to final status of authorization given to
them by PNGRB. Put together, out of a total firm allocation of KG
D6 gas of 1.222 mmscmd for CGD sector for the entire country,
0.326 mmscmd has been allocated to Gujarat alone which is
around 27% of the total allocation.
5.12 The decline in the production of natural gas from KG D6
has continued and by March 2011, the production had fallen to
48 mmscmd. Therefore, in public interest this Ministry decided
to fulfil the firm demand of the core sectors. The supply
situation worsened further and in August, 2011, the production
has fallen to mere 47 mmscmd, thereby leading to a cut even in
the CGD sector, which is one of the core sectors.
5.13 It may be seen from the above that against the firm
allocations of 63.3 mmscmd (of which around 52 mmscmd is for
the above mentioned four core sectors), the current production
from the KG D6 field has fallen to around 47 mmscmd and is not
even sufficient to even meet the firm allocations earlier made by
EGoM to the core sectors. As such, no allocation can be made
from KG D6 field also.
5.14 The present total availability of natural gas in the
country is around 166.17 million standard cubic meters a day
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(mmscmd); of this the indigenous gas is only 71 mmscmd. The
source-wise details of natural gas are as follows:
Source Average daily availability
(mmscmd) in June 2011ONGC 50.78OIL 6.63PMT 11.87Other J Vs 3.39KG D6 47.17(l)Total of Domestic
Gas
119.84
Spot R-LNG 21.2RLNG 25.13(2) Total of Imported
gas
46.33
Total (1+2) 166.17
5.15 As submitted above, the non-APM indigenous production
of natural gas in the country consists of production from new
fields of nominated blocks, pre-NELP production and production
under NELP. At present, the production from KG D6 field is
around 47 mmscmd and is priced at US$4.2/mmbtu. It is single
largest indigenously produced natural gas in the country.
Similarly, APM gas is also priced at US$4.2/mmbtu less royalty.
In view of this, the argument that APM is cheaper than other
gases is not correct. However, the imported RLNG is more
expensive. It is also a fact of life that domestic production is
much lower than the demand and therefore, will have to be met
by imported gas.
5.16 The Government's endeavour is to accord high priority
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to the core sectors in the matter of allocation of gas as reflected
in the Gas Utilization Policy. The current overall sector-wise
supply (June 2011) of the natural gas (including imported RLNG)
is as follows:-
SECTORSupply
MSCMD)
% OF TOTALSUPPLY
Fertilisers 37.74 22.7%Power Sector 61.41 37.0%CGD (Domestic+
CNG) 7.9 4.8%Court Mandated
Customer 1.09 0.7%Shrinkage for Liquidextraction - LPG etc. 7.18 4.3%
Small consumerHaving allocation
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gas. All sectors including the extremely price sensitive sectors
such as power and fertilizer also use some imported RLNG to
fulfil their requirements of gas. The use of RLNG in the country is
set to grow as the domestic demand cannot be met by the
domestic gas. As the domestic gas is limited, its allocation is as
per a well-defined policy of the Government and as per the
broad following priority:-
1.Fertilizer
2.LPG
3. Power
4. CGD
5. Other sectors such as steel, Petrochemicals,
Refineries, etc.
5.18 The amount of domestic gas available is distributed
as per the above priority in a rational manner to serve larger
public interest. No sector which is not in accordance with this
Gas Utilization Policy can claim overriding priority. Supreme
Court in its Judgment dated 7.5.2010 in the RIL & RNRL cases
has held that the Government owns the gas till it reaches its
ultimate consumer and that Production Sharing Contract (PSC)
shall override any other contractual obligation between the
Contractor and any other party. Under the provisions of the PSC,
commercial utilization of natural gas would be determined in
accordance with the Government's Gas Utilization Policy.
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5.19 Government has accorded priority to enhance energy
security of the country. A multi-pronged strategy has been
adopted to augment gas supplies and to bridge the gap between
supply and demand for the domestic market by intensification of
domestic Exploration and Production (E&P) activities, including
Coal Bed Methane (CBM), through LNG imports, and new
technologies like Underground coal gasification and Natural Gas
Hydrate Programme (NGHP). In this context, Government is also
trying to ensure import of natural gas through trans-national gas
pipelines.
5.20 Government has enacted the Petroleum and Natural Gas
Regulatory Board Act, 2006 which has established the Petroleum
and Natural Gas Regulatory Board to regulate, inter alia,
transportation, distribution, marketing and sale of petroleum,
petroleum products and natural gas. The Board, either on the
basis of an application or on suo motu basis, forms an opinion
that it is necessary or expedient to lay, build, operate or expand
a pipeline, it gives wide publicity of its intention to do so and
authorizes the entity for the same.
5.21 It is the endeavor of the Government to encourage
supply of Compressed Natural Gas (CNG) to a large number of
cities, so as to improve the quality of air and to bring down air
pollution. CNG is sold by City Gas Distribution (CGD) Companies,
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which are not Central Public Sectors Undertakings (CPUs).
Development of CGD projects in any area depends upon, inter
alia, pipeline connectivity, availability of gas and commercial
viability of the project and is processed by Petroleum and
Natural Gas Regulatory Board (PNGRB for short). However, no
gas is available at present for allocation to CGD sector as sector
having higher priority are still short of gas for their requirement.
5.22 The petitioners have failed to establish as to how and
which of the actions of Respondent No. 1 is arbitrary, high
handed or unreasonable. In order to attract public as well as
private players in city/local natural gas distribution networks
throughout the country, the Government of India has enacted
the Petroleum and Petroleum and Natural Gas Regulatory Board
(PNGRB) Act. PNGRB would undertake inter alia, authorization of
city or local natural gas distribution networks.
5.23 The Government has formulated Gas Util ization Policy
in larger public interest. As no indigenous gas is available for
allocation, it is not possible to allocate additional indigenous gas
to CGD sector in Gujarat. However, RLNG is being increasingly
used by the CGD and is available for use. Currently about 46
mmscmd of RLNG is being used in the country by various sectors
as the domestic gas is unable to fulfil the demand of all users.
