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PETITIONER: CHITTOOR ZILLA VYAVASAYADARULA SANGHAM

       Vs.

RESPONDENT: A.P. STATE ELECTRICITY BOARD & ORS.!Rythu SamakhyaVs.Govt. of A.P. & Ors.

DATE OF JUDGMENT:       03/11/2000

BENCH: N. Santosh Hegde.

JUDGMENT:

MISRA, J. L...I...T.T.......T.......T.......T.......T.......T.......J

Leave granted in all the special leave petitions.

The questions raised in these appeals are:

   (a)  Whether  the  Andhra   Pradesh  Electricity  Board (hereinafter  referred  to as the Board) is competent  to put  an  end to the policy decision of the State to  supply electricity  to  the  agricultural   sector  at  subsidised uniform flat rate and convert the same into multi different tariff  rates  discarding  the  principle  of  fixation  of uniform  tariff  as  contemplated  in  Section  59  of  the Electricity  (Supply) Act, 1948.  (b) Whether the Board  is competent  to  fix tariff as per use of smaller  or  bigger@@                                                  JJJJJJJJJJ H.P.   motor and whether this fixing has any rational basis@@ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ which   discriminate   between    one    from   the   other agriculturists.

   The  present appeals are directed against the orders of the  Andhra Pradesh High Court dismissing appellants  writ petitions,  holding  that  the  Board  decision  in  fixing different  rates based on the capacity of motor is  neither arbitrary nor discriminatory.

   In  order  to appreciate the controversy we are  herein giving  short  matrix  of  facts.    The  appellant  is   a registered  society having farmers in various districts  of Andhra  Pradesh  as its members.  According to the case  of the  appellant,  a farmer-consumer of electricity  for  his agricultural  purpose is classified by the respondent-Board as  a low tension consumer entitled for a subsidised  price in  the  light of the policy of the State  Government.   In pursuance  to the same, the Board reduced the tariff  rates for  a  very  short period, in the light of  the  assurance given  on the Floor of the Assembly in January, 1995 by the then Chief Minister.  Accordingly the tariff was reduced to Rs.50/- per H.P.  per annum with effect from 1.4.1995 under B.P.Ms.   No.110,  dated 5.6.1995.  Subsequently the  Board after  consultation  with  the State revised  the  impugned tariff.   The question raised is, whether revision of  this tariff  could be justified when it runs counter to the said policy decision of the State, based on the assurance of the

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Chief  Minister  and  in view of the social  and  statutory obligation,  both  on  the Board and the  State  to  supply electricity  economically towards its subject.  The revised new  tariff  rate through B.P.Ms.  No.32,  dated  29.7.1996 was:

Tariff  rate @@ IIIIIIIIIIIII

year

   i) Upto 3 H.P.  Rs.250/- per H.P.  per year

   ii)  Between 3 H.P.  to 5 H.P.  Rs .350/- per H.P.  per                                                        year

   iii)  From 5 H.P.  to 10 H.P.  R s.450/- per H.P.   per                                                        unit

   iv) 10 H.P.  and above Metered supply @ Rs.0.50 per per of Rs.600/- subject to a minimum H.P.  per year.@@             IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII

   Thereafter  on the representation from the farmers this tariff  was  reduced, first through B.P.Ms.   No.35,  dated 14.8.1996:

   Tariff rate

   i) Upto 3 H.P.  Rs.200/- per H.P.  per year

   ii)  Between 3 H.P.  to 5 H.P.  Rs.300/- per H.P.   per                                                        year

   iii)  From  5 H.P.  to 10 H.P.  Rs.400/- per H.P.   per@@     JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ                                                        year

   iv) 10 H.P.  and above Rs.500/- per H.P.  per year

   Finally, came the impugned revised rates as per B.P.Ms. No.40, dated 3.9.1996 which is:

   Tariff  rate DPAP Area Others@@                  JJJJJJJJJJIIIIII

   i) Upto 3 H.P.  Rs.100/- per H.P.  per yearRs.150/-@@                                                IIIIIIII

   ii)  Between 3 H.P.  to 5 H.P.  Rs.200/- per H.P.   per                                                yearRs.250/-@@                                                    IIIIIIII

   iii)  From  5 H.P.  to 10 H.P.  Rs.300/- per H.P.   per                                                yearRs.350/-@@                                                    IIIIIIII

   iv)  10  H.P.   and  above   Rs.400/-  per  H.P.    per                                               yearRs.400/-@@                                                   IIIIIIII

