"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Friday, June 10, 2011

Update on the Gas Allocation Issue

Business Standard has reported that the Bombay High Court has asked the Ministry of Petroleum and Natural Gas (MoPNG) to state whether they would be able to supply natural gas to Welspun Maxsteel and Ispat Industries. For those new to this blog and to the gas allocation issue, the Ministry of Petroleum and Natural Gas had directed Reliance Industries Limited, the operator of the Reliance D 6 Field, to supply gas only to select core sectors considering the shortage in supply of gas. Steel industries, which used natural gas, were denied supply of the same from the D 6 Field. Therefore, some steel companies had challenged the said decision before the Bombay and the Delhi High Courts. Recently, the Delhi High Court had asked the Empowered Group of Ministers (EGoM) to explain its position on the issue through an affidavit.

Yesterday, the Bombay High Court has asked the Government if it would be able to allow supply of gas to the petitioners, Welspun Maxsteel and Ispat Industries. This was consequent to the petitioners’ argument that the decision would result in closure of the plant and would also lead to a Rs. 1,000 crore loss of exchequer. Implying that the Government’s decision was harsh, Justice Shah is reported to have stated: “Sometimes government does not realize. If an industry shuts down, it is very difficult to revive”.

The dispute is definitely interesting to followers of the petroleum industry. So far in the history of Indian lex petrolea, the Government has been exercising virtually untrammelled powers as regards the petroleum sector. Even the courts have not questioned this. Examples are Association of Natural Gas Industries [(2004) 4 SCC 489] and Reliance decisions of the Supreme Court. However, it appears that the Bombay High Court seems to be of the view that the impugned decision is harsh, as the abovwe quote of Justice Shah would show.

The Government is fighting against these petitions before the Delhi as well as the Bombay High Courts. To prevent inconsistent decisions, it would be prudent for the matter to be transferred to either of these courts.

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