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5.24 This Respondent is fully aware that air quality has
increasingly become an issue of social concern in the backdrop
of increasing industrialization and vehicular pollution. In order to
control vehicular pollution, Government of India has formulated
the Auto Fuel Policy. The policy aims at comprehensively and
holistically address the issues of vehicular emissions, vehicular
technologies and auto fuel quality in a cost-efficient manner
while ensuring the security of fuel supply and supply of CNG is
only one of the instruments to reduce air pollution. However, it
is the endeavour of this Respondent to encourage supply of CNG
to the maximum number of cities.
5.25 The allocation is made by the Respondent No. 1 in
accordance with the Gas Utilization Policy which has been
framed keeping in view the larger public interest. It is not for the
Petitioners to decide the order of priority or to interfere with the
policy of the Respondent No. 1. Like LPG, natural gas is also in
short supply and has to be used to derive optimum benefits. The
Union of India is fully competent and has powers for taking a
policy decision on allocation of natural gas, which falls within
Entry no.53 of List I- Union List of VII Schedule of the
Constitution of India. Therefore, the question before this Court
is to satisfy itself whether this policy decision is arbitrary,
unjust, violative of fundamental rights or is dehors the
Constitution or violative of any statutory rights.
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5.26 The Respondent No. 1 is fully competent to take policy
decision in larger public interest. The Petitioners cannot claim
allocation of gas as a matter of right and neither can they claim
supply of gas at a particular rate or price.
5.27 The overall gas portfolio out of 119.51 mmscmd APM
allocation, 26.7 mmscmd has been allocated to Gujarat. It may
also be clarified that after revision of APM price in 2010, the
price of APM gas is almost at par with KG D6 gas. Out of the
total firm allocation of 1.222 mmscmd for CGD sector for the
entire country, 0.326 mmscmd has been allocated to the CGD
sector in Gujarat , which is around 27%.
5.28 The allocation of gas is made in accordance with the
Gas Utilization Policy and it is not for the Petitioner to decide the
allocation.
5.29 The Petitioners ought to be concerned with reducing
environmental pollution and not with the supply of cheap gas.
RLNG is available in abundance and can be used for vehicles to
reduce pollution. As already submitted, all other sectors,
including fertilizers and power, are also using RLNG in some
measure, due to short supply of indigenous gas.
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5.30 The Petitioners have failed to establish that the
allocation of natural gas made by the Respondent No. 1 is not in
accordance with the Gas Utilization Policy. On the contrary, the
Petitioners are seeking interference of this Court to ignore the
order of priority prescribed in the Gas Utilization Policy, which
has been broadly discussed in two recent decisions by the
Bombay High Court vide order dated 08.7.2011 in Writ Petition
No. 3748 of 2011 filed by Welspun Maxsteel Limited and by the
Delhi High Court vide order dated 29.9.2011 in Writ Petition No.
3106 of 2011 filed by Essar Steel Limited.
5.31 The petition filed by the petitioners is misconceived and
is totally devoid of merits or substance warranting interference
of this Court and may be dismissed outright with costs.
5.32 The respondent No.1 Union of India has filed a supplementary
affidavit in reply by which it made the following clarifications of the
earlier affidavit:
5.33 With regard to paragraph 7 of earlier Affidavit, it was
clarified that all consumers, irrespective of their end usage of gas but
whose total allocation of gas is less than 50,000 SCMD are included in
this category.
5.34 The price of CNG is not determined by the Government. CGD
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entities determine the price based on various factors, inter alia, cost
of natural gas, trunk transportation tariff, local distribution charges,
Compression & dispensing charges, Operating expenses,
Administrative cost, Applicable taxes & duties.
5.35. In the year 2010-11 the supply of APM gas against allocation
was as follows:
Sectoral Allocation in units in Gujarat state (MMSCMD)Power Fertilizers Steel Others Internal
Consumption +
Shrinkage
Total
10.49* 5.51 3.11 5.62 2.04 26.77Supply (MMSCMD) in 2010-11 against the allocation4.709 3.224 0.698 2.540 1.21 12.381
*Includes the allocation of 2.25 mmscmd to Pipavav Power
Project, which has not taken off yet.
5.36 It was further clarified that Firm basis allocation is made
where the buyer is obligated to receive a certain quantity of gas &
simultaneously seller is obligated to supply a certain quantity of gas
through a commercial agreement. In a Fallback allocation, seller will
supply gas as and when gas is available with the seller after meeting
its firm commitments. For example, this can be on account of
additional production beyond the firm allocation or when a buyer(s) is
(are) unable to lift the contracted firm allocation(s).
5.37 The firm allocation of KG-D6 gas made to various CGD
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entities by EGoM as mentioned in paragraph 15 of the original
affidavit is as below:
__________________________________________________________________
SI No. Name of the Plant Gas allocated (inmmscmd)
1. Sabarmati Gas Ltd.(Gujarat) 0.0782. HPCL (Gujarat) 0.0493. Adani Energy Ltd.(Gujarat) * 0.2004. Indraprastha Gas Ltd. 0.3095. Avantika Gas Ltd. - for Indore 0.0126. Avantika Gas Ltd. - for Ujjain 0.001
7. Mahanagar Gas Ltd. 0.3708. Green Gas Ltd 0.0159. GAIL Gas Ltd 0.02010. Soumya DSM 0.02011. BGL Hydrabad 0.10012. BGL Kakinada 0.047
Total 1.222*subject to PNGRB authorization.
5.38 An Empowered Group of Ministers (EGoM) for commercial
utilization of natural gas produced from Blocks under New-Exploration
& Licensing Policy (NELP) has been formed to decide pricing &
allocation of gas produced from NELP blocks. The EGoM had approved
the following pricing formula for of KG-D6 gas: Selling price/ (P) = 2.5
+ (CP-25)0.15 (in US$/mmbtu), where CP=crude price in US$/barrel,
with cap of CP=US$ 60/barrel.
5.39 The selling price comes to US$ 4.2/mmbtu for crude price
greater or equal to US$ 60/barrel. The price basis/ formula is valid for
five years from the date of commencement of supply, viz., till March
2014. The prices of other domestic gases such as APM, non-APM are
fixed by Government, while some other gas prices are as per
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respective PSC provisions. The price of imported spot RLNG is market
determined and vary from cargo to cargo.