   Before  reaching  this stage, it is necessary  to  give some  historical background of the imposition of the tariff

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from  the  year 1982 till the date of the impugned  tariff. The  TDP  Government  headed  by Mr.   N.T.   Rama  Rao  in exercise  of powers under Section 78A of the aforesaid Act, directed  the  Board, through letter dated 15.12.1982  from the  Secretary  to the Government of  Energy,  Environment, Science and Technology Department to revise the electricity tariff  for  Borewell/Tubewell pumpset to Rs.50/- per  H.P. per  annum  without installation of meters.   The  relevant portion of the said letter is quoted hereunder:

   While   agriculturists   owning   lands   under   flow irrigation  from major projects for both reliable and cheap irrigation,   farmers  depending  on   ground-water   based irrigation,  most  of whom are small and marginal  farmers, have  to  incur  relatively higher expenditure  in  lifting water,  besides  being  vulnerable   to  recurring  drought resulting  in  lowering  of the water table in  the  wells. Moreover,  in rural areas maintenance of electricity meters and  the  billings  of individual farmers  based  on  meter reading  is  be set with administrative defects leading  to loss  of  revenue,  hardship  to   the  farmers  and   high collection  cost.   Keeping all the above factors in  view, the  Government  feel  that the present  power  tariff  for agricultural  pump  sets needs rationalisation and  that  a flat  rate system based on the horse-power of each pump-set would  be more appropriate in such cases.  Government  have therefore, decided that with effect from 1st November, 1982 the  revised power tariff for agricultural pumpsets in  the State should be a flat rate of Rs.50/- per H.P.  per annum.

   With  a view to mitigate hardship to small and marginal farmers  depending solely on well irrigation and to give  a fillip  to  agricultural  production  in  the  State,   the Government  under Section 78-A of the Electricity  (Supply) Act,  1948 direct that, in supersession of the instructions issued  in  the letter cited (dated 20.1.1982),  the  APSEB shall revise the electricity tariff for irrigation wells to Rs.50/-  per H.P.  per annum, and that this rate shall take effect from 1.11.1982.

   Accordingly  the Board fixed the tariff at Rs.50/-  per H.P per annum.

   After  the  change  of the Government the  tariff  were again  revised.   Thereafter when again Government  of  Mr. N.T.   Rama  Rao came into power, it gave assurance to  the State  Legislature  on  20.1.1995, as  aforesaid  that  the farmers in the State would be supplied with power @ Rs.50/- per  H.P.  per annum.  Based on this assurance, followed by the  communication  of the Government dated 27th May,  1995 the  Board issued B.P.Ms.  No.110, dated 5.6.1995, revising tariff to Rs.50/- per H.P.  per annum for all pumpsets upto 75  H.P..   At  that point of time  B.P.Ms.   No.147  dated 18.11.1992  issued by the Board was in operation as amended from   time   to  time   through  B.P.Ms.   No.100,   dated 29.12.1992,  B.P.Ms.   No.471,   dated  15.3.1994,  through B.P.Ms.   No.64  dated  24.4.1995,   B.P.Ms.   No.70  dated 8.5.1995 and through B.P.Ms.  No.72 dated 9.5.1995.

   With  the  change of the Government again  the  present impugned B.P.Ms.  No.  40, dated 3.9.1996 was issued.

   Submission  for the appellant is, this impugned B.P.Ms. has  divided the agriculturists into multi groups, based on the  consumption  of the horse power by the  pumpsets  into

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various  slabs  which runs contra to the uniform tariff as contemplated under Section 49 of the Act.

