These proceedings have been instituted by the Northern India Glass Manufacturers Association, which is a part of the All India Glass Manufacturers Federation, whose members are engaged in the manufacture of glass containers and glass products. Most of the members of the Association are stated to use natural gas as an industrial fuel. When the petition was initially filed, the subject matter of the grievance was the allocation of Administered Pricing Mechanism (APM) gas to industries situated in the Taj Trapezium Zone (TTZ) by the Union Ministry of Petroleum and Natural Gas. The controversy related to the allocation of 1.1 Metric Million Standard Cubic Meters per Day (MMSCMD) of APM gas to industries which were situated in the TTZ. As we shall explain in some detail hereafter, the basic grievance of the petitioner was the allocation of APM gas to industries within the TTZ, based on which the petitioner sought a mandamus commanding the Union Government to withdraw such allocation. This grievance was resolved during the pendency of the proceedings when the Union Government decided to allocate natural gas to industries in the TTZ on the basis of the Uniform Pricing Mechanism (UPM). The petition was then amended to seek two additional prayers. By the first of the two prayers, the petitioner seeks a declaration that any allocation and supply of natural gas to an industry on any basis or understanding which leads to discrimination, would infringe the fundamental rights conferred under Articles 14 and 19(1)(g) of the Constitution. A consequential direction was, accordingly, sought that the Union Government be prohibited from dealing with the supply of natural gas on the basis of a price mechanism that introduces "undue classifications". The second prayer is to restrain the Union Government from allocating and supplying natural gas to the TTZ industries by adopting UPM as the basis. In sum and substance, the grievance of the petitioners is that UPM, like APM, is a price mechanism for a favoured class of industries to whom preferential treatment would be extended. According to the petitioners, this results in a hostile discrimination between the industries which are not situated in the TTZ and those which are so situated. The submission is that the industries which are situated outside the TTZ have to purchase industrial gas at much higher rates, namely those under the Re-gasified Liquefied Natural Gas (RNLG) rates which are much higher than the UPM gas rates at which natural gas is made available for industries which operate in the TTZ. This, it is asserted, leads to a comparative disadvantage resulting in violation of the fundamental rights conferred by Articles 14 and 19 (1) (g) of the Constitution.
2. In order to understand the background of the case, it would be necessary, at the outset, to advert to the decision of the Supreme Court in M.C. Mehta Vs. Union of India & Ors.1. In that case, the issue which was highlighted before the Supreme Court was the serious environmental impact on the ambient air around TTZ caused, amongst others, by the operation of industrial units which were based largely on coal/coke. Before the Supreme Court, the problem was brought to focus by several reports of Expert Committees. The National Environment Engineering Research Institute (NEERI) found that industries in the TTZ comprising of the districts of Agra, Mathura, Firozabad and Bharatpur were the main source of pollution causing damage to the Taj. The Supreme Court noted that the Expert Committee reports had specifically recommended relocation of industries from TTZ. Although the U.P. Pollution Control Board had placed on record a list of 510 industries which were responsible for causing air pollution, the judgment was confined to 292 industries located and operating in Agra. Based on the reports of Expert Committees, the Supreme Court recorded a finding that the emissions generated by the coke/coal consuming industries had a damaging effect on the Taj as well as on persons living in the TTZ and had to be eliminated at any cost, particularly having regard to the precautionary principle. The salient directions which were issued by the Supreme Court were that (i) 292 industries would apply by the stipulated date to the Gas Authority of India Limited (GAIL) for the grant of industrial gas connections; (ii) industries which were not in a position to obtain gas connections and those which did not wish to do so were to apply to government for allotment of alternative plots in industrial estates outside the TTZ by the stipulated date; (iii) those industries which neither applied for the grant of gas connection nor for the allotment of alternative plots were stopped from functioning with the aid of coal/coke in TTZ with effect from 30 April 1997 and supply of coke/coal was directed to be stopped forthwith; (iv) GAIL would commence supply of gas to the industries by 30 June 1997; and (v) industries which would relocate outside the TTZ would cease to operate in TTZ beyond 31 December 1997. The directions which were issued by the Supreme Court were founded on the fundamental premise that coal/coke based industries in TTZ were the source of serious detriment to the environment. Hence, the directions envisaged that industries would either relocate outside the TTZ by the stipulated date or in the alternate commence the use of natural gas as a source of fuel in place of coke/coal; GAIL being the nominated agency for the supply of natural gas. In other words, with effect from the stipulated date, no industry within the TTZ area covered by the judgment would be entitled to operate with fuel other than natural gas.