5.40 In view of the foregoing submissions made herein above, the
instant petition filed by the petitioners is misconceived and is totally
devoid of merits or substance warranting interference of this Court
and may be dismissed outright with costs.
6. The State of Gujarat, the respondent No.2 took the following
defences by filing an affidavit in reply, rather supporting the
petitioner; this may be summed up thus:
6.1 In spite of State Government's continuous representation to
the Central Government for last many years to allocate Administered
Price Mechanism (APM) gas to the State of Gujarat, no positive
response has been received so far. Subsequent to discovery of D-6
gas by M/s.Reliance Company, the State Government also requested
Central Government to allocate D-6 Gas, since the State had already
developed substantial City Gas Distribution (CGD) network through
State owned Company GSPC Gas Limited and various other
companies.
6.2 The State Government also considered to frame, a law viz.
Gujarat Motor Vehicles (Use of Fuel) Regulation Bill, 2005 and sent the
same for approval of the Central Government. However, Central
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Government has yet not approved the same and neither has it
advised the State Government about clauses and the Bill has been
returned back to the State Government with a direction that the same
may first be passed by the State assembly and then, be sent for
Presidential Approval.
6.3 In Gujarat, more than Rs.5000 crore's investment has been
made in gas pipeline infrastructure. Gas grid network of around 2500
km. high-pressure transmission line has already been commissioned.
Similarly, 10,000 km. City Gas Distribution (CGD) pipeline network is
also functional in the State. Various companies in the public sector,
private sector, Joint Venture Company, Cooperative Societies and
local bodies have taken innovative steps in establishing this CGD
network. The State Government has facilitated all these CGD
companies for acquiring Right of Use (RoU) on the concerned land for
laying out necessary pipeline network. State Government has also
allocated land for setting up necessary infrastructure for CGD
network, wherever it was necessary. It is only because of constant and
concentrated efforts by the State Government for so many years that
this CGD Network has become possible.
6.4 At present more than 8.07 lakhs of domestic
households are connected and provided gas with 24X7 incessant
supplies. Similarly, Compressed Natural Gas (CNG) is being provided
to 2.6 lakh vehicles daily through 242 CNG outlets scattered across
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the State of Gujarat. Therefore, it cannot be said that the State Govt.
has not taken adequate steps for preserving the environment and
creating gas grid network. However, in spite of repeated
representations by the Government of Gujarat at various level and
before various forums, the State Government has yet not received
any positive response in respect of allocation of APM Gas and D-6
Gas, the State's Public Sector Company GSPC Gas Limited is not
allocated APM Gas in spite of its large CGD network.
6.5 Domestic PNG connections would replace LPG household
connections. It is pertinent to mention here that for each LPG cylinder
provided to the customers, the Government of India is providing
subsidy of more than Rs.356 for each cylinder. Similarly, Central Govt.
is also bearing subsidy of more than Rs.10 for each one liter of petrol
and diesel. Because of the innovative steps taken by the State Govt.,
so many vehicles, in the State are using gas as fuel, and therefore,
the State Government's CGD network has helped the Central Govt. in
saving the subsidy amount to the tune of Rs.281 crore per annum for
LPG cylinders and Rs.380 Crore per annum towards the subsidy of
Petrol and Diesel.
6.6 In absence of APM of D-6 gas, the State Government has to
rely on imported RLNG only. Currently, the CGD Companies in the
State, except Gujarat Gas Company, depend on RLNG from M/s.
Petronet LNG Limited (PLL) for onward supply of Gas to the customers
in residential, commercial and transport segment. The prices of RLNG
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continue to increase every month in terms of the formula agreed
between PLL and its supplier. Therefore, prices of gas supply by these
Companies have to be increased affecting adversely million of people
across the State. All these points have been brought to the notice of
the Central Govt. time and again and lastly vide the Chief Ministers
letter dated 14-7-2011 addressed to the Prime Minister. The State
Govt. is yet to receive a positive response from the Central Govt. in
this regard. If APM and D-6 gas are allocated to the State, the price at
which the CGD companies supply gas to its customers would reduce
substantially.
6.7 The State Government supports the prayers of the petitioner
that APM gas and D-6 Gas should be allocated to the CGD Companies
in the State and there should be a regulator for fixing price of the Gas
for various types of customers.
7. The respondent No. 3 has filed affidavit-in-reply to the affidavit
filed on behalf of the Union of India [Respondent No.1] taking up the
following defence:
7.1 The Respondent No. 1 has in its Affidavit avoided the main
issues raised in the petition. The Respondent No.1 has not denied that
there is discrimination in allocation of gas to the City Gas Distribution
(CGD) companies operating in the State of Gujarat. The Respondent
No. 1 has only stated that it is no longer possible to undertake any
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allocation of gas under the APM as the Gas Linkage Committee that
decided the earlier allocation has since been disbanded.
7.2 The averment made in paragraph 8 of Affidavit of
Respondent No.1, stating that post dismantling of the Gas Linkage
Committee, no APM gas has been allocated, is erroneous.
7.2.1 As opposed to the above mentioned averment of
Respondent No.1, Indraprastha Gas Limited ("IGL") in Delhi and NCR
regions and Mahanagar Gas Limited ("MGL") in Mumbai (CGD
companies promoted by Central PSUs) have been allocated APM gas
post dismantling of GLC on November 9, 2005. Furthermore, in June
2011, when supplies from D6 fields were declining, additional gas
from APM (0.3 MMSCMD) was allocated to IGL.
7.2.2 It is pertinent to note that as recently as June 2011 (when
production in KG D-6 Fields was declining), it was reported that
Respondent No.1 also granted approval to IGL to use unutilized APM
allocations for Gurgaon / Faridabad for its own operations. It has also
been reported that MGL was recently allocated gas from APM fields on
"no cut" basis and MGL has 0.2 MMSCMD of unutilized APM
quantities. Thus, in spite of winding up of Gas Linkage Committee,
APM gas was allocated by the Respondent No. 1 to IGL, while a critical
resource like APM gas is lying unutilized with MGL.
