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2018 (12) TMI 1773

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..... et 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 .....

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..... tarakhand and manufactures a range of chemicals including Mono ethylene Glycol, Diethylene Glycol, Tri ethylene glycol, Fatty Acid Ethoxylates, Fatty Amine Ethoxylates, Alkyl Phenol Ethoxylates, Castor/Natural Oil Ethoxylates, Ethoxylated and Propylated co-polymers, brake fluids, anti-freeze coolants and performance chemicals etc. Its activity is based on use of Ethanol as raw material; not on petroleum based raw material. It claims that such use not only saves valuable foreign exchange, but also is extremely environment friendly. Ethanol is based on recovery from molasses (a dark, viscous liquid made from sugarcane. Its production is a labour-intensive process requiring several steps, including cutting the sugarcane plants, boiling, straining, skimming and re-boiling). The petitioner consumes about 2,40,000 kilo litres of ethanol annually; other major chemical plants, like it are ethanol based and produce articles. Put together, all these consume approximately 8,50,000 kilo litres annually. It is stated that the petitioner has a workforce of about 1350 and over the years, it has contributed to the exchequer by way of taxes, to the tune of ₹ 1000 crores. 3. The petitione .....

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..... in October, 2012, which stated that all user industries i.e. chemical, alcohol and petroleum should compete for procurement of ethanol. The Senior Counsel submitted that the National Policy on Bio-fuels, the Dr. Saumitra Chaudhuri Report and the Dr. C. Rangarajan report were completely ignored by CCEA while fixing administered price. 5. The petitioners argued that on 29-1-2011, the Ministry of Chemicals and Fertilizers (Respondent No. 2) expressed its serious reservations regarding implementation of EBP on mandatory basis stating that the chemical industry has been suffering from a long time from shortage of ethanol. 6. The basic objective of Ethanol has not been achieved due to shortfall in supply by the ethanol suppliers. Further, there has been more outflow of foreign exchange due to import of ethanol by chemical industry or value-added chemicals which earlier were being produced from ethanol. The petitioners argue that the EBP programme has not only been unsuccessful, but has failed in its objective. Contending that there is a significant change in the fact situation, during the decade between 2002-2003 to 2011-12, which witnessed a 68% rise in alcohol production (fr .....

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..... arch, 2011, commented that potentially EBP could be based either on a combination of the need to reduce consumption of fossil fuels and the motivation for this could be concern for the foreign exchange and import bills as also the environment and the need for improving the economics of the sugar industry by identifying a remunerative use for a by-product of the industry. The Council stated that according to the present EBP was based upon the latter consideration. The Council then recommended that the end-use price paid for ethanol by the user should be market determined and not on the basis of helping out an individual set-up; the Council highlighted that this is so in the context of there being a reasonably well-established market for ethanol, both the spirits industry and alcohol based chemical industry. As a consequence, price for the EBP programme should be left to normal commercial process. 10. The petitioners urge that the Committee also noted that in view of the tremendous year-to-year variations as well as supply falling short of demand, it was difficult to continue the compulsory blending programme. It suggested, therefore, that the Oil Marketing Companies (hereafter .....

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..... tive market, the UOI went ahead, and issued a directive on 22-11-2012 with reference to price fixation, for procurement by the PSU oil companies. It is also stated that this was followed up by a Press release dated 7th December, 2012, by the Central Government. 13. Learned Counsel relied on various replies to queries made to Union Ministers in Parliament during the period 2014-18 to say that the EBP never reached its target of 5% blending (of ethanol with petroleum); rather it reached only 3.49% annually in 2015-16 and during the previous years was lower. The total ethanol procurement was also 65.4 crore litres - it did not go up as dramatically as envisioned; in 2010-11 it was 36 crore litres. It was submitted that on the other hand, the price fixation by the Central Government artificially drove up prices of a commodity which could well be procured at a cheaper rate by domestic industry, which due to the constraint of higher prices, was forced to import the product, to the national detriment. 14. It was submitted that barring statutory price fixation which is constitutionally well recognized, the State or its agencies cannot resort to controlling prices, or dictating to .....

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..... Section 4 of the Competition Act and accordingly closed the matter. Aggrieved by the aforesaid Order of CCI, the petitioner filed an Appeal No. 119 of 2012 (India Glycols Limited v. Indian Sugar Mills Association & Ors.) before the Competitive Appellate Tribunal. That Tribunal, in its order dated 9th December, 2013, dismissed the appeal. Later the petitioner also preferred a Civil Appeal No. 810 of 2014 before the Supreme Court of India, which is sub judice. 18. It is submitted that the Central Government introduced the EBP keeping in mind the beneficial effects it will have on the agricultural sector as well as on the environment. It is further submitted that before the Union Government s decision to implement the EBP consultations were held with the stakeholders and only upon careful consideration of the benefits of the said programme, and the logistical and financial advantages it entailed for a country like India, did the Central Government eventually take an informed decision of mandating EBP. The programme was initiated keeping in mind the long-term advantages that it entails. The Central Government is taking initiatives to ensure that the EBP Programme is successfu .....

