SAI BHASKAR IRON LTD. Vs. A.P.ELECT.REGUL.COMMISSION & ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 5542 of 2016, Judgment Date: Jul 05, 2016
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO…5542 OF 2016
[Arising out of SLP [C] No.12398/2014]
Sai Bhaskar Iron Ltd. … Appellant(s)
Vs.
A.P. Electricity Regulatory Commission & Ors. … Respondents
WITH
CA Nos.5543-5544 of 2016 @ SLP [C] Nos. 14638-14639/2014
CA No.5545 of 2016 @ SLP [C] No. 15205/2014
CA Nos. 5546-5571 of 2016 @ SLP [C] Nos. 15245-15270/2014
CA Nos. 5572-5575 of 2016 @ SLP [C] Nos. 15348-15351/2014
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CA No. 5844 of 2016 @ SLP [C] No. 2689/2015
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C.A. No. 8249/2015;
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CA No. 5860 of 2016 @ SLP [C] No. 3063/2016; and
CA No. 5861 of 2016 @ SLP [C] No. 3516/2016.
J U D G M E N T
ARUN MISHRA, J.
1. Delay condoned in filing SLPs.
2. Leave granted.
3. The question involved in the present case is with respect to levy of
fuel surcharge adjustment (in short ‘FSA’) which is collected from the
consumers in addition to fixed tariff for consumption of power. The concept
of FSA was brought in by the Andhra Pradesh Electricity Reform Act, 1998
(hereinafter referred to as ‘the Act of 1998’). Earlier the Electricity
Board used to collect fuel cost adjustment. Under section 3(1) of the Act
of 1998, Andhra Pradesh Electricity Regulatory Commission has been
established bestowed with the power to grant licences and fix tariff for
supply of power. Section 26(9) of the Act lays down that no tariff or part
of tariff required to be determined under sub-section (6) of section 29 may
be amended more frequently than once in any financial year ordinarily
except in respect of any changes expressly permitted under the terms of any
fuel surcharge formula prescribed by the regulations.
4. The Government of India enacted the Electricity Act, 2003
(hereinafter referred to as “the Act of 2003”) to consider the laws of
trading of power for the purpose of making it consumer-friendly and to
create better environment for development of power industry, at the same
time protecting the rights of the consumers. Section 62(3) of the Act of
2003 prohibits preference to any consumer of electricity but may
differentiate according to the consumer’s load factor and other aspects
permissible under the aforesaid provision. Section 62(4) of the Act of 2003
is pari materia to section 26(9) of the Act of 1998. By virtue of the power
conferred under sections 9(2) and 54(2) of the Act of 1998, the A.P.
Electricity Regulatory Commission (hereinafter referred to as “the
Commission”) has framed the Andhra Pradesh Electricity Regulatory
Commission (Conduct of Business) Regulations, 1999 (hereinafter referred to
as “the Regulations of 1999”). The Commission has framed Regulation No.8
dated 28.8.2000 called Andhra Pradesh Electricity Regulatory Commission
(Conduct of Business) First Amendment Regulations, 2000. By virtue of the
aforesaid First Amendment Regulations, provisions contained in the chapter
on tariff were incorporated by way of Regulation 45-A specifying expected
revenue from charges and tariff proposals and under Regulation 45-B fuel
surcharge adjustment formula was prescribed. Regulation 45C was also
inserted providing for subsidies as the State Government may consider
appropriate. Regulation 45-B was further amended by way of reforms called
the Andhra Pradesh Electricity Regulatory Commission (Conduct of Business)
Amendment Regulations, 1 of 2003. They came into force w.e.f. 1.4.2003. The
amended Regulation 45-B provided a formula for working out the FSA.
Condition No.1 also mentioned that FSA will be distributed among all
categories of consumers that existed in the quarter. However the
consumption by the agricultural sector will be excluded till the Commission
is satisfied that metering of agricultural consumption is complete, as may
be notified from Tariff orders from time to time. As per section 61 of the
Act of 2003, the Commission has to be guided by the aforesaid provisions.
As the Central Government had not framed the national electricity policy or
interim policy, as such Regulation No.9 of 2004 was notified by the A.P.
Electricity Regulatory Commission. The Commission made the transitory
Regulations in exercise of the power conferred under section 181 read with
section 61 of the Act of 2003 called the A.P. Electricity Regulatory
Commission (Transitory Provisions for Determination of Tariff) Regulations,
2004 (in short “Regulations of 2004”). They came into force w.e.f.
10.6.2004. It was specified that the Regulations of 1999 as amended from
time to time under the provisions of the Act of 1998 shall continue to
apply as regulations under the Electricity Act, 2003 and remain in force
till appropriate new regulations are notified by the Commission under the
Electricity Act, 2003.
5. The Commission had also framed terms and conditions for determination
of tariff for wheeling and retail sale of electricity called the Andhra
Pradesh Electricity Regulatory Commission (Terms and Conditions for
Determination of Tariff for Wheeling and Retail Sale of Electricity),
Regulation, 2005. Aggregate Revenue Requirement (in short “ARR”) was
specified in Regulation 2(1)(2). Regulation 3(4) provided ARR to be the
basis for the fixation of the tariff/charges for retail sale of electricity
including surcharges. However Regulation 24(3) provided that nothing in
the Regulation shall, expressly or by implication, bar the Commission from
dealing with any matter or exercising any power under the Act for which no
Regulations have been framed, and the Commission may deal with such
matters, exercise such powers and discharge such functions in a manner it
deems fit. The orders of the Commission determining the FSA were questioned
before the High Court. Writ petitions were filed before the High Court
challenging the vires of section 26(2) of the Act of 1998, and the validity
of Regulation 45-B of Regulations of 1999 as substituted in 2003. The
Commission determined the FSA for all the eight quarters for the period
from 2010 to March, 2012 vide order dated 20.9.2012 and vide order dated
2.11.2012 for the first quarter of financial year 2012-13. The orders were
also questioned in the writ petition. The Division Bench of the High Court
vide order dated 24.2.2014 upheld the vires of the Regulations and on
merits left the matter to be agitated in the alternative remedy of appeal.
However, writ petitions which were filed were also disposed of in terms of
order dated 24.2.2014 hence the special leave petitions have been filed in
this Court.
Rival Submissions :
6. It was submitted on behalf of the appellants that Regulation 45-B of
the Regulations of 1999 is ultra vires the provisions contained in section
26(9) of the Act of 1998 and section 62(4) of the Act of 2003, insofar as
it provides for inclusion of any variation other than that arising out of
fuel costs alone. It was further submitted that only fuel cost had to be
considered and no other charges other than transportation can be included.
The FSA formula in Regulation 45B provides for element other than variable
cost of all purchases even beyond variation of fuel costs alone and the
same transgresses the limits of FSA formula permitted under the Act. Since
the provision of section 26(9) of the Act of 1998 and section 62 of the Act
of 2003 provide for variation of tariff more than once in a financial year
the exception provided is with respect to FSA. Fuel has to be given natural
meaning. In fact, the negative imperative of no variation of tariff more
than once is being violated. Condition Nos.5, 10 and 11 of the formula are
also ultra vires to the aforesaid provisions. It was also submitted that
providing for exclusion of agricultural consumption till metering of
agricultural services are complete as contained in Condition 1 of
Regulation 45-B is bad in law and contrary to the mandate of section 55(1)
of the Act of 2003; more so, after a lapse of 2 years’ period. Time
mandated under section 55(1) for metering the consumption has not been
extended. Mandate of compulsory metering has taken effect from 10.6.2005.
Consequently, condition No.1 is repugnant to the aforesaid provision as
such it was submitted that all sales of electricity including the
agricultural consumption has to be considered in computing the factor ‘Qi’
in the FSA formula. Regulation 45B ceased to have effect on 10.6.2004 after
one year from the date of coming into force of the Electricity Act, 2003 by
virtue of the proviso to section 61 of the said Act. It was further
submitted that on coming into force of Tariff Regulation 4 of 2005 modified
under the Act of 2003, Regulations of 1999 containing Regulation 45-B
ceased to have the effect. The Regulations of 2003 were also attacked on
the ground that there was no previous publication of the draft. Regulation
9 of 2004 made under the Reform Act with retrospective effect of 10.6.2004,
the Commission has no power to make regulations with retrospective effect.
Regulation 45B casts an additional burden without authority of law.
Condition No.1 is contrary to the provision contained in sections 61 and 65
of the Act of 1998. It was also submitted that it was the liability of the
State Government to compensate the supplier of electricity affected by the
grant of subsidy made to the agricultural sector. Condition No.1 is also
contrary to sections 61 and 65 of the Act of 2003. Regulations of 2005
indicate that power purchase cost for each year stands included in the ARR
and FSA over and above the purchase cost. It does not provide for
adjustment in price on account of fluctuation in the cost of fuel. Formula
for determining the FSA travels beyond that.
7. It was submitted on behalf of the Commission and the State Government
that under section 85(3) of the Act of 2003, the Act of 1998 is saved, in
the Schedule at serial No.3. Consequently, the provisions of the Act of
1998 which are not consistent with the provisions of the Act of 2003 shall
continue to apply to the State of Andhra Pradesh. The saving provision in
the Regulations of 2005 reflects that the Regulations of 1999 framed under
the Act of 1998 are still in operation. Regulation 12.4 of Regulations of
2005 provides for levy of FSA. The fuel surcharge has not been defined
under the Act of 1998 or the Act of 2003 or in the Regulations of 2005
framed thereunder. The meaning and scope of fuel surcharge is given in
Regulation 45-B of Regulations of 1999. The formula contains the components
to form part of FSA and had been implemented for the last more than one
decade. FSA has been determined as per the formula prescribed under
Regulation 45-B. It is incorrect to submit that FSA should be confined to
variation of fuel cost. Condition Nos.1, 5, 10 and 11 of Regulation 45-B
have been notified in the Gazette, therefore, there is complete compliance
of the provisions contained in section 55(1) of the Act of 2003. The
Commission is empowered to differentiate according to consumer’s load
factor or power factor etc. as provided in section 26(7) of the Act of
1998. Similar provisions are contained in section 62(3) of the Act of 2003.
The Commission has power to frame the regulations under sections 26(9) and
54 of the Act of 1998 with respect to FSA and under section 62(4) of the
Act of 2003. FSA is a related surcharge levied to meet the increased cost
of generation and purchase of electricity. The vires of section 62(4) of
the Act of 2003 have not been questioned and the challenge to the vires of
the provisions of section 26(9) of the Act of 1998 has been given up. The
orders passed by the Regulatory Commission are justified and writ petitions
have been rightly dismissed by the High Court.
Statutory Provisions :
8. For appreciating the rival contentions, we deem it appropriate to
take note of the various provisions of the Act of 1998 which have been
enacted to establish and incorporate autonomous statutory Electricity
Regulatory Commissions to balance the interest of all the stakeholders in
the electricity industry and to promote healthy growth of power sector in
the State. The State has been divested of its regulatory functions. Section
11 deals with the functions of the Commission. It has the power under
section 11(1)(c) to issue licences and determine the conditions to be
included in the licences. Under section 11(1)(e) it has the power to
regulate the purchase, distribution, supply and utilization of electricity,
the quality of service, the tariff and charges payable. Part ‘A’ of the Act
of 1998 deals with tariff. Section 26 deals with licensee’s revenues and
tariffs. The provisions contained in section 26 are extracted hereunder :
“26. Licensee's revenues and tariffs:- (1) The holder of each licence
granted under this Act shall observe the methodologies and procedures
specified by the Commission from time to time in calculating the expected
revenue from charges which it is permitted to recover pursuant to the terms
of its licence and in designing tariffs to collect those revenues.