3. Broadly speaking, there have been two pricing regimes for natural gas in the country: (i) gas which is priced under the APM; and (ii) non-APM or free market gas. The price of APM gas is set by the Government whereas non-APM gas is governed by the free market. The non-APM gas, in turn, falls within two broad categories, namely (i) imported Liquefied Natural Gas (LNG); and (ii) domestically produced gas from New Exploration Licensing Policy (NELP) and pre-NELP fields. In 1990, the Union Ministry of Petroleum and Natural Gas had formulated a gas use policy considering natural gas as a premium source of fuel and feedstock with a variety of competing demands. The Government of India constituted the Gas Linkage Committee, a Committee of Secretaries in July 1991 which was, inter alia, represented by various user departments including Power, Fertilizer, Steel, Chemical and Petrochemicals, besides representatives from the Planning Commission, Department of Economic Affairs, Department of Expenditure (Ministry of Finance) and three national oil and gas companies, namely GAIL, ONGC and Oil India.
4. The Union Government had allocated 0.6 MMSCMD of APM gas on 2 May 1995 and an additional 0.5 MMSCMD on 5 June 2000. The initial supply of gas by GAIL was made on the basis of APM. With the increase in the demand of natural gas for the industries which were situated in the TTZ area, gas was imported by the Union Government through GAIL in the liquefied form known as RNLG. In July 2012, consumers of natural gas in the TTZ area were informed by a subsidiary of GAIL that it shall supply commingled gas under a UPM regime to all industrial consumers in the TTZ area. The decision to charge UPM prices with effect from 16 July 2012 was challenged by industries which were running in the TTZ area in writ proceedings before a Division Bench of this Court. Their grievance was that as a result of the enforcement of UPM, the price which was hitherto being charged for the supply of natural gas under the APM regime stood increased under the UPM regime. The Division Bench of this Court, by a judgment dated 12 July 2013, dismissed a batch of writ petitions (National Chamber of Industries & Commerce U.P. & Ors. Vs. GAIL (India) Ltd. & Ors.2). The Division Bench held that the supply of gas under the APM regime had been extended to industries in the TTZ area to obviate environmental pollution particularly to the Taj Mahal and at a time when coal/coke was the main fuel for the industry. With the growth in the use of natural gas as fuel, the use of coal/coke had become obsolete. The Division Bench held that the advantage which was given to a set of industries for certain reasons, should not be perpetuated and a level playing field for all the industries has to be provided, so as to ensure a proper growth of non-polluting industries. Consequently, the Division Bench was of the view that the industries in the TTZ area represented by the petitioners therein could not have a claim to a monopoly over APM gas for all times and to create an unreasonable classification in their favour. Hence, the protection which was extended in 1996 could not be extended for all times to come. The Division Bench held that price fixation was an arena in which, in the jurisdiction under Article 226 of the Constitution, the Court would not enter. The adoption of the UPM mechanism was only to ensure the equitable distribution of gas at a uniform price to all similarly situated industries in order to prevent an advantage being enjoyed by a particular group of similar industries which had the benefit of supply of APM gas.
5. The present petition, as originally filed, sought to question the allocation of APM gas to the industries in the TTZ area. A mandamus was sought to the Union Government to withdraw the allocation of APM gas to industries within the TTZ. This prayer stood worked out upon the decision to adopt the UPM in the TTZ area; the decision being upheld by a Division Bench of this Court. The Special Leave Petition against the judgment of the Division Bench was dismissed by the Supreme Court. However, the petition has now been amended to seek a declaration that any allocation and supply of natural gas to an industry on the basis of an understanding which leads to discrimination would be unconstitutional as infringing rights guaranteed under Articles 14 and 19(1)(g) of the Constitution and that the respondents be restrained from dealing with gas, whether domestically purchased or otherwise, and its supply on the basis of any pricing mechanism introducing undue classifications. The second prayer, as amended, is for a direction in the nature of mandamus directing the Union Government to forebear from allocating and supplying natural gas to the TTZ industries by adopting UPM, on the ground that UPM is also founded on and is derived from the concept of a favoured class of industries.