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7.2.3 Furthermore, this clearly proves the arbitrary manner in
which Respondent No.1 has been allocating APM gas to only such CGD
companies which are promoted by Central PSUs and discriminating
against other CGD companies and in particular those operating in the
State of Gujarat.
7.3 The natural gas was and continues to be under the complete
jurisdiction of the Government of India even though the APM as it
existed earlier may have been disbanded, it is the Government of
India that has the jurisdiction and control over allocation of natural
gas resources in India.
7.4 The Respondent No. 1 in its Affidavit did not address the
issue of the grounds for allocation of natural gas by the Government
of India and nor did it address the issue of unutilized APM allocation to
IGL and MGL, which are promoted by Central PSUs. There has been no
rationale or principles formulated by the Government of India in
formulating the policy for allocation of APM Gas or D-6 Gas. The
Government of India is acting without any clear guidelines or
principles in exercising its jurisdiction/authority to allocate natural gas
from the APM and D-6 fields. The Respondent No. 1 in its Affidavit has
only reiterated the actions that it has undertaken without providing
the guiding principles or the basis for the allocation of natural gas
undertaken by it, as also, the reason for not considering or evaluating
the repeated requests by the Government of Gujarat for allocation of
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APM or KG Basin D6 Field gas to city gas distribution companies in the
State of Gujarat.
7.5 The factum of fall in production of D-6 Gas is not linked to
the principles of allocation of gas by the Government of India. It is
clear that the fall in production of D-6 Gas is temporary and the
operator of the D-6 fields will implement the required technical
solutions to ensure increase in output of natural gas from the D-6 gas
fields. However, the principles of allocation of gas and the extent of
allocation of gas cannot be arbitrary and not based on any known or
discernible guidelines.
7.6 The Respondent No. 1 in its Affidavit did not address the
issue of the requirement of allocation of natural gas for CNG purposes
in the State of Gujarat. The Supreme Court ruled in M.C. Mehta versus
Union of India [(2002)4 SCC 356 ] , that the Respondent No.1 would
give priority to transport sector including private vehicles all over
India with regard to allocation of natural gas from domestic fields for
usage in CNG segment. The Apex Court further said that this meant
that first the transport sector in Delhi, and other air polluted cities in
India, will be allocated natural gas for CNG segment, and it is only
thereafter, if any domestic gas is available, the same can be allocated
and made available to the industries, preference being shown to
public sector undertakings and power projects.
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7.6.1 In light thereof, non-allocation of gas from domestic
fields, by Respondent No.1, for usage in CNG and PNG segments in
State of Gujarat is gross violation of the above mentioned order.
7.7 In Paragraph 9 of its affidavit the Respondent No.1 has
claimed that 26.7 MMSCMD of APM gas has been allocated to the
State of Gujarat. No APM gas has been allocated to CGD entities,
namely, GSPC Gas Co. Ltd., Adani Gas Limited, and
Sabarmati Gas Ltd. and currently, the requirement of CNG segment is
being met through expensive RLNG. The APM gas supplies
to GGCL, only CGD entity in Gujarat apart from GAIL Gas, to have
allocation of APM gas have reduced substantially over the years.
Against a total allocation to GGCL of approx. 0.45 MMSCMD, whereas
the current supplies stand at only 0.2 MMSCMD.
7.8 The averments made by the Respondent No.1 in its Affidavit
are essentially to the effect that since there has been a fall in APM
and D-6 Gas production, the Government of India has taken a policy
decision to first meet the allocation of the core sectors. Although
Respondent No.1 in the said Paragraph 21 states "the amount of
domestic gas is distributed as per the above priority in a rational
manner to serve larger public interest", it does not provide any
specific guidelines or principles that governs such policy for allocation
of gas and thereby the statement that such allocation is undertaken
in a rational manner stands unsubstantiated.
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7.9 According to the Respondent No. 3, the allocation of
available gas, specifically allocation of gas in the period wherein a
shortfall in production from the APM and D-6 Fields is witnessed, has
not been done in accordance with any stated policy but by unguided
and opaque executive decisions of Government of India. The Affidavit
of the Respondent No.1 failed to disclose or provide any such stated
policy based on which the executive decision of allocation of available
gas has been undertaken by the Government of India.
7.9.1 There are in existence, well developed principles in the
gas industry that would govern a gas distribution company in
allocation of available gas during periods of shortfall in availability of
gas. No such corresponding principles have been formulated or
considered by the Government of India. The Affidavit of Respondent
No. 1 merely states that there exists a shortfall in production,
however, how the Government of India intended to respond or
manage such shortfall in availability has not been accounted for.
7.10 Only a small fraction of natural gas produced in India is
earmarked for usage in CNG & PNG segments. Furthermore, assuming
but without admitting that there is a short supply of an essential
commodity, then the priority must be given to public health by
promoting usage of "eco-friendly" natural gas in CNG & PNG
segments, as opposed to the health of the balance sheet of a
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company. To enable industries to cut their losses or make more profit
at the cost of public health is not a good sign of governance and this
is contrary to the mandate of Article 39(e), 47 and 48-A of the
Constitution of India.
