Government's fixation of royalty rates based on ecological and economic factors is valid, highlighting limited judicial intervention in administrative price settings.

1These sets of appeal arise from a common judgment of the Division Bench of the High Court of Judicature at Andhra Pradesh whereby the said High Court has rejected the appellants' challenge to the fixation of rates of royalty on bamboo and hardwood to the paper industry in Andhra Pradesh. For the sake of convenience, we would refer to the facts and contentions in Civil Appeal Nos. 7519-20 of 1995 arising from Writ Appeal No. 591 of 1984 and Writ Petition No. 3927 of 1987 filed by the Sree Rayalseema paper Mills Ltd. It was stated by the counsel for both the parties before us, as was done before the High Court, that these appeals can be taken as representative of the facts and contentions in all the appeals.

2 Relevant facts for determining the points raised in these appeals are:
Till the year 1975 there were only two paper Mills in the State of Andhra Pradesh namely, (1) Sirpur Paper Mills, and (2) Andhra Pradesh Paper Mills Ltd. to which the Government was supplying hard and soft wood for manufacture of paper at concessional rates. These rates were being fixed every five years. By a memorandum dated 2nd September, 1975 the Government of Andhra Pradesh in Forest and Rural Development Department, fixed royalty rates at Rs. 30/- per Tonne for barked hardwood and Rs. 60/- per Tonne for barked softwood for a period of 5 years commencing from 1.10.1975. The Chief Conservator of Forests was requested to get the agreement drafted and furnish to the Government for approval after enquiring into the needs of the mills and after locating the areas in consultation with the mills for the supply of hard and soft wood. The duration of agreement was to be for 20 years. Pending the finalisation of the agreement, the Chief Conservator of Forests was requested to allow the mills to have the wood on payment of royalty, as indicated above, on adhoc basis after obtaining an undertaking from the mills that they would abide by the conditions prescribed by the Government for the supplies to be effected.

3 Another factor which needs to be mentioned although not relevant for the purpose of these appeals is that on a representation made by Rayalseema Paper Mills Limited and Bhadrachalam paper Boards Limited which were set up in a backward area, Government of Andhra Pradesh by G.O.Ms. No. 665 dated 15th July, 1976, a further concession in the rate of royalty on bamboo and hard wood by 50% was extended to these two mills for a period of 5 years from the date of their going into production. On a further request made by them the period of concession was extended from 5 to 10 years subject to the condition that Government reserved its right to review the position after first 5 years. This concession commenced from 1.10.1978. Concessional period of first five years expired on 30th September, 1983. The Government of Andhra Pradesh reviewed the matter and issued orders contained in G.O.Ms. No. 65 dated 9.2.1984 withdrawing the said concession altogether w.e.f. 1.10.1983. G.O.Ms. No. 65 dated 9.2.1984 was challenged by filing writ petitions which were dismissed by the single Judge of the High Court. Further appeal filed before the Division Bench was also dismissed. However, it was held that the said G.O.Ms. being administrative in character, could not be given retrospective effect. This judgment became final between the parties.

4 To continue with the facts from the previous paragraph the rates of royalty fixed by the Government Memorandum dated 2.9.1975 @ Rs. 60/- per Tonne for barked soft including Bamboo at Rs. 30/- per Tonne for barked hard wood were valid for the period 1.10.1975 to 30th September, 1980. The Government desired to fix revised royalty rates for the next five years. It appears that the Chief Conservator of Forests submitted proposals in February and June, 1980 suggesting a rate of Rs. 425/- per Metric Tonne for bamboo and Rs. 75/- per Metric Tonne for mixed hardwood for supply to Paper Mills. He based his figures on the minimum cost of production a