2018 (12) TMI 1773 - HC - Indian Laws

Implementation of Ethanol Blended Petrol (EBP) on mandatory basis - Chemical industry has been suffering from a long time from shortage of ethanol - basic objective of Ethanol has not been achieved due to shortfall in supply by the ethanol suppliers - HELD THAT - It is apparent from inception, the EBP factored in purchase of ethanol by OMCs, which are public sector units, at prices to be decided by the Central Government. This was part of its overall strategy of not only ensuring cleaner fuel, and lowering emission, but increasing eventually bio fuel component to 10%. The material on record shows that from an initial low of about 1.75% in 2009, the EBP achieved upto 3.5% of bio-fuel element in the petroleum sold. The various cabinet notes and decisions also indicate that a key component in EBP and its envisioned success was on the basis of sustained supply of ethanol at prices determined by the Central Government. This, it was felt, would act as incentive to those supply ethanol, for the EBP. The February 2010 minutes suggests that the Saumitra Chowdhury Committee was set up at the behest of the Central Government. The petitioner s challenge to the EBP is two-fold a constitutional challenge on the basis that the policy is an unsustainable restriction, as it is not founded even on a statute; and two that its continued existence is arbitrary, since it has the effect of driving up the price of ethanol, which has applications other than for biofuel purposes, especially in the chemical industry. So far as the first issue is concerned, It is therefore, evident that not all activities of the State, carried out through its executive powers, need to be based on legislation. The State can do the robes of a trader, and enter into commercial relationships; it can procure goods, set price limits for procurements of article by its officers and agencies and in the course of commerce or other multifarious activities it engages in, fashion guidelines including pricing parameters, ceiling limit in respect of nature of articles, or the spelling out the kind of services it wishes to procure, or set out the standard terms of contract. This freedom to contract is fettered only to the extent that it should be aimed at securing public interest and inuring to the larger public good. As to the second argument that the decision to continue with the EBP is unfair, as it results in artificial and tends to drive up prices of ethanol and that without such intervention, whereby the oil manufacturing companies are directed to procure the product at specified prices, the Court recollects that in the exercise of policy framing and implementation, the State has flexibility in its approach. It is thus, apparent that the Court s jurisdiction is limited to examine the validity or legal efficacy of a policy and ensuring that it does not violate any statutory canon or is not the outcome of an irregular or unfair procedure; nor tainted by mala fides. In the facts of the present case, what the petitioner frontally challenges is not just the legality of the EBP but its efficacy as well, contending that it has not yielded the benefits envisioned on the one hand, and on the other, is wreaking havoc on its business - it is unfeasible for this Court to venture into the area of a merits review of that policy, purely because the procurement price fixed, tends to drive up prices of ethanol for use by industrial consumers, like the petitioner. Petition dismissed.

Issues Involved:
1. Constitutionality of the Ethanol Blended Petrol (EBP) Programme.
2. Arbitrariness and impact of the administered price of ethanol.
3. Impact on the petitioner's business and the chemical industry.
4. Judicial review of government policy decisions.

Detailed Analysis:

1. Constitutionality of the Ethanol Blended Petrol (EBP) Programme:
The petitioner challenged the EBP programme as discriminatory and arbitrary, arguing that it adversely impacted the price of ethanol, which is vital to its business. The petitioner claimed that the EBP programme, which mandates a purchase price for ethanol by state-owned petroleum companies, was not founded on any statutory basis and thus constituted an unsustainable restriction on trade.

The court observed that government policies, even if not based on legislation, can be valid if they are in the public interest. The court referenced several precedents, including *State of Orissa v. Radheysham Meher* and *Dalmia Cement (Bharat) Ltd. v. Union of India*, to establish that the state can exercise its executive power to frame policies aimed at public welfare without the need for legislative backing.

2. Arbitrariness and Impact of the Administered Price of Ethanol:
The petitioner argued that the administered price fixed by the Central Cabinet Committee of Economic Affairs (CCEA) was arbitrary and lacked a legal foundation since ethanol is not an essential commodity under the Essential Commodities Act, 1955. The petitioner cited reports from the Saumitra Chaudhuri Committee and the C. Rangarajan Committee, which recommended that ethanol prices should be market-determined to avoid adverse impacts on other industrial users.

The court noted that the CCEA's decision to fix ethanol prices was part of a broader strategy to promote cleaner fuel and support the agricultural sector. The court emphasized that policy decisions, especially those related to economic matters, are within the executive's purview and are not subject to judicial review unless they violate constitutional or statutory provisions.

3. Impact on the Petitioner's Business and the Chemical Industry:
The petitioner argued that the EBP programme led to a significant rise in ethanol prices, making its business unviable and forcing it to import ethanol, thereby increasing foreign exchange outflow. The petitioner claimed that the policy ignored the interests of the chemical industry, which uses a substantial portion of ethanol produced.

The court acknowledged the petitioner's concerns but reiterated that the policy's primary objective was to promote environmental sustainability and reduce dependency on fossil fuels. The court held that the inconvenience caused to the petitioner could not outweigh the larger public interest served by the EBP programme.

4. Judicial Review of Government Policy Decisions:
The respondents argued that the executive power under Article 73 of the Constitution allows the government to frame policies, and such decisions are not subject to judicial review unless they are arbitrary or violate fundamental rights. The court cited several judgments, including *State of MP v. Nandlal Jaiswal* and *Delhi Science Forum v. Union of India*, to support the principle that courts should not interfere with policy decisions unless they are unconstitutional or arbitrary.

The court concluded that the EBP programme was a policy decision aimed at public welfare and environmental protection. The court held that the policy was neither arbitrary nor unconstitutional and that the petitioner's challenge was unmerited.

Conclusion:
The court dismissed the petition, holding that the EBP programme was a valid exercise of executive power aimed at promoting environmental sustainability and supporting the agricultural sector. The court emphasized that policy decisions, especially in economic matters, are within the executive's domain and are not subject to judicial review unless they violate constitutional or statutory provisions. The petitioner's concerns about the impact on its business were outweighed by the larger public interest served by the EBP programme.

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