7.11 In paragraph 12 of its affidavit, the Respondent No.1 has
claimed that GSPCL and GGCL have been allocated gas from PMT gas
fields, according to the respondent No. 3, the current supplies of gas
from PMT fields to GGCL & GSPCL are lower compared to the
allocations made earlier. It may be noted that there is an uncertainty
with regard to the term of supply of PMT gas to GSPCL as indicated
below:
Party
Allocation made Current supplies
GSPCL 1.3 MMSCMD (Dec2006)
0.7 MMSCMD(Sept 2011)
GGCL 2.13 MMSCMD (Apr2008) 1.45 MMSCMD (Sept 2011)
7.12 In paragraph 15 of its affidavit, the Respondent No. 1 has
stated that the State of Gujarat has been allocated a total of 0.326
MMSCMD of gas from KG D6 field (i.e. 27% of total allocation). In this
regard, the following facts are relevant:
a. The Empowered Group of Ministers (EGoM) vide
meeting held on May 28, 2008 decided an allocation of
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initial 40 MMSCMD of RIL D6 gas, out of which a maximum
of 5 MMSCMD would be made available to CGD projects for
supply to PNG to households and CNG to transport sector.
b. Further, EGoM vide its meeting on March 23, 2009,
decreased the allocation for PNG & CNG to 0.8 MMSCMD
and in view of the same, the balance quantity of =4
MMSCMD allocated to power sector companies.
c. The Respondent No.1 has stated that the total firm
allocation of KG D6 gas to CGD sector is 1.222 MMSCMD
for entire country, of which 0.326 MMSCMD has been
allocated to Gujarat, i.e. 27%.
d. Of the 0.326 MMSCMD allocation of KG D6 gas to
Gujarat, 0.20 MMSCMD has been allocated to Adani Gas
Limited but the same is on provisional basis and is subject
to final status of authorization given to them by PNGRB.
e. Therefore, not taking into account the allocation of
point 0.2 MMSCMD made to Adani Gas Ltd. the total
allocation from KG D6 fields to CGD segment in Gujarat is
only about 0.126 MMSCMD, against the current total
demand of CGD in Gujarat of 9 MMSCMD.
There is no rationale for the allocation made as the same
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seems to have no relationship with the demand. Thus, the
statement being made by the Respondent in paragraph 15
of its affidavit that the State of Gujarat has been allocated
a total of 0.326 MMSCMD from KG D-6 basin is erroneous.
f. Requests for allocation of gas from Gujarat CGDs
were overlooked due to the issue of authorization, which
was never a precondition of Empowered Group of Ministers
constituted in August 2007 for allocation of gas.
g. However, with reduction in the output of gas from
RIL's KG D6 fields, supplies to CGD entities in Gujarat as of
October 2011 have been reduced to 0 (zero).
7.13 In paragraph 20 of its affidavit, the Respondent No.1 has
claimed that no gas is available at present for allocation to CGD
sector as sectors having higher priority are still short of their gas
requirement. In this regard, it is relevant to state that out of the total
supplies, to the CGD (Domestic + CNG) segment in India of 7.9
MMSCMD, Gujarat CGD companies receive only about 0.126 MMSCMD
from KG-D6 fields which is less that 2% of allocation of gas for CGD in
India.
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7.14 In paragraph 25 of its Affidavit, the Respondent No.1 has
claimed that no gas is available at present for allocation to CGD
sector as sectors having higher priority are still short of their gas
requirement. This does not provide any disclosure of the reason as to
why Gujarat based CGD companies had been left out earlier, i.e. at
the time of making allocation of gas from domestic fields (i.e. APM,
PMT & D6 gas) and furthermore, does not provide any rationale as to
the principles on which gas is being allocated during this period of
shortfall in production.
7.15 In paragraph 28 of its Affidavit Respondent No. 1 has stated
that RLNG is being increasingly used by the CGD segment and is
available for use. The CNG & PNG segments are also extremely price
sensitive and using R-LNG vis-a-vis domestic gas for the said
segments would in turn make the prices of CNG and PNG unaffordable
to the masses.
7.16 In paragraph 32 and other parts of its Affidavit, the
Respondent No. 1 has stated that allocation is made in accordance
with the Gas Utilization Policy, which has been framed keeping in view
the larger public interest. In this regard, it may be mentioned that
based on data available with it from various reports in public domain,
gas from the domestic fields has been allocated by the Government of
India to industries not featuring in the priority order as prescribed by
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the current Gas Utilization Policy while the representations of the
State of Gujarat for allocation of gas to CGD companies have been
overlooked while allocating gas from the domestic fields.
7.17 In paragraph 34 of its Affidavit, the Respondent No. 1 has
stated that "after revision of APM price in 2010, the price of APM gas
is almost at par with KG D-6 gas". In this regard the following table
that indicates the prevailing gas prices for various gas sources in India
should be taken on record:
Source US$/MMBTU Rs./'000 scm
APM(Excluding North est region) 4.20 8333
Panna Mukta 5.73 11369
Tapti 5.57 11052
RIL D6 4.20 8333
RLNG-Long Term Agreement 9.097 18050
RLNG-Spot Cargo Around 17 33730
(Assuming 1 US$=50 Rs.) (Gas prices are excludingmarketing margin, transmission charges, taxes & duties)
7.17.1 Thus, it is clear that even though the price of APM gas
may now be similar to KG D6 gas, it is still more reasonable in pricing
than other sources of gas such as RLNG (long term) / Spot RLNG.
7.17.2 Further in paragraph 34 of its affidavit the Respondent
No. 1 has stated that "Out of the total firm allocation of 1.222
mmscmd for CGD sector for the entire country, 0.326 mmscmd has
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been allocated to the CGD sector in Gujarat which is around 27%." In
this regard, the answer of the Respondent No.3 is that based on
various sources, at present, the demand of natural gas for usage only
in CNG & PNG segments in Gujarat is less than 2 MMSCMD. While, the
current production of natural gas from the domestic fields in India is
around 120 MMSCMD., it can therefore be implied that the natural gas
requirement of only the CNG & PNG segments in the State is just over
1.5% of the total natural gas currently being produced. Hence,
Government of India should at least allocate such small quantity by
applying a pro-rata marginal cut in the supplies to such non-priority /
private sector customers in the larger public interest.
7.17.3 In this regard, it is worthwhile to mention that even
though the State of Gujarat was allocated 26.7 MMSCMD of APM gas
earlier, however, currently such supplies have been reduced to about
9 MMSCMD. Gujarat Gas Co. Ltd. was not allocated gas from D6 fields
owing to its allocation of APM/PMT gas. However, CGD companies
promoted by Central PSUs, such as Mahanagar Gas Ltd., Indraprastha
Gas Ltd. (M/s GAIL is one of the co-promoters), Sabarmati Gas Ltd.
(M/s BPCL is one of the co-promoters) and others were recognized as
authorized entities by MoP&NG and allocated D6 gas in spite of some
of them having prior allocation of APM / PMT gas (i.e. Mahanagar Gas
Ltd. and Indraprastha Gas Ltd.).
