Natural Resources Regime in India: Impact on Trade and Investment

The process of economic liberalization commenced in India in the 1990s, and has resulted in regulatory reform to allow for increased private sector participation in sectors such as national highways, airports, ports, electricity generation and distribution, etc. However, there has been no significant legislative reform in laws relating to the natural resources sector, where the prevailing legal framework in sectors such as coal, petroleum, and natural gas, dates back to the 1950s and vests the central and state governments with comprehensive jurisdiction and control over natural resources. A key reason for lack of legislative reform in this sector is the sensitivities involved at the local and state levels, and absence of a single party government that can initiate and sustain legal reforms. To keep pace with a liberalized investment regime, the executive wing of the government has been initiating actions to encourage private sector participation. This has in turn triggered increased scrutiny of government action by the judiciary. The Supreme Court of India has recognized that the natural resources of India are impressed with a public trust that limits in certain ways the ways the government may exploit and allocate these resources. The public trust doctrine as interpreted by the Supreme Court prevents the government from conferring a benefit on private persons without adequate consideration of the public interest, including the protection of environmental quality. India maintains and levies export taxes on several types of natural resources.