6. On behalf of the petitioner, the learned Senior Counsel submitted that (i) the government holds natural resources in trust for the people, and the regulation, distribution and sale of natural gas through allocation should sub-serve the common good within the meaning of Article 39 (b) of the Constitution; (ii) the judgment of the Supreme Court in M.C. Mehta (supra) did not contain any mandate in regard to the pricing of natural gas for industries in the TTZ zone; and (iii) the supply of natural gas at the UPM rate for industries in the TTZ area has led to a discrimination which infringes Article 14 of the Constitution, particularly because it has resulted in an expansion of capacity of glass container units in the TTZ area.
7. While we deal with the petition in terms of the amended prayers, it would, at the outset, be necessary to preface our consideration of the case by the two initial observations. The first relates to the nature of price fixation itself while the second is a caution which the Court exercises in the exercise of the power of judicial review in dealing with matters of policy, particularly economic policy, under Article 226 of the Constitution. Price fixation is an activity which has a legislative or quasi legislative character. Being in the nature of a legislative exercise or a quasi legislative exercise, the limitations which would apply to the judicial review of legislative action would extend when the Court is called upon to review a decision in the matter of price fixation. The second consideration which the Court must bear in mind is that in the exercise of the power of judicial review under Article 226 of the Constitution, Courts are generally reluctant to tread on issues of economic policy. Those in charge of formulating and implementing economic policy in the executive arm of the Government must possess a broad latitude or discretion to make suitable classifications that will subserve the object and purpose that is sought to be achieved by a particular policy. Undoubtedly, there is no absolute exclusion of judicial review because where the Courts find that a policy suffers from manifest arbitrariness or has been framed mala fide or for extraneous purposes, it would examine its legality within the broad ambit of Article 14 of the Constitution. However, the Court would exercise due caution and would not substitute its own view of the justness of the object which is sought to be achieved by a particular economic policy or the means which are adopted to pursue the end. So long as there is a broad nexus between one and the other, that would meet the requirement of Article 14 of the Constitution and the Court would not direct that an object should be pursued by adopting a policy which, in the opinion of the Court, would have a better or closer nexus with the goals of the policy.
8. In M/s. Prag Ice & Oil Mills & Anr. Vs. Union of India3, a Bench of seven learned Judges of the Supreme Court laid down the following parameters on which a challenge to price fixation should be adjudicated;
"In the ultimate analysis, the mechanics of price fixation has necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of operators, the processual basis of price fixation has to be accepted in the generality of cases as valid."
Again, the principle was formulated as follows:
"The Parliament having entrusted the fixation of prices to the expert judgment of the Government, it would be wrong for this Court, as was done by common consent in Premier Automobiles4 to examine each and every minute detail pertaining to the Governmental decision. The Government, as was said in Permian Basin Area Rate Cases5 is entitled to make pragmatic adjustments which may be called for by particular circumstances and the price control can be declared unconstitutional only if it is patently arbitrary, discriminatory or demonstrably irrelevant to the policy which the legislature is free to adopt. The interest of the producer and the investor is only one of the variables in the "constitutional calculus of reasonableness" and Court ought not to interfere so long as the exercise of Governmental power to fix fair prices is broadly within a "zone of reasonableness". If we were to embark upon an examination of the disparate contentions raised before us on behalf of the contending parties, we have no doubt that we shall have exceeded our narrow and circumscribed authority."
9. The same principle was reiterated by a Bench of three learned Judges of the Supreme Court in M/s. Hoechst Pharmaceuticals Ltd. & Anr. Vs. State of Bihar & Ors.6.