7.17.4 In light of the arbitrary stand being taken by the
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Respondent No. 1 in rejecting requests for higher allocation for CGDs
in the State of Gujarat on grounds of the Gas Utilization Policy and
further allocating gas to entities outside the Gas Utilization Policy
itself is highly vague and opaque. Thereby, the increased use of RLNG
in view of non-allocation/ curtailment of domestic gas have resulted in
higher CNG prices in the State of Gujarat.
7.17.5 This position adopted by Respondent No.1 has resulted in
a lacuna that is prompting abuse of dominant position by certain
private sector gas distribution entities. The Government of Gujarat
has recently even referred a matter to the Competition Commission of
India against Gujarat Gas Co. Ltd. (GGCL) for abnormal increase in
CNG prices in Surat, Bharuch & Ankleshwar areas. However, GGCL has
claimed that said increase is attributed to higher use of costlier R-LNG
in its natural gas portfolio. At present, the matter is before the
Competition Commission of India for consideration.
7.17.6 The Government of Gujarat neither has control on
allocation of gas nor prices of CNG being charged by the city gas
distribution companies in the State. Hence, Government of Gujarat is
left with no other option but to request for adequate allocation of
domestic gas to various CGD companies in Gujarat to cater to the
CNG & PNG segments.
7.17.7 The CNG prices of HPCL have recently increased from
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41.55 Rs./kg in October 2011 to 50.20 Rs/ kg in November 2011 (21%
increase) which is currently the highest in the country, as the supply
of gas from RIL's D6 fields has reduced from 0.049 MMSCMD to 0
MMSCMD and HPCL had to cater to the requirement of its CNG
stations by utilizing RLNG sourced on spot basis. This has led to lower
sales of CNG.
7.17.8 Based on various sources that CGDs in Gujarat have
connected over 8 lacs household customers and sell more than 11 lac
kg a day of CNG (i.e. = 1.5 MMSCMD), thereby resulting in subsidy
savings to Central Government of approximately Rs. 335 crore per
annum on LPG and Diesel. In view of the likely saving, if usage of CNG
& PNG were promoted, there would be several advantages namely (i)
promotion of environment friendly fuel (ii) competitive price fuel for
the masses (iii) lower inflation (iv) lesser subsidy burden on the
Central Government.
7.18 In paragraph 36 of its Affidavit, Respondent No.1 has
claimed that RLNG is available in abundance and can be used for
vehicles to reduce pollution. In this regard, the Respondent No.1
firmly believe that RLNG is an abundant and viable source for use by
vehicles, then on what grounds has it allocated APM and KG D-6 gas
to IGL and MGL, the two CGDs which are promoted by Central PSUs.
7.19 In response to paragraph 37 of Affidavit of Respondent No.
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1, wherein it has sought to rely on the cases of Welspun Maxsteel
Limited and Essar Steel Limited, it may be mentioned that the
allocation to Welspun Maxsteel Limited and Essar Steel Limited are
themselves an example of the arbitrary manner in which Respondent
No. 1 has been allocating gas from KG D-6 basin since the steel sector
had been allocated lower priority than the CGD sector in the Gas
Utilization Policy of Respondent No.1.
7.19.1 The case of Welspun Maxsteel Limited, cited by the
Respondent No.1 in paragraph 37 of its affidavit, is not an applicable
precedent to this case, as the Welspun case was a challenge by a
specific industrial unit whose gas allotment under its individual gas
supply agreement had been curtailed in light of the fall in supply of
gas from the D-6 gas fields. The court considering the fact that there
are provisions of the gas sales agreement that allowed for such
curtailment and also the fact that the decision was based on the Gas
Utilization Policy merely held that the order curtailing the gas supply
to the unit had been issued with due application of mind and was not
arbitrary. The present petition however is very different. The issue
before this Court in the present petition is not of mere curtailment of
gas supply to a particular unit but the manner in which executive
action has been undertaken by the Government of India in allocating
gas between states and sectors themselves. It is, therefore, erroneous
concept to state that the judgment of the Welspun case would govern
the present proceedings before this Court.
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7.19.2 Similarly, the case of Essar Steel Limited, cited by the
Respondent No. 1 in paragraph 37 of its affidavit, is again not a
correct precedent to the present proceedings. In the proceedings
before this Court, the petitioner is pressing the fact that the manner
of allocation of natural gas, even during a period of shortfall, has been
arbitrary and not rational. Therefore, the Essar Steel Limited decision
is also not a suitable precedent for Respondent No.1 in the present
proceedings.
7.20 In light of the facts stated, it is the prayer of the Respondent
No.3, that :
i. This Court be pleased to direct the Union of India to
allocate additional quota of Natural Gas for domestic and
vehicular usage for the benefit of the general public and
environment to the State of Gujarat at the APM rate at which
Natural Gas is being supplied to the cities of New Delhi and
Mumbai;
ii. This Court be pleased to direct the Union of India to
prioritize and diversify the unutilized Natural Gas from non-
priority sector to the CGD for their domestic and vehicular
usage, as
directed by Supreme Court of India in the case of M. C.
Mehta versus Union of India, reported in (2002) 4 SCC 356,
which in turn would reduce the pollution and the cost of
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living;
iii. This Court be pleased to direct the Union of India to
allocate Natural Gas from any other domestic gas field, such
as C-Series or North Tapti, for domestic and vehicular usage
for the benefit of the general public and environment to the
State of Gujarat;
iv. This Court be pleased to direct the Union of India to
clearly stipulate the principles based on which APM and Non-
APM Domestic gas would be allocated.
8. The respondent No. 3 the Under Secretary to the Government of
Gujarat has also filed additional affidavit and has taken up the
following defence:
8.1 The Respondent No.l has by its own admission submitted in
paragraph 20 of its Affidavit in Reply that the Government (i.e.