(2) The Commission shall subject to the provisions of sub-section (3) be
entitled to prescribe the terms and conditions for the determination of the
licensee’s revenue and tariffs by regulations duly published in the
Official Gazette and in such other manner as the Commission considers
appropriate.
Provided that in doing so the Commission shall be bound by the following
parameters:–
(a) the financial principles and their applications provided in the Sixth
Schedule to the Electricity (Supply) Act, 1948 read with Sections 57 and 57-
A of the said Act;
(b) the factors which would encourage efficiency, economic use of the
resources, good performance, optimum investments performance of licence
conditions and other matters which the Commission considers appropriate
keeping in view the salient objects and purposes of the provisions of this
Act; and
(c) the interest of the consumers.
(3) Where the Commission, departs from factors specified in the Sixth
Schedule of the Electricity (Supply) Act, 1948 while determining the
licensees' revenues and tariffs, it shall record the reasons therefor in
writing.
(4) Any methodology or procedure specified by the Commission under sub-
sections (1), (2), and (3) above shall be to ensure that the objectives and
purposes of the Act are duly achieved.
(5) Every licensee shall provide to the Commission in a format as specified
by the Commission at least 3 months before the ensuing financial year full
details of its calculation for that financial year of the expected
aggregate revenue from charges which it believes it is permitted to recover
pursuant to the terms of its licence and thereafter it shall furnish such
further information as the Commission may reasonably require to assess the
licensee's calculation. Within 90 days of the date on which the licensee
has furnished all the information that the Commission requires, the
Commission shall notify the licensee either—
(a) that it accepts the licensee's tariff proposals and revenue
calculations; or
(b) that it does not consider the licensee's tariff proposals and revenue
calculations to be in accordance with the methodology or procedure in its
licence, and such notice to the licensee shall,-
(i) specify fully the reasons why the Commission considers that the
licensee's calculation does not comply with the methodology or procedures
specified in its licence or is in any way incorrect, and
(ii) propose a modification or an alternative calculation of the expected
revenue from charges, which the licensee shall accept.
(6) Each holder of a supply licence shall publish in the daily newspaper
having circulation in the area of supply and make available to the public
on request the tariff or tariffs for the supply of electricity within its
licensed area and such tariff or tariffs shall take effect only after seven
days from the date of such publication.
(7) Any tariff implemented under this section, –
(a) shall not show undue preference to any consumer of electricity, but
may differentiate according to the consumer's load factor or power factor,
the consumer's total consumption of energy during any specified period, or
the time at which supply is required; or paying capacity of category of
consumers and need for cross-subsidisation;
(b) shall be just and reasonable and be such as to promote economic
efficiency in the supply and consumption of electricity; and
(c) shall satisfy all other relevant provisions of this Act and the
conditions of the relevant licence.
(8) The Commission also shall endeavour to fix tariff in such a manner
that, as far as possible, similarly placed consumers in different areas pay
similar tariff.
(9) No tariff or part of any tariff required by sub-section (6) may be
amended more frequently than once in any financial year ordinarily except
in respect of any changes expressly permitted under the terms of any fuel
surcharge formula prescribed by regulations. At least three months before
the proposed date for implementation of any tariff or an amendment to a
tariff the licensee shall provide details of the proposed tariff or
amendment to a tariff to the Commission, together with such further
information as the Commission may require to determine whether the tariff
or amended tariff would satisfy the provisions of sub-section (7). If the
Commission considers that the proposed tariff or amended tariff of a
licensee does not satisfy any of the provisions of sub-section (7), it
shall, within 60 days of receipt of all the information which it required,
and after consultation with the Commission Advisory Committee and the
licensee, notify the licensee that the proposed tariff or amended tariff is
unacceptable to the Commission and it shall provide to the licensee an
alternative tariff or amended tariff which shall be implemented by the
licensee. The licensee shall not amend any tariff unless the amendment has
been approved by the Commission.
(10) Notwithstanding anything contained in Sections 57-A and 57-B of the
Electricity (Supply) Act, 1948, no Rating Committee shall be constituted
after the date of this enactment and the Commission shall secure that
licensees comply with the provisions of their licences regarding their
charges for the sale of electricity (both wholesale and retail) and for the
connection to and use of their assets or systems in accordance with the
provisions of this Act.
Explanation :- In this section, –
(a) "the expected revenue from charges" means the total revenue which a
licensee is expected to recover from charges for the level of forecast
supply used in the determination under sub-section (5) above in any
financial year in respect of goods or services supplied to customers
pursuant to a licensed activity; and
(b) “tariff” means a schedule of standard prices or charges for
specified services which are applicable to all such specified services
provided to the type or types of customers specified in the tariff
notification.”
Section 26(9) specifically allows changes in fuel surcharge which is to be
prescribed as per the formula prescribed by the regulations.
9. The Commission has power under section 26 of the Act of 1998 to
prescribe tariffs by Regulations duly published in the Official Gazette,
inter alia, considering the interests of consumers. Licensee is obligated
to furnish the information under section 26(5) as to its calculation for
financial year of the expected aggregate revenue which it would recover.
Under section 26(6) the holder of a supply licence shall publish in the
daily newspaper tariff or tariffs for the supply of electricity in his
licensed area. As per the provision in section 26(8) the Commission shall
endeavour to fix tariff in the manner as far as possible, similarly placed
consumers in different areas pay similar tariff. Section 26(9) creates a
negative mandate on amendment of tariff determined under section 26(6)
which may not be amended more than once in a financial year except FSA.
Section 39 provides for appeals against the orders of the Commission.
Section 54 of the Act of 1998 deals with the power to make regulations.
Under section 54(2)(g) the Commission has the power to fix the method and
manner of determination of licensee’s revenues and tariff fixation and the
matters to be considered in such determination and fixation.
10. The provision contained in section 185(3) of the Central Act of 2003
saves the enactment specified in the Schedule not inconsistent with the
provisions of the Act. Relevant portions of section 185(3) and the Schedule
are extracted hereunder :
“185. Repeal and saving.—(1) Save as otherwise provided in this Act, the
Indian Electricity Act, 1910 (9 of 1910), the Electricity (Supply) Act,
1948 (54 of 1948) and the Electricity Regulatory Commissions Act, 1998 (14
of 1998) are hereby repealed.
(2) Notwithstanding such repeal,—
(a) anything done or any action taken or purported to have been done or
taken including any rule, notification, inspection order or notice made or
issued or any appointment, confirmation or declaration made or any licence,
permission, authorisation or exemption granted or any document or
instrument executed or any direction given under the repealed laws shall,
in so far as it is not inconsistent with the provisions of this Act, be
deemed to have been done or taken under the corresponding provisions of
this Act;
(b) the provisions contained in sections 12 to 18 of the Indian Electricity
Act, 1910 and rules made thereunder shall have effect until the rules under
sections 67 to 69 of this Act are made;
(c) the Indian Electricity Rules, 1956 made under Section 37 of the Indian
Electricity Act, 1910 (9 of 1910) as it stood before such repeal shall
continue to be in force till the regulations under section 53 of this Act
are made;
(d) all rules made under sub-section (1) of section 69 of the Electricity
(Supply) Act, 1948 (54 of 1948) shall continue to have effect until such
rules are rescinded or modified, as the case may be;
(e) all directives issued, before the commencement of this Act, by a State
Government under the enactments specified in the Schedule shall continue to
apply for the period for which such directions were issued by the State
Government.
(3) The provisions of the enactments specified in the Schedule, not
inconsistent with the provisions of this Act, shall apply to the States in
which such enactments are applicable.
(4) The Central Government may, as and when considered necessary, by
notification, amend the Schedule.
(5) Save as otherwise provided in sub-section (2), the mention of
particular matters in that section, shall not be held to prejudice or
affect the general application of section 6 of the General Clauses Act,
1897 (10 of 1897), with regard to the effect of repeals.
THE SCHEDULE
ENACTMENTS
[See sub-section (3) of Section 185]
1. The Orissa Electricity Reform Act, 1995 (Orissa Act No.2 of 1996).
2. The Haryana Electricity Reform Act, 1997 (Haryana Act No. 10 of 1998).
3. The Andhra Pradesh Electricity Reform Act, 1998 (Andhra Pradesh Act No.
30 of 1998).
4. The Uttar Pradesh Electricity Reform Act, 1999 (Uttar Pradesh Act No. 24
of 1999).
5. The Karnataka Electricity Reform Act, 1999 (Karnataka Act No. 25 of
1999).
6. The Rajasthan Electricity Reform Act, 1999 (Rajasthan Act No. 23 of
1999).
7. The Delhi Electricity Reforms Act, 2000 (Delhi Act No. 2 of 2001).
8. The Madhya Pradesh Vidyut Sudhar Adhiniyam, 2000 (Madhya Pradesh Act No.
4 of 2001).
9. The Gujarat Electricity Industry (Reorganisation and Regulation) Act,
2003 (Gujarat Act No. 24 of 2003).”
In the Schedule at item No.3, Act of 1998 is mentioned as such it has
been saved from repeal. As specified and provided under section 185(3) of
the Act of 2003, the provisions of the Act of 1998, which are not
inconsistent with the provisions of the Act of 2003 are in vogue.
11. In the aforesaid backdrop, we proceed to take note of the Regulations
of 1999 framed by the Commission under the provisions of sections 9 and 54
of the Act of 1998. The Regulations provide for provisions for conduct of
the business. By virtue of the First Amendment Regulations, 2000, the
Regulations of 1999 had been amended. Under the heading of tariffs,
Regulation 45-B has been inserted providing for fuel surcharge adjustment
formula.
Regulation 45-B had been substituted in 2003 which is extracted
hereunder:
“45-B:
Unless otherwise agreed by the Commission, the amount eligible for
recovery towards the Fuel Surcharge Adjustment (FSA) for the price and mix
variations in the quantity of energy to be purchased as per the tariff
order during a quarter ‘1’ shall be determined as per the following
formula, aggregated for the quarter ‘1’.
Fi = (Pi x Ei +FCi + Z + Ai)
----------------------------
Qi
Where
Pi is the difference in the Weighted Average Variable Cost in Rupees
adjusted to four decimal points, of power purchase cost in quarter ‘1’ for
the power purchase quantity mentioned in the tariff order compared to the
Weighted Average Variable Cost adopted in the tariff order.
Ei is the energy purchase as mentioned in the tariff order in K wh
during the quarter to be submitted for each of the generating stations.
FCi difference in Rupees, of the actual total fixed charges of the
generating stations from the base values adopted in the tariff order.
Qi is the actual energy sold to all categories in K wh in the quarter in
DISCOM or RESCO, subject to condition No. 1, mentioned here under.
Z is the changes in the cost in Rupees as allowed by the Commission for
a period extending in the past beyond the relevant quarter.
Ai adjustment in Rupees to account for the financial impact of
demonstrated incidents of merit order violation on account of controllable
factors or any other events the financial impact of which, in the
Commission’s view, should be given appropriate treatment.
Condition (1) The FSA as worked out will be distributed among all
categories of consumers that existed in the quarter. However the
consumption by the agricultural sector will be excluded till the Commission
is satisfied that metering of agricultural consumption is complete, as may
be notified in the Tariff orders from time to time.
(2) The licensee shall provide the Commission with its calculation of
each fuel surcharge adjustment required to be made pursuant to its tariff
before it is implemented with such documentation and other information as
it may require, for purpose of verifying the correctness of adjustments.
(3) FSA billed to retail categories to be made over to Bulk supplier by
individual Distribution Companies and/or RESCOS as the case may be.