10. In M/s. Rohtas Industries Ltd. & Anr. Vs. The Chairman, Bihar State Electricity Board & Ors.7, a Bench of three learned Judges of the Supreme Court held thus:
"Some of the appellants have endeavoured to persuade us to go into the minutest details of the mechanism of the tariff fixation effected by the Board in an endeavour to demonstrate in relation thereto that a factor here or a factor there which ought to have been taken into account has been ignored. We have declined to go into those factors which are really in the nature of matters of price fixation policy and the Court will be exceeding its jurisdiction if it is to embark upon a scrutiny of matters of this kind which are essentially in the domain of the executive to determine, subject, of course, to the Constitutional limitations."
11. In M/s. Shri Sitaram Sugar Co. Ltd. & Anr. Vs. Union of India & Ors.8, a Constitution Bench of the Supreme Court emphasised that price fixation is in the nature of legislative action:
"Price fixation is in the nature of a legislative action even when it is based on objective criteria founded on relevant material. No rule of natural justice is applicable to any such order. It is nevertheless imperative that the action of the authority should be inspired by reason : Saraswati Industrial Syndicate Ltd.9. The Government cannot fix any arbitrary price. It cannot fix prices on extraneous considerations : Renusagar (supra)."
12. The principles which govern the allocation and pricing of natural resources have been elucidated in a judgment of the Constitution Bench of the Supreme Court in a Special Reference under Article 143 of the Constitution in Re:Natural Resources Allocation10. In the leading judgment of four learned Judges, Hon'ble Mr. Justice D.K. Jain observed as follows:
"The disposal of natural resources is a facet of the use and distribution of such resources. Article 39(b) mandates that the ownership and control of natural resources should be so distributed so as to best subserve the common good. Article 37 provides that the provisions of Part IV shall not be enforceable by any Court, but the principles laid down therein are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws. Therefore, this Article, in a sense, is a restriction on "distribution" built into the Constitution. But the restriction is imposed on the object and not the means. The overarching and underlying principle governing "distribution" is furtherance of common good. But for the achievement of that objective, the Constitution uses the generic word "distribution". Distribution has broad contours and cannot be limited to meaning only one method i.e. auction. It envisages all such methods available for distribution/allocation of natural resources which ultimately subserve the "common good"."
13. The Constitution Bench emphasised that there cannot be one universal or uniform method for distribution of natural resources. The Court would respect a policy decision of the executive in regard to the methodology for the disposal of natural resources. The Court does not substitute its own opinion on whether one policy is fairer than the other, and it is only where a policy or law is patently unfair that Article 14 would be infringed:
"To summarize in the context of the present Reference, it needs to be emphasized that this Court cannot conduct a comparative study of the various methods of distribution of natural resources and suggest the most efficacious mode, if there is one universal efficacious method in the first place. It respects the mandate and wisdom of the executive for such matters. The methodology pertaining to disposal of natural resources is clearly an economic policy. It entails intricate economic choices and the Court lacks the necessary expertise to make them. As has been repeatedly said, it cannot, and shall not, be the endeavour of this Court to evaluate the efficacy of auction vis-à-vis other methods of disposal of natural resources. The Court cannot mandate one method to be followed in all facts and circumstances. Therefore, auction, an economic choice of disposal of natural resources, is not a constitutional mandate. We may, however, hasten to add that the Court can test the legality and constitutionality of these methods. When questioned, the Courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are ultra vires and intra vires the provisions of the Constitution. Nevertheless, it cannot and will not compare which policy is fairer than the other, but, if a policy or law is patently unfair to the extent that it falls foul of the fairness requirement of Article 14 of the Constitution, the Court would not hesitate in striking it down."
14. The Constitution Bench observed that while market price may be an index of the value that a market prescribes to a good, this valuation is a function of several variable dynamics. Since multiple variables are involved, competitive bidding does not constitute even an economic mandate, much less a constitutional mandate (at page 98, para 147).
15. Hon'ble Mr. Justice J.S. Khehar, in his Lordship's concurring opinion agreed with the principles which were enunciated in the judgment of the four learned Judges and held thus:
"... no part of the natural resource can be dissipated as a matter of largess, charity, donation or endowment, for private exploitation. Each bit of natural resource expended must bring back a reciprocal consideration. The consideration may be in the nature of earning revenue or may be to "best subserve the common good". It may well be the amalgam of the two..."