Respondent No.l) endeavour is to accord high priority to the core
sectors in the matter of allocation of gas as reflected in the Gas
Utilization Policy. Further, in paragraph 21 of its Affidavit in Reply
Respondent No.1 has stated that since the domestic gas is limited, its
allocation is as per a well defined policy of the Government and
following priority :
1] Fertilizer2] LPG
3] Power4] CGD5] Other Sectors such as Steel, Petrochemicals, Refineries,
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etc.
8.1.1 Additionally, the Respondent No. 1 has sought to impress
in the said paragraph 21 that the amount of domestic gas available is
distributed in accordance with the above priority in a rational manner
to serve larger public interest and that no sector, which is not in
accordance with the Gas Utilization Policy, can claim overriding
priority.
8.1.2 Further, in paragraph 25 of its Affidavit in Reply, the
Respondent No. l highlighted that although it is Respondent No. l's
endeavour to encourage supply of Compressed Natural Gas (CNG) to
a large number of cities, so as to improve the quality of air and to
bring down pollution, the same has not been possible as no gas is
available for allocation to CGD sector as sectors having priority are
still short of their gas requirement. Even in paragraph 28 of its
Affidavit in Reply the Respondent No.l has stressed on its inability to
allocate additional indigenous gas to CGD sector in Gujarat.
8.2 Further to the aforesaid, it may be brought to the notice of
this court that contrary to its above stated submissions, Respondent
No. l has also supplied gas from domestic fields to industries not
featuring in the list prescribed by the current Gas Utilization Policy or
priority order referred to in paragraph 21 of the Affidavit in Reply of
respondent No.l.
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8.2.1 Herein below, a non-exhaustive list has been provided
enlisting industries that have been allocated gas from the domestic
fields along with the quantities supplied to them, by the Respondent
No. 1 in breach of the Gas Utilization Policy or priority order referred
to in Paragraph 21 of the Affidavit in Reply of respondent No. l. The
said list as shown in Table 1 below is based upon data available from
various reports in public domain:
TABLE-1
Name of the Entity Quantity(MMSCMD)
Name of the Entity Quantity(MMSCMD)
1. ONGCL Return 1.355 2. Supreme Glaze 0.007
3. IPCL, Baroda 0.435 4. Spire Ceramics 0.002
5. IPCL, Gandhar 0.484 6. Sapna Chem 0.005
7. Heavy Water Plant 0.129 8. BPCL, Mumbai 0.097
9. VMC 0.081 10. HPCL, Mumbai 0.003
11. IOCL, MathuraRefinery 0.850 12. Mahanagar Gas Ltd. 0.919
13. Gujarat Glass-K 0.056 14. Vikram Ispat 0.419
15. Vedeocon NarmadaElectronics Ltd.
0.050 16. Prem Chemco 0.005
17. Maruti Udyog 0.002 18. Essar Steel Limited
19. Agra Industries Cluster 1.100 20. H.R. Johnson 0.019
21. Gujarat Borosil 0.042 22. Chennai PetroleumCorpn. Ltd.
0.090
23. Guj. Guard 0.061 24. MMS Steel 0.02625. Atmiya Chem 0.003 26. R. Ceramics 0.026
27. Pragati Glass 0.045 28. Boss Profile 0.006
29. Haldyn Glass 0.031 30. Henkel Spic 0.011
31. N. Glass 0.029 32. Sun Chem 0.016
33. Crys. Glaze 0.003 34. Chemplast Sanmar 0.031
35. GACL-Dahej 0.033 36. K Chlorites 0.016
37. Prestige Glass 0.006 38. Naycer (I) Ltd. 0.0003
39. Nahar Colours 0.018 40. Welspun Maxsteel Ltd.
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8.2.2 The gas produced from PMT fields has been sold to
various customers, of which many of them are Power and Fertilizer
sector customers. However, some customers such as Arvind Ltd.,
Gujarat Fluorochemicals Ltd., United Phosphorus and RIL have also
been allocated PMT Gas although such customers / segments do not
feature in the priority list referred to in paragraph 21 of the Affidavit
in Reply of Respondent No.1.
8.2.3 Thus, on one hand while the representations of the State
of Gujarat for allocation of gas to CGD companies have been
overlooked while allocating gas from the domestic fields , on the other
hand, industries not featuring in the priority order, have been
allocated gas from domestic fields.
8.3 The EGOM met on 28.05.2008 and 27.10.2009 for deciding,
inter alia, allocation of gas to CGD segment from RIL D6 fields.
Subsequently, vide MoPNG correspondence dated 13.05.2009, 0.8
MMSCMD of gas was allocated on firm basis to CGDs for supply to
PNG and CNG segments from RIL D6 fields. Details of the said
allocation to entities is given in the table below:
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Sr.No.
Entity City Gas Allocation(SCMD)
1. Indraprastha Gas Ltd. (IGL) NCT of Delhi 308,642
2. Mahanagar Gas Ltd. (MGL) Mumbai, Navi Mumbai,Mira-Bhayander and Thane
370,370
3. Sabarmati Gas Ltd. Gandhinagar, Mehsana andSabarkantha
77,593
4. Green Gas Ltd. Agra 15,062
5. Aavantika Gas Ltd. Indore 12,346
6. Aavantika Gas Ltd. Ujjain 1,235
7. HPCL Ahmedabad 49,383
Total 834,631
8.3.1 Further, with regard to gas allocations made to CGD
companies, it may be highlighted that as reported in Infraline
Newsletter dated December 19,2011, CGD companies in other States
meet most of their requirement from gas allocated from domestic
fields, unlike Gujarat CGDs.
8.3.2 The CGD companies l ike IGL and MGL (co-owned by
Central PSUs) have been recently allocated gas from APM fields to
make up for non-supply of gas from RIL's D6 fields. Moreover,
unutilized APM gas quantities allocated for Gurgaon, Faridabad and
Ghaziabad in NCR region have been diverted to IGL for supply of gas
in Delhi to take care of shortfall in supplies from RIL's D6 fields.
Similarly, gas from APM fields has been allocated to MGL on 'no-cut'
basis to make up for shortfall due to non supply from D6 fields.
8.3.3 In view of the same, in spite of recent curtailment / non-
supply of gas from D6 fields for CGD segment, the said CGD
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companies (i.e. IGL and MGL) are not materially affected by such
shortfall.