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..... or venturing into the executive domain of policymaking. Counsel also argued that change in policy based on an established foundation of public interest and in the absence of any allegation that the policy is structured to suit one particular private party or harm a particular private party is impregnable to a challenge. No private right will prevail over a change in policy, structured and mandated in public interest. A change in policy occasioned by application of some principles of public interest cannot be challenged on the ground that it affects private rights of private individuals. 23. It was contended by the respondent that in economic matters especially, the Government enjoys wide latitude of discretion. In such matters, geographical classification which is based on sound rationale and proper reasons is not per se violative of Article 14. In support of this, the respondents relied on Parisons Agrotech (P) Ltd. v. Union of India - (2015) 9 SCC 657 = 2015 (323) E.L.T. 3 (S.C.); Anant Prasad Lakshminiwas Generiwal v. State of AP, AIR 1963 S.C. 853; State of Kerala v. T.P. Roshana, (1979) 1 SCC 572; State of MP v. Bhopal Sugar Industries, AIR 1964 SC 1179 and Harshendra Cho .....

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..... Haveli 3. Chandigarh. 2. The Central Government may, suo motu, or on a reference made to it, after due consideration of facts, by an order, modify the areas, and the percentage of ethanol in the ethanol blended petrol that may be supplied, and specify the period for the same. [F.NO. P-45018/28/2000-CC] 26. Later, the Central Government issued the National Policy on Bio-fuels. The relevant extract of the said policy, dealing with Bio-fuels, reads as follows : 5.6 Ethanol is mainly being produced in the country at present from molasses, which is a by-product of the sugar industry. 5% blending of ethanol with gasoline has already been taken up by the Oil Marketing Companies (OMCs) in 20 States and 4 Union Territories. 10% mandatory blending of ethanol with gasoline is to become effective from October, 2008 in these States. In order to augment availability of ethanol and reduce over supply of sugar, the sugar industry has been permitted to produce ethanol directly from sugarcane juice. The sugar and distillery industry will be further encouraged to augment production of ethanol to meet the blending requirements prescribed from time to time, while ensuring that this does .....

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..... nd could be considered for providing such financial incentives. 5.17 As biofuels are derived from renewable biomass resources they will be eligible for various fiscal incentives and concessions available to the New and Renewable Energy Sector from the Central and State Governments. 5.18 Bio-ethanol already enjoys concessional excise duty of 16% and biodiesel is exempted from excise duty. No other Central taxes and duties are proposed to be levied on bio-diesel and bio-ethanol. Custom and excise duty concessions would be provided on plant and machinery for production of bio-diesel or bio-ethanol, as well as for engines run on biofuels for transport, stationary and other applications, if these are not manufactured indigenously. 27. The record contains minutes of the CCEA on pricing and supply of Ethanol of 25-9-2007. The later note of 16-2-2010 reads, inter alia, as follows : CABINET NOTE FOR THE CABINET COMMITTEE ON ECONOMIC AFFAIRS (CCEA) No. P-32017/5/2007-CC vol.m Ministry of Petroleum & Natural Gas decisions taken in the meeting as approved by Hon ble Minister of Agriculture, Food and Consumer Affairs are as under :- (i) The CCEA had in October 2007 decided a .....

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..... ee year period. However, Department of Expenditure, Ministry of Finance is of the view that the price of ₹ 27/1 litre may apply for a period of six months and the Committee of experts should be set up immediately to finalize its recommendations within a period of six months. Planning Commission has suggested that this committee may be by Dr. Saumitra Chaudhury, Member Planning Commission. The suggestion of Planning Commission is accepted as the expert committee headed by a Member Planning Commission can more effectively take care of competing interests in pricing of ethanol. 3.6 In the National Policy on Bio-fuels approved by the Cabinet on 23-7-2009, it has been provided that the National Bio-fuel Steering Committee chaired - by Cabinet Secretary would determine the price of ethanol and decided by the National Biofuel Coordination Committee chaired by the Prime Minister. It has been further that the OMCS will be compensated for any losses they suffer on account of fuel falling below the minimum purchase price (extracts of Bio-fuel Policy at Annexure-XII) 3.7 In line with the decision of the Government taken in October, 2007 accepting the principle of a uniform purc .....