16. The fact that the industries in the TTZ area have constituted a class by themselves is evident from the judgment of the Supreme Court in M.C. Mehta (supra). These industries were a matter of specific concern in view of the polluting nature of the activities, as the expert reports before the Supreme Court indicated, because of the use of coal/coke as a source of fuel. The judgment of the Supreme Court laid down a clear mandate: either relocate or shift to natural gas which was considered to be an environmentally friendly option. The industries in the TTZ area had no choice but to make themselves compliant with the natural gas option or to shift from the area. After the date stipulated by the Court, there was no third option available and industries which did not comply with one or the other option had to close down.
17. Now, it is in this background that the Union Government gave the benefit of the APM regime to industries in the TTZ area. Subsequently, as the demand for natural gas increased from industries in the TTZ area, the Union Government was confronted with a situation where it was not just feasible to indefinitely provide the benefit of the APM regime. To provide two pricing mechanisms within the TTZ - some industries governed by APM and others by a market determined rate was considered to be discriminatory in character. The element of discrimination was sought to be obviated by shifting to the UPM regime with effect from 2012. As the Division Bench of this Court held, while dismissing the challenge to the UPM regime, the object and purpose was to ensure a level playing field.
18. According to the petitioners, even the UPM regime does not go far enough to provide a level playing field to industries in the TTZ area on the one hand and those outside, and must be abolished in its entirety. In the second rejoinder affidavit which has been filed in these proceedings, it has been stated that there is a wide disparity in prevailing prices (i) outside the TTZ area in Uttar Pradesh and in the States of Haryana and Rajasthan in comparison with the erstwhile APM gas rates and UPM gas rates for industries situated in the TTZ. The grievance of the petitioners is that glass industries which fall outside the TTZ area are required to pay much higher rates for RLNG or, as the case may, Furnace Oil Rates than what are paid by the TTZ industries. According to the petitioners, there has been a capacity addition in respect of the TTZ glass industries particularly after 2006-07. The petitioners have placed on the record the report of the Standing Committee on Petroleum and Natural Gas (2013-14) which, inter alia, notes that glass units in other towns/cities in the country which buy gas at market related price are at a competitive disadvantage in comparison with units located in the TTZ area. The Standing Committee has recommended that the Union Ministry of Petroleum and Natural Gas should implement the judgment of the Supreme Court without creating any imbalance in competitive factors for other similar industrial units in the country.
19. The issue, however, is whether, these are matters of policy which must be looked into by the Union Government or whether, the Court would be justified in striking down the UPM regime altogether on that basis. We are conscious that in a matter, such as the present, the determination of an appropriate pricing mechanism involves a balance of complex factors. When the government draws the balance, it would not be possible for the Court to hold that location of an industry in the TTZ area is a factor which is extraneous to price fixation. The TTZ area has a particular need for the conservation of the environment, a need which is distinct or perhaps even of a higher order in view of the presence of a nationally protected monument and the deleterious effects that could be caused if environmental pollution were not controlled in the area. Classifications in the area of price fixation are not constitutionally impermissible. Where a scarce natural resource has to be allocated, priorities have to be observed. How long the incentive for TTZ industries who were compelled to switch over to natural gas should continue and the manner in which the incentive should be structured or phased out cannot be determined in a simplistic exercise of judicial review. The disparity which the petitioners point out and which the Standing Committee on Petroleum and Natural Gas has commented upon in its report of 2013-14 are matters for close analysis by the Union Government. The history of the case would, in fact, indicate that the Union Government acted in 2012 by taking necessary measures to replace the APM regime with a UPM regime which was found by this Court to be necessitated by the goal to create a more level playing field. The extent to which this should now be extended by following a market based approach, is not a matter on which the Court can issue a binding direction. Courts just do not have the expertise to enter into these areas. We should, therefore, follow the conventional wisdom on the subject which is to leave it to the Union Government to take a comprehensive look at the issue which, we have no reason to presuppose, would not be done.
20. For these reasons, we are not inclined to grant the reliefs as sought in these proceedings and we dispose of the petition in the light of our observations made above. There shall be no order as to costs.