STATE OF GUJARAT THRO. THE UNDER SECRETARY Vs. UNION OF INDIA, MINISTRY OF PETROLEUM AND NATURAL GAS AND ANR.

JUDGEMENT

(1.) BY this Writ application under Article 226 of the Constitution of India, the State of Gujarat seeks to challenge the alleged arbitrary and unreasonable action of the Union of India and the Oil & Natural Gas Commission Ltd. (for short, 'the ONGC') in respect of payment of royalty on the basis of post -discount prices of crude extracted from the onshore blocks situated in the State of Gujarat which, according to the petitioner, is in contravention of the provisions of the Oilfields (Regulation & Development) Act, 1948 (for short, 'the Oilfields Act'). The State of Gujarat also seeks to challenge the action of the Government of India, Ministry of Petroleum & Natural Gas of addressing a letter dated 23rd May 2008 to the Director PPAC (Petroleum Planning & Analysis Cell), New Delhi, thereby withdrawing the instructions issued by the Ministry in its letters dated 30th October 2003 and 28th March 2008 respectively to the effect that the revenue of the State Governments in terms of royalty of crude oil would not be affected by the discount on the ONGC crude oil and that the onshore royalty payable to the State Governments would continue to be paid on pre -discount prices.

(2.) THE petitioner has also prayed for a consequential relief for the payment of royalty based on pre -discount, fair market driven wellhead price on crude oil produced from the onshore blocks situated in the State of Gujarat.

(3.) IN exercise of its powers under Entry 53 of List -1 of Schedule VII to the Constitution of India, the Parliament has enacted the Oilfields Act. This Act provides, inter alia, for regulation of oilfields and development of mineral oil resources. Section 6A of the Act, introduced in the year 1969, pertains to royalties in respect of mineral oils. Sub -section (2) of Section 6 provides that the holder of the mining lease (i.e. the ONGC) shall pay royalty in respect of mineral oil mined, quarried, evacuated or collected by it from the leased area at the rate for the time being specified in the Schedule in respect of that mineral oil.