(4) APTRANSCO must file with the Commission all information (including
sales data from the DISCOMS/RESCOs) required for calculation of the Fuel
Surcharge Adjustment within 30 days of the end of the respective quarter
failing which it will forfeit any future claims on this account for such
quarter. DISCOMS/RESCOs should use actual consumption details of the
relevant quarter when levying FSA.
(5) The licensee will report data from computing the total cost (split
for fixed and variable) for each of the generation stations that has
supplied power in the respective quarter for which fuel surcharge
adjustment is being computed. The total amount eligible for recovery will
be computed on an aggregate basis.
(6) Fuel cost data has to conform to the fuel costs to the allowed level
and no other charges other than the transportation cost can be included in
the fuel cost. Every statement has to be confirmed by the licensee to that
effect. The costs arrived at will be compared to the fuel cost indexation
which will be developed by the Commission in the future.
(7) Penalties are leviable for furnishing wrong data.
(8) The licensee shall publish the FSA approved by the Commission in one
English and one Telugu daily newspaper with circulation in the area of
supply, for general information of the consumers, and shall make available
copies of the FSA order for the relevant quarter to the public on request,
at a reasonable cost.
(9) The FSA shall be implemented after 7 days of such publication.
(10) The actual variable costs and Fixed costs computed for Central
Generating Stations 9CGS) should exclude the effect of UI charges.
(11) The FSA will include not only fixed costs of two part tariff but also
of single part tariff wherever applicable”.
(By Order of the Commission)
S. SURYA PRAKASA RAO,
Secretary to Commission
Hyderabad,
23-06-2003.”
12. Sections 61 and 62 of the Act of 2003 deal with the tariff
regulations and determination of tariff. The provisions are extracted
hereunder :
“61. Tariff regulations.—The Appropriate Commission shall, subject to the
provisions of this Act, specify the terms and conditions for the
determination of tariff, and in doing so, shall be guided by the following,
namely:—
(a) the principles and methodologies specified by the Central Commission
for determination of the tariff applicable to generating companies and
transmission licensees;
(b) the generation, transmission, distribution and supply of electricity
are conducted on commercial principles;
(c) the factors which would encourage competition, efficiency, economical
use of the resources, good performance and optimum investments;
(d) safeguarding of consumers’ interest and at the same time, recovery of
the cost of electricity in a reasonable manner;
(e) the principles rewarding efficiency in performance;
(f) multi-year tariff principles;
(g) that the tariff progressively reflects the cost of supply of
electricity and also reduces cross-subsidies in the manner specified by the
Appropriate Commission;
(h) the promotion of co-generation and generation of electricity from
renewable sources of energy;
(i) the National Electricity Policy and tariff policy:
Provided that the terms and conditions for determination of tariff under
the Electricity (Supply) Act, 1948 (54 of 1948), the Electricity Regulatory
Commissions Act, 1998 (14 of 1998) and the enactments specified in the
Schedule as they stood immediately before the appointed date, shall
continue to apply for a period of one year or until the terms and
conditions for tariff are specified under this section, whichever is
earlier.
62. Determination of tariff.—(1) The Appropriate Commission shall determine
the tariff in accordance with the provisions of this Act for—
(a) supply of electricity by a generating company to a distribution
licensee:
Provided that the Appropriate Commission may, in case of shortage of supply
of electricity, fix the minimum and maximum ceiling of tariff for sale or
purchase of electricity in pursuance of an agreement, entered into between
a generating company and a licensee or between licensees, for a period not
exceeding one year to ensure reasonable prices of electricity;
(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the same area by
two or more distribution licensees, the Appropriate Commission may, for
promoting competition among distribution licensees, fix only maximum
ceiling of tariff for retail sale of electricity.
(2) The Appropriate Commission may require a licensee or a generating
company to furnish separate details, as may be specified in respect of
generation, transmission and distribution for determination of tariff.
(3) The Appropriate Commission shall not, while determining the tariff
under this Act, show undue preference to any consumer of electricity but
may differentiate according to the consumer’s load factor, power factor,
voltage, total consumption of electricity during any specified period or
the time at which the supply is required or the geographical position of
any area, the nature of supply and the purpose for which the supply is
required.
(4) No tariff or part of any tariff may ordinarily be amended, more
frequently than once in any financial year, except in respect of any
changes expressly permitted under the terms of any fuel surcharge formula
as may be specified.
(5) The Commission may require a licensee or a generating company to comply
with such procedure as may be specified for calculating the expected
revenues from the tariff and charges which he or it is permitted to
recover.
(6) If any licensee or a generating company recovers a price or charge
exceeding the tariff determined under this section, the excess amount shall
be recoverable by the person who has paid such price or charge along with
interest equivalent to the bank rate without prejudice to any other
liability incurred by the licensee.”
Section 62(1) provides for determination of tariff for supply of
electricity by generating company to a distribution licensee, transmission
of electricity, wheeling of electricity and for retail sale of electricity.
Section 62(3) enables the Commission to differentiate according to
consumer’s load factor, power factor, voltage, total consumption of
electricity, geographical position of any area, nature of supply and
purpose for which supply is required. At the same time, it is not to show
undue preference to any consumer. Section 62(4) of the Act of 2003 is akin
to section 26(7) of the Act of 1998 and permits change in fuel surcharge as
per the specified formula. Section 55(1) of the Act of 2003 mandates that
no licensee shall supply electricity after the expiry of two years from the
appointed date, except through installation of a correct meter.
13. Though the Act of 1998 had been specifically saved by the provisions
contained in section 185 of the Act of 2003, the Commission decided to make
a transitory regulation to be in force till new regulations are framed and
accordingly, published a draft regulations in the A.P. Gazette on 16.6.2004
seeking comments and suggestions by 26.6.2004. No suggestions for any
changes/modifications had been received. Thus, in exercise of power
conferred under section 181 and section 61 of the Act of 2003 and other
powers enabling the Commission in that behalf, it framed the Regulations of
2004 which came into force with effect from 10.6.2004 and it has adopted
the existing Regulations of 1999 as amended from time to time, and they
shall continue till new Regulations are notified by the Commission under
the Act of 2003. Regulations of 2004 are extracted hereunder :
“ANDHRA PRADESH ELECTRICITY REGULATORY COMMISSION
Regulation No. 9 of 2004
INTRODUCTION
Under section 61 of the Electricity Act, while specifying the terms
and conditions for the determination of tariff, the Commission has to be
guided inter-alia by the Provisions of clauses (a) to (i) thereof. One of
the provisions refers to the National Electricity Policy and tariff policy
to be notified by the Central Government. As the Central Government has
not framed the National Electricity Policy and tariff policy till date, the
Commission has not finalized the aforementioned terms and conditions for
the determination of tariff. The Commission is also in the process of
finalizing various other Regulations under the Electricity Act, 2003. The
Commission will be notifying these Regulations including the Conduct of
Business Regulations under the Electricity Act, 2003. The Commission
therefore decided to make a transitory Regulation to be in force till the
new Regulations are framed and accordingly published a draft Regulation in
the A.P. Gazette on 16-06-2004 seeking comments and suggestions of
interested persons by 26-06-2004. No suggestions for any
changes/modifications have however been received.
In exercise of the powers conferred on the A.P. Electricity
Regulatory Commission under Section 181 read with 61 of the Electricity
Act, 2003 (Act 36 of 2003) and other powers enabling the Commission in that
behalf, the Commission here makes the following Regulation, namely:
(i) This Regulation may be called the A.P. Electricity Regulatory
Commission (Transitory Provisions for Determination of Tariff) Regulation,
2004.
This shall be deemed to have come into force on 10th June, 2004.
2. The existing Regulations notified by the Andhra Pradesh Electricity
Regulatory Commission, including the A.P. Electricity Regulatory Commission
(Conduct of Business) Regulation, 1999, incorporating the provisions
relating to determination of tariff and terms and conditions and notified
as Regulation No. 2 of 1999 and published in the A.P. Gazette No. 23 dt. 22-
07-99 and as amended from time to time as well as all other regulations
notified by the Commission from time to time under the provisions of the
Andhra Pradesh Electricity Reform Act, 1998, shall continue to apply as
regulations under the Electricity Act, 2003 and remain in force till
appropriate new Regulations are notified by the Commission under the
Electricity Act, 2003.
(BY ORDER OF THE COMMISSION)
S. SURYA PRAKASA
RAO,
Secretary”
14. The Commission has framed the Regulations of 2005 under section 181
read with sections 61 and 62 of the Act of 2003. ‘ARR’ is defined in
Regulations under section 2(1)(2) thus :
“2. DEFINITIONS AND INTERPRETATION
In this Regulation, unless the context otherwise requires:
xxx xxx xxx
2. “Aggregate Revenue Requirement: (ARR) means the revenue required to
meet the costs pertaining to the licensed business, for a financial year,
which would be permitted to be recovered through tariffs and charges by the
Commission.
xxx xxx xxx”
Regulation 3 deals with the extent of application of the regulations.
Same is extracted hereunder :
“3. EXTENT OF APPLICATION
This Regulation shall apply to all the Distribution Licensees in the State
for a) Distribution Business and b) Retail Supply Business.
In accordance with the principles laid out in this Regulation, the
Commission shall determine the Aggregate Revenue Requirement (ARR) for a)
Distribution Business and b) Retail Supply Business.
The ARR determined for Distribution Business will be the basis for the
fixation of the wheeling tariff/charges.
The ARR determined for Retail Supply Business will be the basis for the
fixation of the Tariff/Charges for retail sale of electricity including
surcharges.”
The expenditure of the Distribution Licensee considered as
“controllable” and “uncontrollable” has been specified in Regulation 10.
The cost of power purchase is uncontrollable. It is also provided in
Regulation 10(4) that the Distribution Licensee shall be eligible to claim
variations in “uncontrollable” items in the ARR. Regulation 24 of
Regulations, 2005 deals with the saving. Same is extracted hereunder :
“24. SAVING
Nothing in this Regulation shall be deemed to limit or otherwise affect the
power of the Commission to make such orders as may be necessary to meet the
ends of justice or to prevent abuse of the process of the Commission.
Nothing in this Regulation shall bar the Commission from adopting in
conformity with the provisions of the Act, a procedure, at variance with
any of the provisions of this Regulation, if the Commission, in view of the
special circumstances of a matter or class of matters and for reasons to be
recorded in writing, deems it necessary or expedient for dealing with such
a matter or class of matters.
Nothing in this Regulation shall, expressly or by implication, bar the
Commission from dealing with any matter or exercising any power under the
Act for which no Regulations have been framed, and the Commission may deal
with such matters, exercise such powers and discharge such functions in a
manner it deems fit.”
It is clearly provided in Regulation 24(3) that nothing in
Regulations of 2005 shall, expressly or by implication, bar the Commission
from dealing with any matter or exercising any power under the Act for
which no Regulations have been framed.
Meaning of ‘surcharge’ :
15. As to the meaning of ‘surcharge’, appellants have relied upon various
decisions, it is appropriate to mention them. Relying upon The
Commissioner of Income Tax, Kerala v. K. Srinivasan 1972 (4) SCC 526, it
was submitted that income-tax includes surcharge. Reference has also been
made to Sarojini Tea Co. (P) Ltd. v. Collector of Dibrugarh, Assam and Anr.
(1992) 2 SCC 156 in which this Court has considered various decisions
relating to the meaning of ‘surcharge’, thus :
“10. Since the question for consideration is whether the surcharge levied
under the Surcharge Act can be held to be land revenue, it is necessary to
examine the nature of the said levy. According to the Shorter Oxford
English Dictionary the word ‘surcharge’ stands for an additional or extra
charge or payment. In Bisra Lime Stone Co. Ltd. v. Orissa State Electricity
Board (1976) 2 SCC 167 after referring to the said definition, this Court
had observed: (SCR pp. 310-11 : SCC p. 170, para 11)
“Surcharge is thus a superadded charge, a charge over and above the usual
or current dues.”
