Supreme Court kills Gujarat dream of gas regulation

Vol 8, PW 1 (07 Apr 04) People & Policy

On 25th March, all hell broke loose in the Gujarat state capital Gandhinagar when at 12.15pm a five-judge bench of the Supreme Court sitting in Delhi quashed the Gujarat governments controversial Gujarat Gas Act and with it the states attempt to regulate its gas sector independent of Delhi.

States have no legislative competence to make laws on the subject of natural gas and Liquefied Natural Gas under Entry 25 of List II of the seventh schedule to the Constitution, ruled the judges unequivocally. Natural gas being a petroleum product, we are of the view that under Entry 53, List I, the Union government alone has got legislative competence.

Last year, simmering controversy between Delhi and Gujarat over the legality of the Gujarat Gas Act resulted in a Presidential Reference to the Supreme Court. In their ruling, the five judges were clear that Gujarat does not have any legislative competence to enact the Gujarat Gas (Regulation of Transmission, Supply & Distribution) Act, 2001 with the damning verdict that: The Act is to that extent ultra vires of the Constitution.

Spearheading Delhis argument against Gujarat was Indias Attorney General, Soli Sorabjee. Judges said they agreed fully with Sorabjees contention that: The Central government has undertaken the task of ensuring balanced growth in supply, transmission and distribution of natural gas and natural gas being a petroleum product falls exclusively in the domain of central legislation.

Sorabjee argued that the Gujarat Gas Act impinged directly upon the authority of the Union and was unconstitutional. Judges further demolished the argument of Gujarat counsel Ashok Desai who argued that Entry 25 of List II includes all types of gases and therefore any legislation related to gas and gas works was perfectly within the legal competence of the state.

But in their 31-page ruling, judges distinguished between the term natural gas and gas works and ruled that Entry 25 of List II covered only manufactured gas and not natural gas.