CNG Judgment

7/22/2019 CNG Judgment

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WPPIL/47/2011 1/205 JUDGMENTcnggasfinalversion

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.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -


GUJARAT RAJYA AUTORICKSHAW FEDERATION & ORS

versusUNION OF INDIA THROUGH SECRETARY & ORS.

WRIPT PETITION PIL /47/2011 07/11/2012 10:28:54 PM


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=========================================================

Appearance :


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,


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

Documents

CNG Judgment