   Learned Senior counsel Mr.  P.P.  Rao appearing for the appellant  submits, the impugned tariff rates are  contrary to  the  Government  policy issued under  Section  78A,  in pursuance  to the assurance given by the Chief Minister, as it  instead of being at flat rates, is based on slab  rates and  is also discriminatory inter se between the same class of  agriculturists.   He also submits, even  otherwise  the revision  of rate is based on factual misrepresentation  by showing  deficit  to  the Board for 1996-97,  the  year  in question,  wherein as per figures placed before the  public in  the  Power Development in Andhra  Pradesh  (Statistics) 1997-98,  shows  surplus for the same year.  In  fact  this inconsistency  was placed before the High Court by some  of the  connected  appellants through review petition but  the High  Court without application of mind rejected the  same. In support of the first part of submission, it is submitted that  the policy decision of the State cannot be changed by mere  consultation.  The change could only be  broughtforth by  the  issuance of fresh policy order by the State  under Section  78 A and communicating the same.  He submits under General  Clauses  Act (Central) and also under Section  15, State  General  Clauses Act, a thing can only be undone  in the  same way as it was done earlier.  In other words, when there  is an order under Section 78A based on the assurance of the Chief Minister there has to be another such order by the  State withdrawing the same under the same Section.  In the  present  case, submission is, admittedly even  as  per Board  there was no such order passed.  He also referred to Section  49  to  show  that   Board  while  supplying   the electricity  has to frame uniform tariffs and while  fixing such  tariffs  it  has to take into consideration  what  is stated under sub-section (2).

   He also laid emphasis that justification to enhance the tariff   cannot  be  sustained   when  admitted  losses  of electricity through transmission and theft etc.  are to the extent  of  33%.   He  fairly  admits,  under  Section  78A direction  by the State Government would be confined to the policy  decision only and the fixation of rate of tariff is within the domain of the Board.

   On  the  other  hand, learned senior  counsel  for  the respondent-Board  Mr.  Shanti Bhushan submits, the impugned tariff  does  not suffer from any illegality and have  been validly  revised.  In fixing the tariff, the Board has kept in  view,  Sections  49  and  50 of  the  Act.   For  ready reference Sections 49 and 50 are quoted hereunder:

Section 49.

   49.   Provision  for  the sale of electricity  by  the Board  to  persons other than licensees.   (1) Subject  to the  provisions of this Act and of regulations, if any made in  this  behalf, the Board may supply electricity  to  any person  not being a licensee upon such terms and conditions as  the  Board thinks fit and may for the purposes of  such supply frame uniform tariffs.

   (2) In fixing the uniform tariffs, the Board shall have regard to all or any of the following factors, namely:-

   (a) the nature of the supply and the purposes for which

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it is required.

   (b)  the  co-ordinated  development of the  supply  and distribution  of  electricity within the State in the  most efficient  and economical manner, with particular reference to  such development in areas not for the time being served or adequately served by the licensee;

   (c)  the simplification and standardisation of  methods and  rates of charges for such supplies;  (d) the extension and  cheapening  of  supplies of  electricity  to  sparsely developed areas.

   (3) Nothing in the foregoing provisions of this section shall derogate from the power of the Board, if it considers it  necessary or expedient to fix different tariffs for the supply  of electricity to any person not being a  licensee, having regard to the geographical position of any area, the nature  of  the  supply  and purpose for  which  supply  is required and any other relevant factors.

   (4)  In fixing the tariff and terms and conditions  for the  supply of electricity, the Board shall not show  undue preference to any person.

Section 59:

   59.   General Principles for Boards finance  (1) The Board  shall,  after taking credit for any subvention  from the  State  Government  under  section  63,  carry  on  its operations  under this Act and adjust its tariffs so as  to ensure that the total revenues in any year of account shall after meeting all expenses properly chargeable to revenues, including  operating, maintenance and management  expenses, taxes  (if  any)  or income and profits,  depreciation  and interest payable on all debentures, bonds and loans, [leave such  surplus  as is not less than three per cent, or  such higher   percentage,  as  the   State  Government  may,  by notification  in  the  Official Gazette,  specify  in  this behalf,  of  the value of the fixed assets of the Board  in service at the beginning of such year.

   Explanation    For the purposes of  this  sub-section, value  if the fixed assets of the Board in service at  the beginning  of  the  year means the original cost  of  such fixed  assets as reduced by the aggregate of the cumulative depreciation  in  respect  of  such  assets  calculated  in accordance  with the provisions of this Act and  consumers contributions for service lines.