11. In that case the Orissa State Electricity Board had imposed a uniform
surcharge of 10 per cent on the power tariff. It was argued that surcharge
was unknown to the provisions of the Electricity (Supply) Act, 1948 and the
Electricity Board had no power under the said Act to levy a surcharge. This
Court negatived the said contention and in that context, after explaining
the meaning of the expression ‘surcharge’, it was observed: (SCR p. 311 :
SCC p. 170, para 11)
“Although, therefore, in the present case it is in the form of a surcharge,
it is in substance an addition to the stipulated rates of tariff. The
nomenclature, therefore, does not alter the position. Enhancement of the
rates by way of surcharge is well within the power of the Board to fix or
revise the rates of tariff under the provisions of the Act.”
12. Similarly, in CIT v. K. Srinivasan (1972) 4 SCC 526 a question arose
whether the term ‘income tax’ as employed in Section 2 of the Finance Act,
1964, would include surcharge and additional surcharge whenever provided.
This Court while tracing the concept of surcharge in taxation laws of our
country, has observed: (SCR p. 312 : SCC p. 528, para 5)
“The power to increase federal tax by surcharge by the Federal legislature
was recommended for the first time in the report of the committee on Indian
Constitutional Reforms, Vol. I Part I. From para 141 of the proposals it
appears that the word ‘surcharge’ was used compendiously for the special
addition to taxes on income imposed in September 1931. The Government of
India Act, 1935, Part VII, contained provisions relating to finance,
property, contracts and suits. Sections 137 and 138 in Chapter I headed
‘finance’ provided for levy and collection of certain succession duties,
stamp duties, terminal tax, taxes on fares and freights, and taxes on
income respectively. In the proviso to Section 137 the federal legislature
was empowered to increase at any time any of the duties of taxes leviable
under that section by a surcharge for federal purposes and the whole
proceeds of any such surcharge were to form part of the revenue of the
federation. Sub-section (3) of Section 138 which dealt with taxes on income
related to imposition of a surcharge.”
13. It was further observed at page 315 of the report: (SCR p. 315 : SCC p.
530, para 10)
“The meaning of the word ‘surcharge’ as given in the Webster’s New
International Dictionary includes among others ‘to charge (one) too much or
in addition …’ also ‘additional tax’. Thus the meaning of surcharge is to
charge in addition or to subject to an additional or extra charge.”
14. In C.V. Rajagopalachariar v. State of Madras AIR 1960 Mad 543: (1959)
in the context of the Madras Land Revenue Surcharge Act, 1954 and the
Madras Land Revenue (Additional Surcharge) Act, 1955, it has been laid
down: [AIR p. 545, para (5)]
“The word ‘surcharge’ implies an excess or additional burden or amount of
money charged. Therefore, a surcharge of land revenue would also partake
the character of land revenue and should be deemed to be an additional land
revenue. Although Section 4 of the two enactments referred to above only
deems it to be recoverable as a land revenue it is manifest that the
surcharge would be a part of the land revenue. The effect of the two Acts
would be, therefore, to increase the land revenue payable by a landholder
to the extent of the surcharge levied. If therefore, a surcharge levy has
been made, the government would be enabled to collect a higher amount by
way of land revenue from a ryotwari pattadar than what was warranted by the
terms of the previous ryotwari settlement.”
15. The said decision was approved by this Court in Vishwesha Thirtha
Swamiar v. State of Mysore (1972) 3 SCC 246. In that case this Court was
considering the question whether the Mysore State legislature was competent
to enact the Mysore Land Revenue (Surcharge) Act, 1961. After examining the
nature of the levy the Mysore High Court had held that the so-called land
revenue surcharge was but an additional imposition of land revenue or a
land tax and fell either within Entry 45 or Entry 49 of the State List.
This Court agreeing with the view of the High Court held that the surcharge
fell squarely within Entry 45 of the State List, namely, land revenue. It
was observed: (SCC pp. 249-50, paras 10 and 12)
“The legislation is but an enhancement of the land revenue by imposition of
surcharge and it cannot be called a tax on land revenue, as contended by
the learned counsel for the appellant. It is a common practice among the
Indian legislatures to impose surcharge on existing tax. Even Article 271
of the Constitution speaks of a surcharge for the purpose of the Union
being levied by way of increase in the duties or taxes mentioned in Article
269 and Article 270 ….
It seems to us that the Act clearly levies land revenue although it is by
way of surcharge on the existing land revenue. If this is so, the fact that
the surcharge was raised to 100 per cent of the land revenue on the wet and
garden land and 75 per cent of the land revenue in respect of dry lands,
subject to some minor exceptions, does not change the nature of the
imposition.”
16. From the aforesaid decisions, it is amply clear that the expression
‘surcharge’ in the context of taxation means an additional imposition which
results in enhancement of the tax and the nature of the additional
imposition is the same as the tax on which it is imposed as surcharge. A
surcharge on land revenue is an enhancement of the land revenue to the
extent of the imposition of surcharge. The nature of such imposition is the
same viz., land revenue on which it is a surcharge.”
16. In State of Orissa & Anr. v. Jayashree Chemicals & Ors. 2004 (13) SCC
594, this Court considered the provisions contained in section 2(g)(v) and
section 3 of the Orissa Electricity (Duty) Act, 1961 and held that charge
in section 2(g)(v) includes surcharge which amounts to charge on freight.
17. On due consideration of meaning of ‘surcharge’ in various decisions,
in our opinion, nature of surcharge has to be considered as per intendment
in which it has been used in the enactment. ‘Surcharge’ is basically over
and above main levy and is in the form of additional charge. It may carry
different contours as per provisions of an enactment and different
methodology for its determination.
In Re : Formula of FSA and its vires :
18. In the backdrop of the aforesaid provisions, we now advert to the
first submission whether Regulation 45-B is ultra vires to the provisions
of section 26(9) of the Act of 1998 or sections 61 and 62(4) of the Act of
2003. Regulation 45-B deals with the determination of fuel surcharge. ‘Fuel
surcharge’ has not been defined in the Act of 1998 or the Act of 2003. The
Commission has the power under section 26(2) to prescribe the terms and
conditions for determination of the licensee’s revenue and tariffs. Section
26(9) enables the Commission to vary fuel surcharge which is to be
determined as per the formula prescribed by regulations. Thus the
Commission has been given the legislative power to prescribe the fuel
surcharge formula by way of making regulation and to include such factors
as it considers appropriate for determination of fuel surcharge. Under
Section 61 of the Act of 2003 the Commission has the power to specify the
terms and conditions for determination of tariff. It is pertinent to note
that under the Act of 2003 Commission has adjudicatory, legislative as well
as advisory powers. It has to consider under section 61(b) commercial
principles in regard to the generation, transmission, distribution and
supply of electricity. Under section 61(d) the Commission has to frame the
conditions with regard to safeguarding of consumers’ interest and at the
same time, recovery of the cost of electricity in a reasonable manner.
Section 62(4) of the Act of 2003 provides that no tariff or part of any
tariff creates an embargo on deviation of tariff frequently more than once
in any financial year, except in respect of any changes expressly permitted
under the terms of any fuel surcharge formula as may be specified. Section
62 does not deal with the matter to be provided in determination of fuel
surcharge formula. The provisions of section 61 contain principles on which
the Commission has to act, it cannot be said to be ultra vires. The
fuel surcharge formula in Regulation 45-B is in consonance with the factors
provided under sections 61 and 62 of the Act of 2003 and also the
provisions contained in section 26 of the Act of 1998. The fixation is as
per law laid down by this Court and the statutory guidelines given under
section 61 of the Act of 2003 are binding upon the Regulatory Commission
and tariff has to be fixed in compliance thereof as held in PTC India Ltd.
v. Central Electricity Regulatory Commission, through Secretary (2010) 4
SCC 603 and National Thermal Power Corporation Ltd. v. Madhya Pradesh State
Electricity Board & Ors. (2011) 15 SCC 580. In Transmission Corporation of
Andhra Pradesh Ltd. & Anr. v. Sai Renewable Power Pvt. Ltd. & Ors. (2011)
11 SCC 34 also, similar proposition was laid down :
“56. Sections 61 to 64 of the Electricity Act, 2003 place an obligation
upon the appropriate Commission to determine the tariff in accordance with
the provisions of this Act. An application for determination of tariff
shall be made by the generating company under Section 64 and the tariff has
to be determined by the appropriate Commission and it is also required to
specify the terms and conditions for determination of the tariff as per the
factors and the guidelines specified under Section 61 of the Act.”
19. It is also true, as contended on behalf of the appellants that
administrative instructions are binding in the absence of statutory
guidelines and any breach thereof would be arbitrary as held in Dr. Amarjit
Singh Ahluwalia v. The State of Punjab & Ors. (1975) 3 SCC 503 which
decision has been followed in B.S. Minhas v. Indian Statistical Institute &
Ors. (1983) 4 SCC 582. However, in our opinion, there is no violation of
the provisions of section 61 of the Act of 2003 and we have found FSA
regulations are in compliance of the statutory directives given in section
61.
20. In Rohtas Industries Ltd. & Ors. v. Chairman, Bihar State Electricity
Board & Ors. 1984 (Supp) SCC 161, a question arose as to the validity of
supplementary bills raised by the Bihar State Electricity Board for fuel
surcharge. In exercise of the power conferred under section 49 of the
Electricity Act, 1948 the Electricity Board from time to time issued
notifications fixing tariffs and terms and conditions. Para 16.7 of the
tariff Notification, 1978 provided that the consumers of specified category
shall be liable to pay fuel surcharge at a rate to be determined every year
in accordance with the formula set out in sub-para 2 of said paragraph
16.7. A dispute arose due to raising of the fuel surcharge. One of the
questions raised was that the bills were not in accordance with the
provisions of tariff notification. The High Court disagreed hence the
matter travelled to this Court. This Court answered the question whether
the fuel surcharge can only be on the actual cost of fuel consumed in the
generating stations. This Court has held that though the nomenclature given
to the levy is “fuel surcharge”, it is really a surcharge levied to meet
increased cost of generation and purchase of electricity and this is made
absolutely clear in the formula given in para 16.7.2. The formula
considered by this Court in Rohtas Industries (supra) and relevant
discussion is extracted hereunder :
“9. The next argument advanced on behalf of the appellants was that even if
the Board is legally entitled to levy the fuel surcharge, that can only be
for the purpose of recouping the amounts actually paid by the Board by way
of “fuel surcharge” to the Damodar Valley Corporation and the U.P. State
Electricity Board for the quantities of energy purchased by the Board from
those sources and the extra cost that the Board had actually to incur on
fuel consumed in those two generating stations at Patratu and Barauni. From
the counter-affidavit filed on behalf of the Board, it is seen that in
respect of the increase in the cost of production of electricity in the two
generating stations of the Board, the fuel surcharge has taken into account
only that part of the increase in cost which is relatable to the increased
price of the coal and oil i.e. fuel alone. The increase in expenditure
referable to the enhancement in cost of the energy generated on other
accounts such as wages, maintenance, etc. has not been taken into account
in the fuel surcharge. Such increase in cost of production on account of
those other factors has been offset by a revision of the basic general
tariff by 16.5 per cent payable not only by the industries but by all
classes except the agriculturist class. In respect of the energies
purchased by the Board from outside sources, namely, the Damodar Valley
Corporation and the U.P. State Electricity Board, the increase in cost per
unit incurred by the Board has been included in the computation of the fuel
surcharge. We see no substance whatsoever in the contention advanced by the
appellants that only such amounts, if any, as might have been paid by the
Board to the D.V.C. and the U.P. State Electricity Board as and by way of
fuel surcharge can go into the computation of the fuel surcharge levied by
the Board under paragraph 16.7 of the 1979 tariff. Though the nomenclature
given to the levy is “fuel surcharge” it is really a surcharge levied to
meet the increased cost of generation and purchase of electricity and this
is made absolutely clear in the formula given in para 16.7.2.
