SC quashes Gujarat Gas Act

The Gujarat Gas (Regulation of Transmission, Supply and Distribution) Act 2001, an initiative of the state government to control transmission, supply and distribution of gas through pipelines, was quashed by the Supreme Court on Thursday. The court said natural gas was a central subject and state government had no legislative power to enact such a legislation.

The Act, sent by the Gujarat government to the President for his assent, was not in force as the President had referred the matter to the Supreme Court.

With the state's gas Act quashed, the central government will frame laws governing the transmission, supply and distribution of natural gas throughout the country.

Asserting that the Centre had the exclusive legislative competence in this field, a five-judge constitution bench of the Supreme Court, comprising Justice S Rajendra Babu, Justice K G Balakrishnan, Justice P V Reddi, Justice B N Srikrishna and Justice G P Mathur, quashed the Act, terming it "unconstitutional".

The Gujarat Legislative Assembly had, in April 2001, enacted the Gujarat Gas (Regulation of Transmission, Supply and Distribution) Act, providing powers to the state to "provide for regulation of transmission, supply and distribution of gas, to promote the gas-based industry in the state".

As the state legislation had the potential to affect all existing and future pipeline projects for inter-state transportation of natural gas as well, the President, in his October 8, 2001 reference to the apex court, had asked "whether natural gas, in whatever form, is a Union subject and the Centre has the exclusive legislative competence to enact law on natural gas".

Replying to the Presidential reference in the affirmative, the five-judge bench unanimously held that "natural gas, including LNG, is a union subject under Entry 63 of List I and the Union government has the exclusive legislative competence to enact laws on natural gas."

Upholding the submissions made by Attorney General Soli J Sorabjee, Justice Balakrishnan, writing the judgement for the bench, said natural gas is a subject falling exclusively under the Central list and " states have no legislative competence to enact law on natural gas, including the liquefied natural gas (LNG)".

The ruling also set aside the portions of the Gujarat Gas Act which purported to regulate the transmission of natural gas through pipelines passing its territory (Gujarat) by holding that the same was enacted without any legislative competence and hence "ultra vires" of the constitution.

The court, while answering the Presidential reference, disposed of all the petitions including the writ petition filed before the Gujarat High Court by the Natural Gas Consumer Associations for fixation of gas prices for consumers.

Assailing the Gujarat legislation proposing to establish the Gujarat Gas Regulatory Authority, Sorabjee said this would be detrimental to the free flow of the fuel across the country as the authority had powers to decide as to who would lay pipelines.

The authority's permission was also to be taken in case the existing companies having pipelines were to take up expansion programmes, he added.

The Gujarat government, through senior advocate Ashok Desai, contended that the state had exclusive power to make laws dealing with 'natural gas' in whatever form, including LNG.

Senior advocate P Chidambaram, appearing for the common carrier company, had contended that any industrial activity connected to 'gas and gas works' were beneficial to the state and the state must be given power to legislate on the subject.