   (2)  In  specifying [any higher percentage] under  sub- section  (1), the State Government shall have due regard to the  availability of amounts accrued by way of depreciation and the liability for loan amortization and leave

   (a)  a reasonable sum to contribute towards the cost of capital works;  and

(b) where in respect of the Board, a notification has been issued under sub-section (1) of section 12A, a reasonable sum by way of return of the capital provided by the State Government under sub-section (3) of that section and the amount of the loans (if any) converted by the State Government into

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capital under sub-section (1) of section 66A.

   Board  supplies electricity and fixes tariff from  time to  time under Section 49.  In doing so, it has  classified the  consumers into low tension consumers and high  tension consumers.   Under  low  tension   consumers  among  the  7 categories the agriculturists is category no.5 (to which we are  concerned)  and  under  high  tension  consumers  fall factories,  industries and also agriculture of high tension consumers.  Different tariff rates are being fixed from the very  inception  by the Board for each class  or  category. The  impugned  tariff revision was undertaken by the  Board keeping  in  view  its statutory responsibility it  has  to undertake  in terms of Section 59.  In doing so, it has  to ensure  that  the total revenue in any year, after  meeting all  expenses  properly   chargeable  including  operation, maintenance  and  management  expenses, taxes (if  any)  on income  and  profits, depreciation and interest payable  on all  debentures, bonds, and loans, leave such surplus as is not  less  than  3%,  or  such  high  percentage  as  State Government  may,  by notification in the official  Gazette, specify.  It is one of the statutory obligation cast on the Board.   It  is  also relevant to reproduce  Section  78  A hereinunder  to properly test the scope of the direction of the  State.  Section 78 A:  78A.  Directions by the  State Government.-  (1)  In the discharge of its  functions,  the Board  shall  be guided by such directions on questions  of policy as may be given to it by the State Government.

   (2)  If  any dispute arises between the Board  and  the State  Government  as to whether a question is or is not  a question  of policy, it shall be referred to the  Authority whose decision thereon shall be final.

   The  submission for the Board is, the communication  by the  Government dated 27.5.1995 cannot be construed to be a direction  issued  under  Section  78A  of  the  Act.   Any direction  under  Section  78A  could   only  be  for   the furtherance  to  discharge its function by the Board.   Any direction which makes Board travel outside such Sections 49 and  59  cannot be covered by Section 78 A.  The  Board  in order  to honour the assurance given by the Chief Minister, notwithstanding it not to be a direction under Section 78A, through B.P.Ms.  No.110 as aforesaid, brought the tariff to Rs.50/-  per  H.P.   per annum to all the  pump  sets  upto Rs.75/-  H.P.   But later, in consultation with  the  State Government,  once  again  revised the tariff  to  bring  it within  the  norms  as  envisaged   by  Section  59.   Thus submission  for  the Board is, firstly issuance  of  letter dated  27.5.1995  is  not a policy direction  issued  under Section  78A  and  even  if such direction  could  be  read implicitly as a policy decision then subsequent revision of the  impugned tariff after consultation with the Government has  also  to be construed implicitly as withdrawal of  the said  policy direction.  He submits, so far the  Government policy   of   supply   of    electricity   to   the   Ryots (agriculturists) at a cheaper and subsidised rates is still maintained  by the Board and the impugned revision is still in  consonance within the same.  He has also placed figures before us, about which we shall be referring later, to show that the supply of power to the agriculturists, even as per the  impugned  tariff,  the  average   supply  is  at   the subsidised  rate of about 90%.  The actual cost incurred by the  Board  in generation and supply of the electricity  is

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Rs.  1.77 per unit.

   It is denied that any misrepresentation was made by the Board  before  the High Court.  The submission is, that  in the  counter affidavit filed by the Board in the High Court it  is  true  -  it records projected  losses  for  1996-97 showing  revenue  deficit  of   Rs.1,533/-  crores.   These projected  losses are shown with reference to the tariff if imposed  at the rate of Rs.50/- per H.P.  per annum.   This figure  is  not actual loss.  It is only to overcome  these projected  losses,  the tariff has been revised.  Hence  in the  statistics of 1997- 98 rightly for 1996-97 surplus  is shown.   This  surplus  is still within 3% as  referred  in Section 59.