8.4 In wake of such non-allocation of gas from domestic fields,
Gujarat CGD companies are striving for requirement of gas and their
dependence on imported LNG is becoming an area of concern,
especially for their downstream CNG and PNG segment customers. In
fact, in spite of Gujarat being ranked amongst one of the best in
terms of CGD infrastructure (i.e. having highest number CNG stations
as well as domestic connections) the gas consumption (vis--vis other
CGD companies) is low owing to non viability of selling imported RLNG
in CNG/PNG segment / non-availability of domestically produced gas.
At this juncture, the following table may be referred to for details:
State Wise existing CNG, Domestic PNG, Industrial and
Commercial PNG Infrastructure
State CNGStation
Consum-ption
during2010-11(MMSCMD)
DomesticPNG
connection
Consu-mption
during2010-11(MMSCMD)
Indust-rial
PNGConne-ction
Consumption during
2010-11(MMSCMD)
Commercial PNG
connection
Consumptionduring
2010-11(MMSCMD)
AndhraPradesh
14 0.046 732 0.000 0 0.000 0 0.000
Assam 0 0.000 23162 0.030 354 0.479 689 0.009
Gujarat 258 0.941 842565 0.415 3130 6.636 12790 0.108
Haryana 6 0.006 1939 0.000 11 0.002 22 0.000
MadhyaPradesh
11 0.001 26 0.000 23 0.025 0 0.000
Maha-rashtra
164 1.339 531473 0.200 44 0.206 1335 0.100
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New Delhi 239 2.368 246662 0.099 141 0.202 551 0.068
Rajasthan 2 0.000 25 0.000 5 0.000 0 0.000
Tripura 2 0.007 8472 0.016 36 0.020 169 0.003
UttarPradesh 28 0.253 13874 0.006 208 0.035 22 0.000
Total 724 4.961 1,668,930 0.766 3,952 7.605 15,578 0.288
(Source: Infralilne Newsletter dated December 29, 2011)
8.4.1 Based on the consumption data available for the year 2011,
the dependence of Gujarat CGD companies on imported R-LNG was
much higher than IGL and MGL, which is shown as per the table below
:
Dependence on R-LNG
Sr. NO. Entity Dependence on R-LNG
1. Gujarat CGD Companies 69.06 %
2. Indraprastha Gas Ltd. 17.17 %
3. Mahanagar Gas Ltd. 5.55 %
(Source: Based on data available in Infraline Newsletter
dated December 29, 2011)
8.4.2 Further, with reduction in the allocated supplies from D6
fields to SGL and HPCL to 0 (Zero) in October 2011, CNG prices levied
by these companies in last 2-3 months have increased by up to 25-
30%, along with increased dependence of these CGD companies on
imported RLNG. Sabarmati Gas Ltd. revised its CNG prices from Rs
40.25 a kg to Rs 47 a kg with effect from 16.12.2011; while HPCL
revised its CNG prices from Rs 41.55 a kg to Rs 50.20 a kg with effect
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from November 1, 2011.
8.4.3 Even though, the requirement of natural gas from
domestic fields in State of Gujarat is an alarming concern, the
Respondent No. l has not only indicated unwillingness to address the
same but has discriminated against Gujarat based CGD companies
vis--vis the CGD companies owned by Central PSUs in the matter of
allocation of natural gas. This action of Respondent No. l is clearly in
violation of Article 14 of the Constitution of India.
8.4.4 Further, at this instance it may be noted that the
respondent No. l has not only discriminated between CGDs promoted
by Central PSUs and other CGDs, but also among Gujarat based
CGDs. The Respondent No. l, in paragraph 15 of its Affidavit in Reply,
has submitted that allocation of 2,00,000 scmd gas from KG D6 has
been made to Adani Gas Ltd. (erstwhile Adani Energy Ltd.), however,
even though gas was allocated to Adani Gas Ltd. (subject to
authorization from PNGRB), from KG D6, the other CGDs, namely,
GSPC Gas Co. Ltd. and Charotar Gas Ltd. were denied the same,
though they also could have been allocated gas on same principles.
The basis of this denial is not only irrational but also arbitrary and is in
violation of Article 14 of the Constitution of India.
8.5 A perusal of the above stated facts makes it abundantly
clear that Respondent No. l has supplied gas from domestic fields to
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industries in breach of the Gas Utilization Policy and has discriminated
against Gujarat based CGDs. Therefore, it is evident that there is a
marked inconsistency in actions of Respondent No. 1 vis--vis
assertions made by it in its Affidavit in Reply. The gross breach of Gas
Utilization Policy and discrimination against Gujarat based CGDs has
been committed even though the air quality hasbecome an issue
of social concern in the backdrop of increasing
industrialization and vehicular pollution', a fact to which
Respondent No. l has admitted in paragraph 28 of its Affidavit in
Reply. The said instance clearly reflects the unreasonableness, high
handedness and arbitrariness deeply embedded in the actions of
Respondent No. l.
8.6 The Respondent No.3, does not in any manner, seek to
decide the priority order of allocation of natural gas. However, it is
highly inequitable on the part of the Respondent No. l to suggest
(paragraph 36 of Respondent No. l's Affidavit in Reply) that if the
concern is to reduce "environmental pollution, efforts must be
directed to procure RLNG, rather than making a demand for cheap
gas.
8.7 It is the fundamental right of every resident of State of
Gujarat to be treated with equality before law as envisaged under
Article 14 of the Constitution of India in matters of allocation of
domestic / indigenous gas, which, consequently, upholds their
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fundamental right of enjoying a proper and healthy environment to
enable them to lead a quality life.
8.8 However it is abundantly clear, in view of the aforesaid,
that the Respondent No. l has facilitated the interest of the industries,
at the cost of public health of residents of State of Gujarat and has
acted in violation of, inter alia, the constitutional mandate as
prescribed under Article 14, Article 21, Article 47and Article 48-A of
the Constitution of India, the "Precautionary principle" recognized by the
Apex Court in Vellore Citizen's Welfare Forum v. Union of