10. The formula for determining the fuel surcharge set out in paragraph
16.7.2 reads:
(A1 x A3 + B1 x B3 + C1 x C3 + D1 x D3 + E1 x E3)
S= -----------------------------------------------------
(A2 + B2 + C2 + D2 + E2)
[pic]
This is followed by detailed explanation as to what the different alphabets
used in the numerator and denominator signify. The explanation given in
respect of Cl is “increase in the average unit rate of purchase of energy
from D.V.C. during the year for which the surcharge is to be calculated.
The said increase to be calculated with respect to the base year 1977-78”.
C3 stands for “units purchased from D.V.C. during the year”. Likewise, El
and E3 have been explained as “Increase in the average unit rate of
purchase of energy from Uttar Pradesh State Electricity Board during the
year for which surcharge is to be calculated, the said increase to be
calculated with respect to the base year 1977-78” and “units purchased from
Uttar Pradesh State Electricity Board” respectively.
11. We see no force in the contention put forward on behalf of some of the
appellants that the words “increase in the average unit rate of purchase of
energy” used in Cl below paragraph 16.7.2 should be interpreted as taking
their colour from the contents of paragraph 16.7.3. From a reading of these
provisions it is abundantly clear that the entire increase in cost incurred
in the purchase of energy from the D.V.C. and the U.P. State Electricity
Board has to go into the computation of the surcharge leviable under
paragraph 16.7. The contention to the contrary advanced by the appellants
is therefore, only to be rejected. There is no ambiguity whatever in the
words used in Cl so as to require us to take light from paragraph 16.7.3
for the purpose of understanding their scope and meaning.
xxx xxx xxx
18. Some of the appellants have endeavoured to persuade us to go into the
minutest details of the mechanism of the tariff fixation effected by the
Board in an endeavour to demonstrate in relation thereto that a factor here
or a factor there which ought to have been taken into account has been
ignored. We have declined to go into those factors which are really in the
nature of matters of price fixation policy and the Court will be exceeding
its jurisdiction if it is to embark upon a scrutiny of matters of this kind
which are essentially in the domain of the executive to determine, subject,
of course, to the constitutional limitations.”
It was submitted on behalf of the appellants that the stand of the Bihar
Electricity Board in Rohtas Industries (supra) particularly in para 9 of
the report, where it had realized fuel surcharge on the basis of that part
of the increase in cost which is relatable to increased price of coal and
oil that is fuel alone but a close scrutiny of para 9 makes it clear that
in respect of energy purchased by the Board from outside sources namely
Damodar Valley Corporation and U.P.State Electricity Board, the increase in
cost per unit incurred by the Board has been included in the computation of
fuel surcharge and this Court has found no merits in the contention that
such amount as might have been paid by the Board to the DVC and the
U.P.State Electricity Board as and by way of fuel surcharge can go into the
computation of fuel surcharge levied by the Board under the 1979 tariff.
The law laid down is that the nomenclature given to the levy as fuel
surcharge is really a surcharge levied to meet the increased cost of
generation and purchase of electricity. Thus the submission has no merit to
sustain. This Court has clearly laid down that the increased cost of
generation and purchase of electricity can be realized under the head of
fuel surcharge.
21. This Court has considered the question of levy of fuel surcharge
again in Bihar State Electricity Board v. Pulak Enterprises & Ors. (2009)
5 SCC 641. Section 49 of the Electricity (Supply) Act, 1948 and Clause
16.10.1 of the Notification dated 21.6.1993 came up for consideration
before this Court. The notification provided payment of operational
surcharge at a rate to be determined every year which consists of two
elements i.e. fuel surcharge and other operational surcharge. Clause
16.10.3 laid down the formula for determining fuel surcharge. Clause
16.10.4 laid down the formula for determination of other operational
surcharge. Following was the formula on fuel surcharge which came up for
consideration of this Court :
“11. In order to appreciate the facts to be stated hereinafter it would be
appropriate to notice the formula for computation of the fuel surcharge
laid down in Clause 16.10.3 as under:
S1 = A1 × A3 + B1 × B3 + C1 × C3 + D1 × D3 + E1 × E3 + F1 × F3 + G1 × G3 +
H1 × H3
----------------------------------------------------------------------------
--------
(A2 + B2 + C2 + D2 + E2 + F2 + G2 + H2)….
Whereas,
S1 = Average fuel surcharge per unit in
paise applicable during the financial year.
A1, B1, C1 = Units generated from PTPS, BTPS and MTPS
respectively.
D1, E1, F1, G1, H1= Units purchased from DVC, U.P. SEB, OSEB, NTPC,
PGCIL and any other source respectively.
A2, B2, C2 = Units sold, out of sent out from PTPS, BTPS
and MTPS on which fuel surcharge is leviable.
D2, E2, F2, G2, H2 = Units sold, out of purchased from DVC, U.P. SEB,
OSEB, NTPC, PGCIL and any other source respectively during the year in
which fuel surcharge is leviable.
A3, B3, C3 = Increase in average cost of fuel surcharge in
paise per unit computed for Board’s generation at PTPS, BTPS and MTPS.
D3, E3, F3, G3, H3 = Increase in average unit rate of purchase of energy
from DVC, U.P. SEB, OSEB, NTPC, PGCIL and any other source respectively
during the year for which the surcharge is to be calculated.
The said increase to be calculated
with respect to the year 1992-1993 (after amendment, read 1991-1992).
(In the above, PTPS stands for Patratu Thermal Power Station, BTPS for
Barauni Thermal Power Station and MTPS for Muzaffarpur Thermal Power
Station. They are Board’s own generating stations. Likewise, DVC stands for
Damodar Valley Corporation, U.P. SEB for Uttar Pradesh State Electricity
Board, OSEB for Orissa State Electricity Board, NTPC for National Thermal
Power Corporation and PGCIL for Power Grid Corporation of India Ltd. They
are external sources of supply of electricity to the Board.)”
This Court has laid down that fuel surcharge has to be calculated
strictly within the framework of the formula provided in tariff
notification. This Court also laid down that fuel surcharge is undoubtedly
a part of tariff but fixing rates of consumption charges or the guaranteed
charges or the fixed charges or the delayed payment surcharge, and fixing
rates of fuel surcharge do not stand on a par.
22. This Court in Pulak Enterprises (supra) has reaffirmed the decision
in Rohtas Industries (supra) as to the factors which can be taken into
consideration for determination of fuel surcharge. Since determination of
fuel surcharge formula is not the function of the court. It is not defined
in the Act, as such the Commission has specified in its wisdom formula for
its calculation in Regulation 45B. It cannot be said to be ultra vires to
the aforesaid provisions. We find no breach of the provisions of section 26
of the Act of 1998 and principles enumerated in section 61 and section 62
of the Act of 2003 or any other provisions of the Act of 2003. The
Regulations advance the mandate of the provisions of the Act. Reliance has
been placed on the provisions which were in vogue in the year 2000 before
the impugned provision was inserted in the year 2003 to contend that
earlier provision was proper and legal. Question is not of choosing a
better Regulation, but of power to frame it. In our opinion, as the
Commission has the power to specify the fuel surcharge formula and
considering nature of levy, could have taken into consideration the
difference in total fixed cost, changes in adjustment as contemplated in
the regulation inserted in the year 2003, the Commission has not at all
transgressed its limits while carving out the formula. There is no
violation of statutory provisions while enacting Regulation 45B in the year
2003. The submission raised that fuel has to be given a specific natural
meaning and it is circumscribed cannot be accepted in view of the decision
of this Court in Rohtas Industries (supra) and Pulak Enterprises (supra)
and in view of the provisions of the Act of 1998 and the Act of 2003.
Scope of interference :
23. The scope of interference in judicial review in such matters reserved
for expert bodies is limited. The court cannot substitute its opinion. It
has been laid down by this Court that price fixation is not the function of
the court. This Court in Pulak Enterprises (supra) has discussed the scope
of interference in such a matter thus :
“29. The significance of the question as to whether fixing the rate of fuel
surcharge is a legislative function or a non-legislative function is that
if the function is held to be legislative, in the absence of any provision
in that regard the principles of natural justice would not be applicable
and the scope of judicial review would also be limited to plea of
discrimination i.e. violation of Article 14 of the Constitution of India.
As a general proposition, the law on the point is settled.
30. In Prag Ice and Oil Mills v. Union of India (1978) 3 SCC 459 a seven-
Judge Bench of this Court by majority observed: (SCC p. 490, para 52)
“52. … In the ultimate analysis, the mechanics of price fixation has
necessarily to be left to the judgment of the executive and unless it is
patent that there is hostile discrimination against a class of [persons],
the processual basis of price fixation has to be accepted in the generality
of cases as valid.”
31. The legal position was reiterated in Rohtas Industries Ltd. v. Bihar
SEB (1984) Supp. SCC 161 and Kerala SEB v. S.N. Govinda Prabhu & Bros.
(1986) 4 SCC 198 wherein it was observed, “ ‘price fixation’ is neither the
forte nor the function of the court” (Kerala SEB case, SCC p. 214, para
10).
32. As regards the nature of the function, in Saraswati Industrial
Syndicate Ltd. v. Union of India (1974) 2 SCC 630 the Court had observed
(at SCC p. 636, para 13) that “price fixation is more in the nature of a
legislative measure even though it may be based upon objective criteria
found in a report or other material”. It should not, therefore, give rise
to a complaint that rule of natural justice has not been followed in fixing
the price. In Prag Ice and Oil Mills v. Union of India (1978) 3 SCC 459 the
Court observed: (SCC p. 482, para 37)
“37. We think that unless, by the terms of a particular statute, or order,
price fixation is made a quasi-judicial function for specified purposes or
cases, it is really legislative in character…. A legislative measure does
not concern itself to the facts of an individual case. It is meant to lay
down a general rule applicable to all persons or objects or transactions of
a particular kind or class.”
33. In Union of India v. Cynamide India Ltd. (1987) 2 SCC 720 this Court
held that except in cases where it becomes necessary to fix the price
separately in relation to individuals, price fixation is generally a
legislative act, the performance of which does not require giving
opportunity of hearing. Following passage from the judgment may usefully be
noticed: (SCC pp. 734-35, para 5)
“5. … legislative action, plenary or subordinate, is not subject to rules
of natural justice. In the case of parliamentary legislation, the
proposition is self-evident. In the case of subordinate legislation, it may
happen that Parliament may itself provide for a notice and for a hearing —
there are several instances of the legislature requiring the subordinate
legislating authority to give public notice and a public hearing before
say, for example, levying a municipal rate—in which case the substantial
non-observance of the statutorily prescribed mode of observing natural
justice may have the effect of invalidating the subordinate legislation. …
But, where the legislature has not chosen to provide for any notice or
hearing, no one can insist upon it and it will not be permissible to read
natural justice into such legislative activity.”
Reference may also be made to a Constitution Bench decision in Shri Sitaram
Sugar Co. Ltd. v. Union of India (1990) 3 SCC 223.