   For  the  appellant it is submitted that the  subsidies tariff  @ Rs.50/- per H.P.  per annum fixed by the Board in 1982  and also on 5.6.1995 was by way of implementation  of the directions issued by the State Government under Section 78A  which is binding on the Board.  It is relevant here to record the assurance of the Chief Minister, dated 20.1.1995 in the Andhra Pradesh Legislative Assembly:

   We  have assured that electricity will be supplied for cultivation to Ryots at the rate of Rs.50/- per horse power per  annum.   I  once   again  respectfully  reiterate  the assurance  that  for the development and welfare  of  Ryots electricity will be supplied at the rate of Rs.50/- only.

   It  is  our responsibility to ensure that according  to the Government policy Ryots are supplied electricity at the rate of Rs.50/- per H.P.  per annum.

   This  was followed by a letter dated 25.5.1995 from the Secretary  of the State Legislature to the Member-Secretary to  the  Government  of  Andhra Pradesh  referring  to  the assurance given by the Chief Minister and this was followed by  letter  dated  27.5.1995 from the  Joint  Secretary  of Government  to  the  Member-Secretary  of  the  Board.   It records:

   Sub:   A.P.  Leg.  Assembly Assurance regarding supply of  power at the rate of Rs.50/- per one House power to the Agriculturists  implementation report

   Ref:    From  Secy.   To   Legislature,  Lr.    No.1959 (assu/95-1,  dt:   20.5.95.  --- I am directed  to  enclose herewith  a  copy  of the reference  cited,  together  with Assurance  No.1959, dt:  20.1.95, regarding supply of power at  the  rate  of  Rs.50/-  per  one  horse  power  to  the Agriculturists  and request you to send the  implementation report, immediately.

   The  question is whether such letter could be an  order under  Section 78A and to be such as to bind the Board  for its  compliance.   Strong reliance has been placed  by  Mr. Rao  on the certain observations made by this Court in Real Food  Products Ltd.  And Ors.  Vs.  A.P.  State Electricity Board  &  Ors., 1995 (3) SCC 295.  The reliance is  on  the following observations:

   It  does  appear that the view expressed by the  State Government  on  a question of policy is in the nature of  a direction  to  be followed by the Board in the area of  the policy to which it relates

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   In  the  present case, the flat rate per H.P.  for  the agricultural  pump-sets indicated by the State  Government, appears  to  have  been found acceptable by  the  Board  as appropriate  particularly  because  it is  related  to  the policy  of concessional tariff for the agriculturists as  a part of the economic programme.

   The submission is, this decision holds State Government policy  direction has to be followed by the Board and  flat rate  of charging tariff is part of the policy of the State Government.   Hence,  the  letter   dated  27.5.1995  is  a direction  of  the  State   Government  under  Section  78A according  to which the rate of tariff has to be Rs.   50/- per  H.P.   per annum which is binding on the  Board.   The Board  notwithstanding  this,  when it revised  its  tariff upwards  is in contravention of this direction hence liable to  be  quashed.  Emphasis is that fixation of  flat  rate, namely,  in the present case Rs.  50/- per H.P.  per  annum is  a part of the policy though it is open to the Board  to escalate the rate, viz., it may be Rs.  100/- per H.P.  per apnnum,  Rs.  200/- per H.P.  per annum but it cannot  vary the policy from flat rate to slab rate.

   It  is necessary first to examine the periphery of  the statutory  fields  within  which the Board  and  the  State Government  has to function.  Admittedly both are statutory functionaries  under the Central Act.  They have to perform their   obligations  within  the   limits  they  have  been entrusted with.  Section 78 A empowers the State Government to  issue directions to the Board on question of policy, on the  other  hand  the Board has to  perform  its  statutory obligations  under  the said Act and with reference to  the fixation  of  tariff  it  has to act in  term  of  what  is contained  in Sections 49 and 50.  But this field of policy direction  is  not unlimited.  There cannot be  any  policy direction which pushes the Board to perform its obligations beyond  the  limits of the said two sections.   Any  policy direction,  which  in  its due performance keep  the  Board within  its  permissible  statutory  limitations  would  be binding on the Board.  So, both State and the Board have to maintain  its cordiality and co- ordination in terms of the statutory  sanctions.   If any policy direction pushes  the Board  in  its compliance beyond statutory limitations,  it cannot  be a direction within the meaning of Section 78  A. It  is significant that opening words of Section 78 A is, in  the  discharge  of its functions, the  Board  shall  be guided by such directions.  So, the direction of the State is  for the guidance to the Board, in the discharge of  its functions.  Thus this direction has also limitation to give such  direction  which  will  subserve  in  performing  its statutory obligation.  We would be returning later to test, if  direction  to charge tariff at the rate of Rs.  50  per H.P.   per  annum  would have been followed by  the  Board, whether it would have travelled beyond Section 59.

