IMPORTANT POINT
For normal fixation of tariff with or without modification, the exercise which has to be undertaken is under sub-section (5) of Section 26 of the Andhra Pradesh Electricity Reforms Act while sub-section (9) will apply only in a case of amendment during a financial year.

Headnote:(i) Andhra Pradesh Electricity Reforms Act, 1998-Section 26-Fixation of tariff by Regulatory Commission-Procedure-Expected revenue from charges-Calculation of-Sub-section (9) of Section 26 is unhappily worded-Sub-section (9) comes into play only when during the financial year an amendment to tariff or a new tariff is proposed-Annual exercise with regard to fixation of tariff has to be undertaken under sub-section (5) of Section 26.
       Held : A reading of sub-section (2) indicates that in the determination of the tariff, the financial principles provided in the Sixth Schedule to the Electricity (Supply) Act, 1948 are applicable unless for reasons recorded in writing, as contemplated by Section 26(3), the Commission departs from the factors specified in the said Sixth Schedule. Sub-section (5) of Section 26 requires every licensee to provide to the Commission at least three months before the ensuing financial year details of its calculation with regard to the expected aggregate revenue from the charges which it believes it is entitled to realise. The Commission is entitled to ask for further particulars and when the data have been supplied the Commission is required within 90 days either to accept the licensee s tariff proposals and revenue calculations or it may proceed under Section 26(5)(b) and, inter alia, propose a modification or an alternative calculation of the expected revenue from the charges which the licensee shall accept. The determination of the Commission either under Section 26(5)(a) or 26(5)(b) is then to be notified under Section 26(6) and seven days after the said publication the tariff so notified is to take effect. (Paras 7 & 8)
       There is no doubt that sub-section (9) of Section 26 is unhappily worded. There does appear, at first blush, some overlapping between sub-section (5) and sub-section (9), but on a careful reading of sub-section (9), we agree with the contention of Shri Shanti Bhushan that sub-section (9) comes into play only when during the financial year an amendment to the tariff or a new tariff is proposed. Reading sub-section (5) and sub-section (9) together, it appears to us that the annual exercise with regard to the fixation of tariff has to be undertaken under sub-section (5), but if for any reasons there is a new tariff which is to be proposed or an amendment is to take place during the financial year, then the procedure set out in sub-section (9) of Section 26 has to be followed. It is for this reason that while under Section 26(5) it is stated that the particulars are to be supplied by the licensee at least three months before the ensuing financial year, on the other hand under Section 26(9) the particulars are to be supplied at least three months before the proposed date of implementation. By use of the words proposed date of implementation in contra-distinction to the use of the words ensuing financial year occurring in sub-section (5), the indication clearly is that sub-section (9) will apply only in a case of amendment during a financial year. For normal fixation of tariff with or without modification, the exercise which has to be undertaken is under sub-section (5) of Section 26. (Para 9)
       (ii) Constitution of India-Article 226-Andhra Pradesh Electricity Reforms Act, 1998-Section 26-Tariff fixation-Judicial review-Scope of-Court should refrain from interfering with such a policy decision unless the power exercised is arbitrary or exfacie bad in law.
       Held : 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 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. (Para 11)

JUDGMENT

Kirpal, J.-With a view to provide for the constitution of an Electricity Regulatory Commission, restructuring of the electricity industry, rationalisation of the generation, transmission, distribution and supply of electricity avenues for participation of private sector in the electricity industry and generally for taking measures conductive to the development and management of the electricity industry in an efficient, economic and competitive manner and for matters connected therewith or incidental thereto, the Andhra Pradesh Electricity Reforms Act, 1998 (hereinafter referred to as "the Act"), was promulgated by the State. After it received the assent of the President, by Notification dated 27th January, 1999, it came into force with effect from 1st February, 1998.

2. The present dispute arises in connection with fixation of the tariff by the Regulatory Commission which has been constituted under the said Act. The tariff which was impugned by the appellants herein was in respect of the year 1st April, 2000 to 31st March, 2001. This tariff was fixed by a decision of the Regulatory Commission dated 27th May, 2000. In the said order determining the tariff, various contentions which had been raised by the licensees and the other interested parties, including the appellants, were considered.

3. The said order dated 27th May, 2000, was challenged by a number of writ petitions filed in the High Court of Andhra Pradesh at Hyderabad. By an elaborate judgment of the Division Bench of the High Court dated 16th October, 2000, the writ petitions were dismissed and the tariff which was fixed by the order dated 27th May, 2000 followed by a notification under Section 26(6) of the Act was upheld.

4. During the pendency of these appeals, with the passage of time, the tariff for the year which was impugned no longer survives and it has been replaced by tariff for the year 1st April, 2001 to 31st March, 2002. It is a common ground that there has been no challenge to the tariff for the current year. In a sense, therefore, these appeals have become infructuous because no effective relief can be granted as the period for which the tariff was fixed has already expired. Be that as it may, as some issues are likely to arise in the future pertaining to the interpretation of Section 26 of the Act which deals with the fixation of tariffs, we have heard the learned counsel for the parties at great length.

5. It has been contended on behalf of the appellants that on a correct interpretation of Section 26 of the Act, the tariff was required to be fixed by complying with the provisions of sub-section (9) and further the tariff must necessarily comply with the parameters prescribed in sub-section (7) of Section 26. It is further the case of the appellants that according to said Section no undue preference can be shown to any consumer of electricity and there can be no classification of consumers according to the purpose for which the electricity is used. It has also been contended, in this regard, that the tariff which was fixed indicates that the cost of supply of electricity to the industry was much lower than the cost of supply to some of the other consumers like domestic consumers, but by charging more per unit from the industry vis-a-vis the domestic consumers undue preference has been shown and that is not permissible.

6. Section 26 reads as follows:

"26(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

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2002 Supreme(SC) 317

IMPORTANT POINTFor normal fixation of tariff with or without modification, the exercise which has to be undertaken is under sub-section (5) of Section 26 of the Andhra Pradesh Electricity Reforms Act while sub-section (9) will apply only in a case of amendment during a financial year.

IMPORTANT POINT
For normal fixation of tariff with or without modification, the exercise which has to be undertaken is under sub-section (5) of Section 26 of the Andhra Pradesh Electricity Reforms Act while sub-section (9) will apply only in a case of amendment during a financial year.