34. In a sense, fixing rate of fuel surcharge under Clause 16.10 of the
tariff notification is different from fixing the tariff under Section 49 of
the Act. Fuel surcharge is undoubtedly a part of tariff. But fixing rates
of consumption charges or the guaranteed charges or the fixed charges or
the delayed payment surcharge, etc. and fixing rates of fuel surcharge do
not stand on a par. Though rates of consumption charges, etc. are based on
objective materials, there is enough scope for flexibility in fixing the
rates. It also involves policy to fix different rates for different
categories of consumers. Such is not the position with the fuel surcharge.
35. Clause 16.10.1 specifies the categories coming in the net of the levy
and Clause 16.10.3 provides the formula. In simple words, the formula
envisages addition of units generated or purchased and increased average
cost of fuel and average unit rate of purchase rates and division of the
total by the quotient is the average fuel surcharge per unit (expressed in
terms of paise) described by denominator S1 in the formula. The whole
exercise, it would appear, involves arithmetical accounting. There is no
scope for exercise of any discretion or flexibility. This distinction,
however, does not help the petitioners. It rather goes against them because
if fixing rate of fuel surcharge is just an arithmetical exercise, giving
opportunity of hearing would hardly serve any useful purpose.”
24. In National Thermal Power Corporation Ltd. (supra), this Court has
observed that price fixation is legislative in character. In PTC India Ltd.
(supra) also, this Court has held that fixation of tariff like price
fixation is legislative in character. The functions of the Commission have
been held to be adjudicatory, advisory and legislative. The powers and
functions enumerated under section 178 of the Act of 2003 confer wide
powers upon the Commission to frame regulations which cannot be said to be
ultra vires.
25. This Court in Association of Industrial & Electricity Users (supra)
has observed that the court has not to act as an appellate authority and
laid down the scope of judicial interference in such matters thus :
“11. We also agree with the High Court that the judicial review in a matter
with regard to fixation of tariff has not to be as that of an Appellate
Authority in exercise of its jurisdiction under Article 226 of the
Constitution. All that the High Court has to be satisfied with is that the
Commission has followed the proper procedure and unless it can be
demonstrated that its decision is on the face of it arbitrary or illegal or
contrary to the Act, the court will not interfere. Fixing a tariff and
providing for cross-subsidy is essentially a matter of policy and normally
a court would refrain from interfering with a policy decision unless the
power exercised is arbitrary or ex facie bad in law.”
26. No doubt about it that section 26(9) and sections 61 and 62(4) of the
Act of 2003 contain an embargo on variation of tariff more than once in a
financial year. Negative words are prohibitory and are ordinarily used as
legislative devise to make a statute imperative as laid down by this Court
in M. Pentiah & Ors. v. Muddala Veeramallappa & Ors. AIR 1961 1107 and as
emphasized by this Court in Mannalal Khetan & Ors. v. Kedar Nath Khetan &
Ors. 1977 (2) SCC 424. However, there is a positive mandate as to FSA
variation which cannot be ignored and has to be given full effect. While
doing so there is no variation of tariff as contemplated under the
aforesaid provisions. Mechanism of determination of tariff is different.
In Re : Disrimination vis-à-vis Agriculture Sector :
27. A challenge has been made to Regulation 45-B submitting that it casts
additional burden without authority of law inasmuch as the letter “Q” in
the formula is subject to condition 1 and therefore excludes the
consumption by agricultural sector and does not permit distribution of
additional charge among all consumers for the actual energy sold to them.
It makes all the consumers not only to pay for the energy consumed by them
but also for the electricity consumed in the agricultural sector which is
arbitrary and contrary to the scheme of the Act and in particular sections
61 and 62. The submission cannot be accepted as differential treatment is
permissible within the ken of the provisions of section 26. As provided in
section 26(8) in case consumers are similarly placed same tariff has to be
applied. Agriculturists and consumers like appellants cannot be said to be
similarly placed. It is also provided in section 26(7) that the tariff
implemented may differentiate according to the consumer’s load factor or
power factor, consumer’s total consumption of energy during any specified
period from the time at which supply is required or paying capacity of
category of consumers and need for gross subsidization. Thus paying
capacity inter alia is one of the factors which can be used for protective
discrimination under discriminatory tariffs as provided in section
26(7)(a).
28. In Real Food Products Ltd. & Ors. v. A.P. State Electricity Board &
Ors. 1995 (3) SCC 295, this Court considered the claim of discrimination of
HT consumers with agriculturists to be untenable. Concessional tariff
extended to agriculturists as a separate class was held not violative of
Article 14.
29. In Rohtas Industries (supra) also this Court had negatived the
submission based upon the classification and held that classification
which is legally valid and permissible for grant of concession in the basic
rates will equally hold good for the purpose of subsequent scheme of
distribution of burden in the form of fuel surcharge and the decision of
the Board restricting levy of fuel surcharge to those categories of
consumers who were enjoying the benefits of concession in the general rate
and in sparing smaller type of consumers such as agriculture, irrigation
and commercial consumers being subjected to that burden was upheld. This
Court in Rohtas Industries (supra) has laid down thus :
“8. The expression “licensee” means a person licensed under Part II of the
Indian Electricity Act, 1910, to supply energy or a person who has obtained
licence under Section 28 of that Act to engage in the business of supplying
energy — through definition in Section 2(6). Admittedly, the appellants
before us are not licensees. They are consumers receiving high tension
supply to their factories. For the purpose of tariff fixation, the Board
has classified the consumers into 10 categories, viz. “domestic”,
“commercial (i)”, “commercial (ii)”, “street light”, “irrigation”, “light
tension industrial” (small scale industrial upto 100 h.p.), “11 k.v.
h.t.s.”, “33 k.v. h.t.s.”, “132 k.v. h.t.s.” and “railway traction (25
k.v.)”. It is seen from the materials on record for us that the industries
between themselves consume nearly 65 per cent of the total quantity of
energy supplied by the Board. Apparently with a view to encouraging the
establishment of industries in the State, the general tariff rate
applicable in respect of high tension supply to industries and factories
has been fixed at rates which are much lower when compared to those
applicable to other types of consumers. While the general rate applicable
for supply of high tension electric energy for industries of the class to
which the appellants belong was 22 paise per unit, consumers belonging to
“commercial” categories were charged at rates ranging between 48 paise to
58 paise per unit, “agricultural” consumers at 29 paise per unit, “low
tension” consumers at 34 to 38 paise per unit and “domestic” consumers at
rates ranging between 38 to 43 paise per unit. Thus, in the fixation of the
general tariff rate, a substantial concession has been shown in favour of
industrial low tension and high tension consumers. The appellants have no
case that any illegality was involved in treating the industrial consumers,
as a separate class and granting them the benefit of a preferential
treatment for the purpose of fixing the basic rate of levy for supply of
electricity. The stand taken by the Board is that it was found absolutely
necessary at the time of the revised tariff fixation effected in 1979 to
augment its revenue by levying of the additional fuel surcharge in order to
offset the heavy increase in expenditure and after taking into account all
relevant facts and circumstances, it was decided to distribute that burden
amongst the privileged class of consumers, namely those belonging to
categories of low tension industrial service, high tension service, extra
high tension service and railway traction service. Even after taking into
account the fuel surcharge so levied under 1979 tariff, the rates
applicable to high tension consumers like the petitioners range between
40.31 paise and 58.80 paise per unit only, while the commercial (ii)
consumer has to pay 71.33 paise per unit and even the domestic consumer has
to pay 48 paise per unit. The position that obtains under the 1981 tariff
which also has been challenged by some of the appellants is substantially
similar. In our opinion, the Board was perfectly within its rights in
deciding to restrict the levy of fuel surcharge to those categories of
consumers who were enjoying the benefit of a concession in the general rate
and in sparing smaller type of consumers such as the agricultural,
irrigation and commercial consumers from being subjected to that burden, in
view of the fact that they were already being subjected to a basic levy at
substantially higher rates. The true consequence of the action so taken by
the Board is only to effect a reduction in the quantum of concession that
was being enjoyed by the consumers belonging to the industrial and railway
traction categories. A classification which is legally valid and
permissible for the grant of a concession in the basic rates will equally
hold good for the purpose of a subsequent scheme of distribution of the
burden in the form of fuel surcharge. In this context, it is also relevant
to remember that the levy of surcharge was necessitated by reason of the
extra expenditure which the Board had to incur in the generation of
electricity in the two power stations run by the Board and in the purchase
of power from the two outside sources, namely, the D.V.C. and the U.P.
State Electricity Board and 65 per cent of the total quantity of energy
supplied by the Board is consumed by the industrial and railway traction
consumers. A classification of these bulk consumers has a rational nexus
with the object and purposes of the levy of surcharge. Having regard to all
these facts and circumstances, we find no substance in the contention
advanced by some of the appellants that the imposition of fuel surcharge
under paragraph 16.7 of the 1979 tariff is arbitrary and violative of
Article 14 of the Constitution.”
30. In Hindustan Zinc Ltd. etc. etc. v. Andhra Pradesh State Electricity
Board & Ors. (1991) 3 SCC 299 placing burden of enhanced tariff on high
tension consumers including power intensive industries was held not
unreasonable and discriminatory since consumers consisted a separate class.
The challenge on the ground of making good the loss on supply of
electricity at cheaper rates was also repelled. This Court also laid down
that the court could not strike down the upward revision made as arbitrary
unless the Board is found to have shed its public utility character and
there is a limited scope of judicial review and this Court further laid
down that there is a limited judicial review in the matter of price
fixation. The relevant portion is extracted hereunder :
“26. It is, therefore, obvious that mere generation of surplus by the Board
as a result of adjusting its tariffs when the quantum of surplus has not
been specified by the State Government after the 1978 amendment of Section
59 of the Supply Act, cannot invite any criticism unless it is further
shown that the surplus generated as a result of the adjustment of tariffs
by the Board has resulted in the Board acting as a private trader shedding
off its public utility character. In other words, if the profit is made not
merely for the sake of profit, but for the purpose of better discharge of
its obligations by the Board, it cannot be said that the public enterprise
has acted beyond its authority. The Board in the present case has shown
that the surplus resulting from upward revision of tariffs applicable to
the HT consumers made in the present case, was for the purpose of better
discharge of its other obligations under the Supply Act and in effect, it
has merely resulted in a gradual withdrawal of the concessional tariffs
provided earlier to the power intensive consumers which do not in its
opinion require continuance of the concessional tariffs any longer. In
fact, no material has been placed before us to indicate that this assertion
of the Board is incorrect or there is any reasonable basis to hold that the
upward revision of tariffs applicable to HT consumers is merely with a
desire to earn more profits like a private trader and not to generate
surplus for utilisation of the funds to discharge other obligations of the
Board towards more needy consumers, such as agriculturists, or to meet the
needs of expansion of the supply to deserving areas. The argument with
reference to statistics that the upward revision of tariffs for the HT
consumers results in earning amounts in excess of the cost of generation
does not, therefore, merit a more detailed consideration.
27. It was also contended on behalf of the appellants that the generation
of electricity by the Andhra Pradesh Electricity Board is both thermal as
well as hydro, the quantity from each source being nearly equal and the
entire electricity generated is fed into a common grid, from which it is
supplied to all categories of consumers. On this basis, it was argued that
the rise in the fuel cost which led to the fuel cost adjustment applicable
only to the HT consumers was unreasonable and discriminatory since the
burden of rise in fuel cost was placed only on the HT consumers. In our
opinion, this argument has no merit. The HT consumers, including the power
intensive consumers, are known power guzzlers and in power intensive
industries, electricity is really a raw material. This category of
consumers, therefore, forms a distinct class separate from other consumers
like LT consumers who are much smaller consumers. There is also a rational
nexus of this classification with the object sought to be achieved.