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..... haudhuri concludes ...Finally, over a period of time, in order to stabilize the ethanol blending programme, it is necessary to encourage a broad-based system of price discovery so that the administered mechanism may be phased out. Both industrial/potable grade ethanol (95%) and anhydrous ethanol should be traded in the commodity exchanges for both spot and future deliveries. Suitable initiatives may be taken in this respect. This will, bring transparency to the industry and form the basis of a market-based price discovery system for the ethanol blending programme. 30. The C. Rangarajan Committee, which submitted its report, in October, 2012 to the Central Government, stated inter alia as follows : The Committee is of the view that there should be no quota imposed (quantitative restrictions) on the mills for sale of molasses. All user industries, viz., potable alcohol, chemicals and petroleum product industries should compete for molasses, and the market should determine its price. 31. The Economic Advisory Council, by its report dated 10th March, 2011, stated, inter alia, as follows : (i) The end use price paid for ethanol (by any user) should be market determined and not .....

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..... s of the Court where Government policies, not based on legislation, but framed in exercise of the State s executive power, were considered. For instance, in State of Orissa and Anr. v. Radheysham Meher & Ors., 1995 (1) SCC 652, the Supreme Court had to deal with an issue concerning executive power of the State Government to permit the opening of medical stores in hospital campuses, twenty four hours of the day. Storekeepers across the road (of hospitals) challenged the policy, complaining that such a policy had an adverse impact on their business. The Court held that setting up such stores within the campus had direct nexus with public interest particularly that of patients and that the policy could not be interfered with because it was not based on any law. It was held that : 5. Learned Counsel appearing for the appellants vehemently urged before us that the said advertisement inviting applications for settling the shop to have a medical store inside the hospital premises was issued in pursuance of the Government policy and with the sole object to make the medicines available to the patients even at odd hours and, therefore, the High Court should not have interfered with .....

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..... ay and night. Consequently, the impugned order could not be sustained. 35. In another decision, Dalmia Cement (Bharat) Ltd. v. Union of India, 1996 (10) SCC 104, the Supreme Court has observed that above economic justice means abolition of such economic conditions which remove inequality between man and man. In our opinion, there has to be positive action for that equality. Again, in Indian Drugs & Pharmaceuticals Ltd. & Ors. v. Punjab Drug Manufacturers Association & Ors., (1999) 6 SCC 247, constitutional validity of the policy requiring State authorities to purchase certain medication for use in public hospitals only from public sector manufacturers was challenged. The High Court had quashed the policy. However, quoting its ruling in Rai Sahib Ram Jawaya Kapur v. State of Punjab, AIR 1955 SC 549, the Supreme Court held that conditions were valid, under the executive power of the State (Article 162 of the Constitution). The challenge on the ground of infraction of rights under Articles 19(1)(g) and 19(6) was turned down. The Court observed thus : 16. It is clear from the various judgments referred to above that a decision which would partially affect the sale .....

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..... the writ petitions before the Punjab and Haryana High Court from which the above civil appeals have arisen being the same, we allow these civil appeals and set aside the judgment and order of the Punjab and Haryana High Court dated 3-6-1988 made in Civil W.P. No. 6144 of 1987. Consequently, the said writ petition stands dismissed. No costs. (emphasis supplied) 36. Earlier, in Bishambhar Dayal Chandra Mohan v. State of Uttar Pradesh & Ors. - AIR 1982 SC 33, the Supreme Court had ruled as follows : The State in exercise of its executive powers is charged with the duty and the responsibility of carrying on the general administration of the State. So long as the State Government does not go against the provisions of the constitution of any law, the width and amplitude of its executive power cannot be circumscribed. If there is no enactment covering a particular aspect, certainly the Government can carry on the administrative directions or instructions, until the legislature makes a law in that behalf. Otherwise the administration would come to a standstill. 37. It is therefore, evident that not all activities of the State, carried out through its executive powers, need to .....

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..... t. They cannot be tested in Court of Law. The courts cannot express their opinion as to whether at a particular juncture or under a particular situation prevailing in the country any such national policy should have been adopted or not. There may be views and views, opinions and opinions which may be shared and believed by citizens of the country including the representatives of the people in Parliament. But that has to be sorted out in Parliament which has to approve such policies... 40. BALCO Employees Union (Regd.) v. Union of India and Ors. - (2002) 2 SCC 333 is a decision which highlighted deference to the executive in regard to matters of policy, and underlining that judicial review of economic matters, should be limited to scrutiny of constitutionality of the measure or law, and not the efficacy of the measures. 41. In Peerless General Finance and Investment Co. Limited & Anr. v. Reserve Bank of India - (1992) 2 SCC 343, the Court held that some matters like price fixation are based on such uncertainties and dynamics that even experts face difficulty in making correct projections, making it all the more necessary for this Court to exercise non-interference : 31 .....

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