Public utility price fixation must be reasonable and non-arbitrary; gas price demands were set aside, but the 90% minimum guarantee stood.
A State instrumentality supplying gas as a public utility must fix and demand prices on rational, relevant and non-arbitrary grounds; price fixation is a policy function, but remains open to judicial review where the basis appears manifestly unreasonable or discriminatory. On the facts, the steep increase in gas prices without a satisfactory disclosed basis was held arbitrary and unreasonable, so the price demands were set aside for fresh fixation on rational principles. The enhancement of the minimum guaranteed quantity to 90% was upheld because the commodity would otherwise be flared and wasted, making the commercial adjustment justified.
Issues: (i) Whether the Oil & Natural Gas Commission, while supplying gas as a public utility, was bound to act reasonably and non-arbitrarily in fixing and demanding prices; (ii) Whether the increase of the minimum guaranteed quantity to 90% was justified.
Issue (i): Whether the Oil & Natural Gas Commission, while supplying gas as a public utility, was bound to act reasonably and non-arbitrarily in fixing and demanding prices.
Analysis: The Commission was treated as a State instrumentality and a public utility engaged in the disposal and supply of a public resource. Its statutory functions under Section 14 of the Oil & Natural Gas Commission Act, 1959, together with the constitutional mandate of equality and non-arbitrariness, required it to act on rational and relevant norms. Price fixation in such matters remained a policy function, but it was still subject to judicial review where the demand appeared manifestly unreasonable or discriminatory. On the material placed before the Court, the steep escalation in gas prices, the absence of a satisfactory break-up or disclosed basis, and the contrast with long-term contracts at lower rates furnished a prima facie case of arbitrariness.
Conclusion: Yes. The Commission was bound to charge only reasonable prices, and the prices demanded from the petitioners were held arbitrary and unreasonable to that extent.
Issue (ii): Whether the increase of the minimum guaranteed quantity to 90% was justified.
Analysis: The commodity was such that, if not consumed, it was liable to be flared and wasted. In that context, the enhanced minimum guarantee was considered a commercially and operationally justified measure rather than an arbitrary burden.
Conclusion: Yes. The increase to 90% was upheld and the challenge on that count failed.
Final Conclusion: The petitions succeeded only in part: the impugned price demands were set aside for fresh fixation on rational principles, while the challenge to the enhanced minimum guarantee was rejected.
Ratio Decidendi: A State instrumentality supplying a public utility cannot fix or demand prices arbitrarily; even where price fixation is a policy matter, it must conform to the constitutional requirement of reasonableness and non-discrimination and is amenable to judicial review if the basis is shown to be irrational or oppressive.
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