Moreover, the power intensive consumers have been enjoying the benefit of a
concessional tariff for quite some time, which too is a relevant factor to
justify this classification. Placing the burden of fuel cost adjustment on
these power guzzlers, who had the benefit of concessional tariff for quite
some time and have also a better capacity to pay, cannot, therefore, be
faulted since the consumption in the power intensive industries accounts
for a large quantity.”
The decision in Hindustan Zinc Ltd. (supra) has been followed in Pulak
Enterprises (supra).
31. This Court in Association of Industrial Electricity Users v. State of
A.P. & Ors. 2002 (3) SCC 711 has considered and upheld the levy of
different tariffs. It has laid down thus :
“10. We are also unable to agree with the learned counsel for the
appellants that the Act does not envisage classification of consumers
according to the purpose for which electricity is used. Sub-section (9) of
Section 26 does state that the tariff which is fixed shall not show undue
preference to any consumer of electricity but then the said sub-section
itself permits differentiation according to the consumer’s load factor or
power factor, consumer’s total consumption of energy during the specified
period, time at which the supply is required or paying capacity of category
of consumers and the need for cross-subsidisation or such tariff as is just
and reasonable and be such as to promote economic efficiency in the supply
and consumption of electricity and the tariff may also be such as to
satisfy all other relevant provisions of the Act and the conditions of the
relevant licence. This section has to be read along with Section 11 which
sets out the functions of the Commission and, inter alia, provides that
amongst the functions is the power to regulate the tariff and charges
payable keeping in view both the interest of the consumer as well as the
consideration that the supply and distribution cannot be maintained unless
the charges for electricity supplied are adequately levied and duly
collected. Depending upon the various factors stipulated in Section 26(7),
categorisation between industrial and non-industrial, agricultural or
domestic consumers can certainly take place. This is precisely what has
been done in the present cases. The High Court has at length considered all
aspects of the cases and has examined in detail the exercise which was
undertaken by the Commission in fixing the tariff and, in our opinion, the
view expressed by the High Court calls for no interference.”
In view of the aforesaid discussion, the submission with respect to
favourable treatment and discrimination vis a vis the agricultural sector
is hereby repelled.
In Re : Variation in cost of Rupee :
32. It was also submitted on behalf of the appellant that Regulation 45B
that letter ‘Z’ in the formula for which the Commission to apply the change
in cost of rupee for a period beyond the period of supply of electricity to
the consumers without any time limit, the submission in this regard is
baseless and cannot be accepted. As a matter of fact the fuel surcharge is
determined as per the formula which takes into account the change in cost
of rupee for a period extending in the past beyond the relevant quarter.
There is nothing bad in it as there is change in the cost of rupees which
can be allowed by the Commission for realization of fuel surcharge as and
when it is determined. It is a method of determining the actual value to be
paid in rupees and cannot be said to be illegal or arbitrary at all. It is
in consonance with business norms.
In Re : Vagueness of Formula :
33. It was also submitted that letter ‘A’ in the formula is vague and
unrealistic so as to permit the Commission to impose additional burden
unrelated to escalation of fuel cost under the guise of FSA. The submission
is too tenuous to be accepted and proceeds on assumption that only
escalation in fuel cost can be levied even the financial year impact of
demonstrated incidents of merit order violations on account of controllable
factors and any other event which had the financial impact can be given
appropriate treatment and can also form part of FSA as laid down by this
Court in Rohtas Industries (supra) and Pulak Enterprises (supra).
In Re : Metering of consumption :
34. Coming to the submission that as metering is mandated on completion
of two years, as such agricultural aspect cannot be included on lapse of
said period. Section 55 of the Act of 2003 deals with the use of meters
and it is provided that no licensee shall supply electricity after expiry
of two years from the appointed date except through installation of a
correct meter in accordance with the regulations. The said Commission may
also extend the period up to two years for a class or class of persons as
may be specified in the notification. The provision made in condition No.1
of Regulation 45-B cannot be said to be repugnant to section 55(1) as it
deals with the licensee’s obligation to supply electricity after two years
only on the basis of metered supply. It has not been achieved so far.
However, electricity is being consumed and the authorities are not able to
do the complete metering of agricultural services. In our opinion, in the
prevailing conditions, in particular plight of agricultural sector and
purpose of enactment, it is open to the Commission to make such a wholesome
provision carved out in condition No.1. Thus there is no violation of the
provisions contained in section 55(1) of the Act of 2003. The consequence
of section 55 of the Act of 2003 cannot be that if metering is not achieved
within two years the consumption in agricultural sector cannot be provided
within the purview of FSA formula. Thus condition 1 did not cease to have
effect after 10.6.2005 as submitted on behalf of the appellants.
In Re : Subsidy :
35. Coming to submission of violation of section 65, section 65 of the
Act of 2003 which enables the State Government to make a provision for
subsidy to any consumer or class of consumers. The State Government has to
pay in advance in such manner the amount to compensate the person affected
by the grant of subsidy. Section 65 is extracted hereunder :
“65. Provision of subsidy by State Government.—If the State Government
requires the grant of any subsidy to any consumer or class of consumers in
the tariff determined by the State Commission under section 62, the State
Government shall, notwithstanding any direction which may be given under
section 108, pay, in advance and in such manner as may be specified, the
amount to compensate the person affected by the grant of subsidy in the
manner the State Commission may direct, as a condition for the licence or
any other person concerned to implement the subsidy provided for by the
State Government:
Provided that no such direction of the State Government shall be operative
if the payment is not made in accordance with the provisions contained in
this section and the tariff fixed by the State Commission shall be
applicable from the date of issue of orders by the Commission in this
regard.”
36. Considering the condition of farmers which is pathetic and they are
unable to face the burden, it is rightly pointed out on behalf of the
Commission that the State Government had given them certain concessions in
the form of subsidy. However the Commission had excluded them from meeting
the fuel surcharge adjustment charges. Provision of section 65 relating to
subsidy by the State Government is not at all attracted. The matter
involved in the present cases is not of subsidy but determination of fuel
surcharge formula. Thus, the submission based upon the violation of the
provision of section 65 is wholly unwarranted and is liable to be rejected
as subsidy has not been included in the determination of fuel surcharge. It
cannot be invalidated on the ground of violation of provisions contained in
section 65 of the Act of 2003.
In Re : Lapse of Regulations of 1999 :
37. Next submission raised on behalf of the appellants is that the
Regulations of 1999 as amended in 2003 being the tariff regulation under
the Act of 1998, ceased to have effect on 10.6.2004 after one year from the
date of coming into force of the said Act, by reason of proviso to section
61 of the Act of 2003. The submission raised is untenable for various
reasons. First is that regulations have been framed with effect from
10.6.2004. The proviso to section 61 of the Act of 2003 makes it clear that
the terms and conditions for determination of tariff and the enactment
specified in the Schedule as they stood before the appointed date, shall
continue to apply for a period of one year or until the terms and
conditions for tariff are specified under section 61, whichever is earlier.
Thus, the tariff regulations framed under the Act of 1998 would remain in
force for maximum period of one year and the regulations had been framed
with effect from 10.6.2004 and the Transitory Regulations have been enacted
vide Regulations of 2004 by the Commission. Regulation 2 of said
Regulations of 2004 clearly provides that Regulations of 1999 as amended
from time to time under the Act of 1998 shall apply as regulation under the
Electricity Act, 2003 and shall remain in force or till new regulations are
notified by the Commission under the Act of 2003. Even if earlier
Regulations of 1999 came to an end on 10.6.2004 and if it is further
assumed without deciding that the Commission had no authority to enact
retrospectively, in our opinion, it could have adopted the Regulations of
1999 as amended, framed under the Act of 1998 shall continue, to apply for
future. Considering the period in question involved in the matter, it
cannot be said to be Regulations of 1999, as amended, are inoperative as
they have been adopted vide Regulation No.9/2004. With respect to the fuel
surcharge adjustment no provision has been made in the regulations framed
in the year 2005. On facts also, the Regulation 45-B was implemented
subsequently and had been again amended in the year 2013. It has operated
for more than a decade for determination of FSA.
In Re : Procedural lapse in framing Regulations :
38. The submission raised that amended Regulations were without previous
publication as envisaged under section 181(3) of the Act of 2003, as such
they are void due to non-compliance of the said provision. It is apparent
that Regulation 9/2004 was previously notified as mentioned in the
notification itself. A draft of regulations was published seeking
suggestions and comments. No suggestions for changes/modification were
submitted. As such the regulations are in compliance with the provision of
section 181 read with section 61. Thus we find no violation of the
provision of section 181(3). The contention that there was no previous
publication is factually incorrect.
Effect of Regulations of 2005 :
39. Submission raised that the FSA can be realized in terms of the
Regulations of 2005 cannot be accepted for the simple reason that the
Regulations of 2005 do not deal with FSA and there is a saving clause as
provided in Regulation 24. Moreover, the Act of 1998 had not been repealed
and there was re-adoption of the Regulations of 1999 in the year 2004. It
is also factually incorrect submission that FSA had been realized under the
Regulations of 2005 after framing of the said regulations. In fact FSA had
been determined as rightly contended on behalf of the Commission under
Regulation 45-B as amended in 2003 for more than a decade. A challenge had
been raised for the first time after 10 years. It is obvious that the
parties clearly understood Regulation 45-B is in vogue and in fact it
legally prevailed and rightly followed.
40. It was also submitted that Regulation 6(4) of Regulations of 2005
provides that ARR shall contain power purchase cost for each year of the
controlled period. It is clear from ARR as defined in Regulations of 2005
and FSA that they do not run counter to each other but are supplementary.
The Regulations of 2005 do not deal with determination of fuel surcharge.
Regulation 45-B cannot be said to be invalid for the aforesaid reason.
41. There is a saving clause contained in Regulation 24 of Regulations of
2005. Regulation 12.4 provides that the distribution licensee shall be
entitled to recover or refund as the case may be the charges on account of
fuel surcharge adjustment as approved by the Commission from time to time
suo motu or based on the filing made by the institution company as the
Commission may deem fit. The provisions of the Act provided that the
formula has to be specified by the Commission for FSA and this has been
specified only in Regulation 45-B which has been adopted in the year 2004
for continuance by the Commission. The Commission had adopted the said
regulations and the same continues to be in operation.
Conclusion :
42. In our opinion, the challenge made by the appellants is unworthy of
acceptance. Fuel surcharge is really a surcharge levied to meet increased
cost of generation and purchase of electricity and the scope cannot be
circumscribed by its nomenclature. Thus the formula in Regulation 45B and
the FSA determined by the Commission would take into consideration various
factors which result in the increased cost of generation and purchase of
electricity.
43. The appeals are found to be devoid of merits and are hereby
dismissed. The appellants are directed to make the deposit along with
interest; if no other rate is prescribed at the rate of 8 per cent per
annum, and other charges for delay, as may be permissible to recover within
a period of one month from today. In addition, the respondents are at
liberty to take coercive steps to recover the amount.
………………………..J.
(V. Gopala Gowda)
New Delhi; ………………………..J.
