The Hindu : States cannot enact laws relating to natural gas: Supreme Court

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Friday, Mar 26, 2004

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States cannot enact laws relating to natural gas: Supreme Court

By J. Venkatesan

NEW DELHI, MARCH 25 . The Supreme Court today opined that only the Union Government had the legislative competence to enact laws on all aspects relating to regulation of mineral oil resources, which include natural gas and liquefied natural gas (LNG).

A five-Judge Constitution Bench, comprising Justice S. Rajendra Babu, Justice K.G. Balakrishnan, Justice P. Venkatarama Reddi, Justice B.N. Srikrishna and Justice G.P. Mathur, made it clear that States were not competent to legislate in this field.

The Court gave this opinion on a reference from the President under Article 143 (1) of the Constitution following the Gujarat Government enacting a law entitled Gujarat Gas (Regulation of Transmission, Supply and Distribution) Act, 2001 empowering the State to regulate transmission/supply and distribution of gas in the State and laying of pipeline etc.

Striking down the Act insofar as the provisions relating to natural gas or LNG were concerned, the Bench said the Act to that extent was without any legislative competence and ultra vires the Constitution. Writing the judgment for the Bench, Justice Balakrishnan said: "Natural gas being a petroleum product, we are of the view that under Entry 53, List I (Union List of the Constitution), the Union Government alone had the legislative competence to enact such a law."

The Gujarat Government's Act provided for regulation of transmission, supply and distribution of gas in the interest of general public and to promote gas industry in the State.

The Centre felt that the State had usurped the powers of the Union and accordingly a reference was made for the opinion of the apex court by the President on whether natural gas in whatever physical form, including LNG, was a Union subject covered by Entry 53 of List I and the Union had the exclusive legislative competence to enact law on natural gas; whether States had legislative competence to make laws on all subjects of natural gas and LNG and whether the Gujarat Government could enact such a law.

The Attorney-General, Soli Sorabjee, contended that the Union Government passed various legislation in respect of petroleum and petroleum products to ensure balanced growth in supply, transmission and distribution of natural gas and LNG and the Centre alone was competent to enact laws relating to gas and LNG.

Counsel for the Oil and Natural Commission, R. Sasiprabhu, while supporting the stand of the Attorney-General, submitted that both oil and gas were mineral oil resources.

Therefore, it would be incorrect to say that the Union Government had legislative competence to make laws on oil, but not on gas.

Not only the source of oil and gas were geologically same, they were same chemically too.

Counsel for the Gujarat Government had contended that in a federal structure, a natural resource such as gas was fundamental to the very economic existence and prosperity of a State and it should not be denied the opportunity to exploit natural resources, including that of gas. This stand was adopted by most of the States.

Rejecting the arguments advanced on behalf of the States, the Bench pointed out that all the materials produced before the court would only show that natural gas was a petroleum product.

It was also important to note that in various legislation covering the field of petroleum and petroleum products, either the word `petroleum' or `petroleum products' had been defined in an inclusive way, so as to include natural gas.

The Bench noted that natural gas being a petroleum product under Entry 53 List I, the Union Government alone had the legislative competence to enact laws in this field and the States under Entry 25 List II of the Seventh Schedule of the Constitution would be competent to pass a legislation only in respect of gas and gas-works for industrial, medical or other similar purposes.

Centre alone can legislate

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