July 5, 2016. (Arun Mishra)
ITEM NO.1B COURT NO.3 SECTION XIIA
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 5542 @ SLP(C) No.12398/2014
SAI BHASKAR IRON LTD. Appellant(s)
VERSUS
A.P.ELECT.REGUL.COMMISSION & ORS. Respondent(s)
WITH
CA Nos.5543-5544 of 2016 @ SLP [C] Nos. 14638-14639/2014
CA No.5545 of 2016 @ SLP [C] No. 15205/2014
CA Nos. 5546-5571 of 2016 @ SLP [C] Nos. 15245-15270/2014
CA Nos. 5572-5575 of 2016 @ SLP [C] Nos. 15348-15351/2014
CA Nos. 5576-5578 of 2016 @ SLP [C] Nos. 15356-15358/2014
CA Nos. 5579-5583 of 2016 @ SLP [C] Nos. 15360-15364/2014
CA Nos. 5584-5586 of 2016 @ SLP [C] Nos. 15389-15391/2014
CA No. 5587 of 2016 @ SLP [C] No. 15603/2014
CA No. 5588 of 2016 @ SLP [C] No. 15845/2014
CA Nos. 5589-5598 of 2016 @ SLP [C] Nos. 15878-15887/2014
CA No. 5599 of 2016 @ SLP [C] No. 15891/2014
CA Nos. 5600-5601 of 2016 @ SLP [C] Nos. 15938-15939/2014
CA No. 5602 of 2016 @ SLP [C] No. 15940/2014
CA Nos. 5603-5611 of 2016 @ SLP [C] Nos. 15985-15993/2014
CA No. 5612 of 2016 @ SLP [C] No. 15998/2014
CA Nos. 5613-5618 of 2016 @ SLP [C] Nos. 17138-17143/2014
CA No. 5619 of 2016 @ SLP [C] No. 17469/2014
CA No. 5620 of 2016 @ SLP [C] No. 17495/2014
CA No. 5622 of 2016 @ SLP [C] No. 17509/2014
CA Nos. 5623-5625 of 2016 @ SLP [C] Nos. 17860-17862/2014
CA No. 5626 of 2016 @ SLP [C] No. 17869/2014
CA Nos. 5630-5631 of 2016 @ SLP [C] Nos. 18043-18044/2014
CA Nos. 5632-5663 of 2016 @ SLP [C] Nos. 18199-18230/2014
CA No. 5666 of 2016 @ SLP [C] No. 18254/2014
CA No. 5667 of 2016 @ SLP [C] No. 18261/2014
CA No. 5668 of 2016 @ SLP [C] No. 18317/2014
CA No. 5670 of 2016 @ SLP [C] No. 18331/2014
CA No. 5671 of 2016 @ SLP [C] No. 18334/2014
CA No. 5672 of 2016 @ SLP [C] No. 18354/2014
CA No. 5673 of 2016 @ SLP [C] No. 18358/2014
CA No. 5674 of 2016 @ SLP [C] No. 18395/2014
CA No. 5675 of 2016 @ SLP [C] No. 18458/2014
CA No. 5676 of 2016 @ SLP [C] No. 18956/2014
CA No. 5677 of 2016 @ SLP [C] No. 19116/2014
CA Nos. 5678-5685 of 2016 @ SLP [C] Nos. 19261-19268/2014
CA No. 5686 of 2016 @ SLP [C] No. 19401/2014
CA No. 5687 of 2016 @ SLP [C] No. 19448/2014
CA No. 5688 of 2016 @ SLP [C] No. 19575/2014
CA No. 5689 of 2016 @ SLP [C] No. 19640/2014
CA No. 5690 of 2016 @ SLP [C] No. 19686/2014
CA Nos. 5692-5703 of 2016 @ SLP [C] Nos. 19709-19720/2014
CA No. 5704 of 2016 @ SLP [C] No. 19728/2014
CA No. 5705 of 2016 @ SLP [C] No. 19752/2014
CA No. 5706 of 2016 @ SLP [C] No. 19774/2014
CA Nos. 5707-5709 of 2016 @ SLP [C] Nos. 19782-19784/2014
CA No. 5710 of 2016 @ SLP [C] No. 19785/2014
CA No. 5711 of 2016 @ SLP [C] No. 19786/2014
CA Nos. 5712-5731 of 2016 @ SLP [C] Nos. 19789-19808/2014
CA Nos. 5732-5745 of 2016 @ SLP [C] Nos. 19818-19831/2014
CA No. 5746 of 2016 @ SLP [C] No. 19880/2014
CA No. 5747 of 2016 @ SLP [C] No. 20340/2014
CA No. 5748 of 2016 @ SLP [C] No. 20383/2014
CA No. 5749 of 2016 @ SLP [C] No. 20406/2014
CA No. 5750 of 2016 @ SLP [C] No. 20581/2014
CA No. 5751 of 2016 @ SLP [C] No. 20940/2014
CA No. 5752 of 2016 @ SLP [C] No. 20956/2014
CA No. 5753 of 2016 @ SLP [C] No. 21054/2014
CA Nos. 5754-5755 of 2016 @ SLP [C] Nos. 21396-21397/2014
CA No. 5756 of 2016 @ SLP [C] No. 21399/2014
CA Nos. 5757-5768 of 2016 @ SLP [C] Nos. 21500-21511/2014
CA Nos. 5769-5776 of 2016 @ SLP [C] Nos. 21615-21622/2014
CA No. 5777 of 2016 @ SLP [C] No. 21624/2014
CA No. 5778 of 2016 @ SLP [C] No. 21928/2014
CA No. 5779 of 2016 @ SLP [C] No. 22665/2014
CA No. 5780 of 2016 @ SLP [C] No. 22677/2014
CA Nos. 5781-5786 of 2016 @ SLP [C] Nos. 22688-22693/2014
CA Nos. 5787-5789 of 2016 @ SLP [C] Nos. 22777-22779/2014
CA No. 5790 of 2016 @ SLP [C] No. 22781/2014
CA No. 5791 of 2016 @ SLP [C] No. 23484/2014
CA Nos. 5792-5793 of 2016 @ SLP [C] Nos. 23492-23493/2014
CA No. 5794 of 2016 @ SLP [C] No. 23495/2014
CA No. 5795 of 2016 @ SLP [C] No. 23556/2014
CA Nos. 5796-5798 of 2016 @ SLP [C] Nos. 24581-24583/2014
CA Nos. 5799-5800 of 2016 @ SLP [C] Nos. 27121-27122/2014
CA Nos. 5801-5804 of 2016 @ SLP [C] Nos. 22950-22953/2014
CA Nos. 5806-5809 of 2016 @ SLP [C] Nos. 27062-27065/2014
CA Nos. 5810-5811 of 2016 @ SLP [C] Nos. 24541-24542/2014
CA No. 5812 of 2016 @ SLP [C] No. 27200/2014
CA No. 5813 of 2016 @ SLP [C] No. 26323/2014
CA No. 5814 of 2016 @ SLP [C] No. 26324/2014
CA Nos. 5815-5818 of 2016 @ SLP [C] Nos. 27201-27204/2014
CA Nos. 5819-5822 of 2016 @ SLP [C] Nos. 26061-26064/2014
CA No. 5823 of 2016 @ SLP [C] No. 26819/2014
CA No. 5824 of 2016 @ SLP [C] No. 24857/2014
CA Nos. 5825-5826 of 2016 @ SLP [C] Nos. 27674-27675/2014
CA No. 5827 of 2016 @ SLP [C] No. 28332/2014
CA No. 5828 of 2016 @ SLP [C] No. 28354/2014
CA No. 5829 of 2016 @ SLP [C] No. 28358/2014
CA No. 5830 of 2016 @ SLP [C] No. 28606/2014
CA Nos. 5831-5832 of 2016 @ SLP [C] Nos. 29863-29864/2014
CA No. 5833 of 2016 @ SLP [C] No. 28246/2014
CA Nos. 5834-5835 of 2016 @ SLP [C] Nos. 29242-29243/2014
CA No. 5836 of 2016 @ SLP [C] No. 32016/2014
CA No. 5837 of 2016 @ SLP [C] No. 31408/2014
CA Nos. 5838-5839 of 2016 @ SLP [C] Nos. 31800-31801/2014
CA No. 5840 of 2016 @ SLP [C] No. 35438/2014
CA No. 5841 of 2016 @ SLP [C] No. 36224/2014
CA No. 5842 of 2016 @ SLP [C] No. 35460/2014
CA No. 5843 of 2016 @ SLP [C] No. 34650/2014
CA No. 5844 of 2016 @ SLP [C] No. 2689/2015
CA No. 5845 of 2016 @ SLP [C] No. 663/2015
CA No. 5846 of 2016 @ SLP [C] No. 35082/2014
CA No. 5847 of 2016 @ SLP [C] No. 36504/2014
CA No. 5848 of 2016 @ SLP [C] No. 1302/2015
CA No. 5849 of 2016 @ SLP [C] No. 4494/2015
CA No. 5850 of 2016 @ SLP [C] No. 2841/2015
CA No. 5851 of 2016 @ SLP [C] No. 4478/2015
CA No. 5852 of 2016 @ SLP [C] No. 8551/2015
CA No. 5853 of 2016 @ SLP [C] No. 7102/2015
CA No. 5854 of 2016 @ SLP [C] No. 7096/2015
CA No. 5855 of 2016 @ SLP [C] No. 16494/2015
CA No. 5856 of 2016 @ SLP [C] No. 16617/2015
CA No. 5857 of 2016 @ SLP [C] No. 16487/2015
C.A. No. 8249/2015;
CA No. 5858 of 2016 @ SLP [C] No.12607/2015
CA No. 5859 of 2016 @ SLP [C] No. 34088/2015
CA No. 5860 of 2016 @ SLP [C] No. 3063/2016; and
CA No. 5861 of 2016 @ SLP [C] No. 3516/2016.
[HEARD BY HON'BLE V. GOPALA GOWDA AND HON'BLE ARUN MISHRA, JJ.]
Date : 05/07/2016 These appeals were called on for pronouncement of
judgment today.
For Appellant(s) Mr. C. S. N. Mohan Rao,Adv.
Mr. Abhijit Sengupta,Adv.
Mr. Sudhir Naagar,Adv.
Mr. Y. Raja Gopala Rao,Adv.
Ms. Vismai Rao,Adv.
Mr. Ananga Bhattacharyya,Adv.
Mr. B. Ramana Murthy,Adv.
Mrs. Sudha Gupta,Adv.
Mr. Rakesh Dahiya,Adv.
Mr. M. P. Shorawala,Adv.
Mr. M. Ram Babu, Adv.
Mr. N. Eswara Rao, Adv.
for M/s. M. Rambabu & Co.
Mr. Senthil Jagadeesan,Adv.
Mr. Venkateswara Rao Anumolu,Adv.
Mr. G. Umapathy, Adv.
for Mr. Rohit K. Singh,AOR
Mr. Sanjay Jain,Adv.
Mr. Vikas Mehta,Adv.
Ms. Anushree Menon, Adv.
Ms. Liz Mathew, Adv.
for M/s. Mclm & Co.
Mr. D. Mahesh Babu,Adv.
Mr. Danish Zubair Khan,Adv.
For Respondent(s) Mr. Rakesh K. Sharma,Adv.
Mr. K. V. Mohan,Adv.
Mr. G. N. Reddy,Adv.
Hon'ble Mr. Justice Arun Mishra pronounced the judgment of the
Bench comprising Hon'ble Mr. Justice V. Gopala Gowda and His Lordship.
Delay, if any, in filing substitution application/s is also
condoned. Substitution applications are allowed.
For the reasons recorded in the reportable judgment, which is
placed on the file, the appeals are dismissed. The appellants are directed
to make the deposit along with interest; if no other rate is prescribed at
the rate of 8 per cent per annum, and other charges for delay, as may be
permissible to recover within a period of one month from today. In
addition, the respondents are at liberty to take coercive steps to recover
the amount.
Pending applications, if any, stand disposed of.
(Renuka Sadana) (Parveen Kumar)
Court Master AR-cum-PS
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