   Now,  we proceed to see to what extent the Board as per impugned   revised  rates  is   charging  the  tariff  from agriculturists.   Learned counsel for the Board has  placed before   us   the   rate  per   unit   charged   from   the agriculturalists in question from 1983-84 till 1997-98.  It is  said  in spite of this upward revision of tariff,  even now the rate is heavily subsidised.

Year                      Flat rate per unit

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                          Charged

1983-84                    9.20 Paisa. 1984-85                    6.12 P. 1985-86                    5.57 P. 1986-87                    4.87 P. 1987-88                    4.72 P. 1988-89                    4.27 P 1989-90                    4.29 P. 1990-90                    2.87 P. 1991-92                    3.27 P. 1992-93                    8.10 P. 1993-94                    6.40 P. 1994-95                    5.27 P. 1995-96                    2.81 P. 1996-9                    13.51 P. 1997-98                   16.18 P.

   Submission is this chart shows, in spite of increase in the  cost  escalation in every field, even in the  impugned tariff  for  1996-97,  the year in question, the  Board  is merely  charging 13.51 per unit when the cost of production is  Rs.1.77  per  unit.  In other words, it  is  subsidised approximately  90% of the average cost.  On the other hand, if  the same tariff, in terms of the letter dated 27th May, 1995  would  have been charged there would have been  heavy loss  to  the Board and thus compliance of the  same  would have resulted in contravention of Section 59 of the Act.

   Now,  we proceed to examine what this Court held in the Real  Food Products Ltd., (supra).  This Court examined the nature  and  effect  of the direction given  by  the  State Government  under  Section  78-A.  It was examined  in  the context  of charging a flat rate per H.P.  for agricultural pumpsets.   It  holds,  view expressed by the  State  on  a question  of  policy  to be followed by the  Board  in  the context  of Boards function under Sections 49, 59 and other provisions of the Act.  This Court held, that the flat rate per  H.P.   for  the  agricultural   pump  set  was   found acceptable  by  the  Board.  What does, acceptable  to  the Board means?  It only means, it to be within the parameters of  Sections  49 and 59 of the Act.  In other words,  Board has not to travel outside its obligations under Section 59. This  decision  records:   However,   in  indicating   the specific  rate  in  a given case the action  of  the  State Government  may  be  in  excess of the power  of  giving  a direction  on  the question of policy, which the Board,  if its conclusion be different, may not be obliged to be bound byif  the  view expressed by the State Government  in  its direction  exceeds the area of policy, the Board may not be bound by it unless it takes the same view on merits itself

   At  any rate, there is no material in the present case to  indicate  that  the flat rate indicated  by  the  State Government   for  the  agricultural   pump-  sets  was   so unreasonable  that  it  could   not  have  been  considered appropriate by the Board.

   Thus  it  is clear Board would not be bound  to  follow every policy directions.  According to the Board, if tariff was  charged at the rate of Rs.50/- per H.P.  per annum, as per the direction in question, loss to the Board would have been to the extent of Rs.1,553 crores for the year 1996-97. This would have gone contrary to the obligation cast on the Board  under Section 59.  Section 59 mandates the Board  to

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leave  such surplus not less than 3% of the revenue,  after meeting  all its expenses referred to therein.  This  Board has  not  to  supply  electricity at such  rate  to  be  in deficit, leaving no hope for its extensions for the benefit of persons living in an uncovered area.  It is for this and other  reason  statute  mandates  Board  to  maintain  this surplus in every year.  If it has to perform this statutory obligation,  how  can  it  do so, if it  follows  any  such direction  which  takes  it  away  from  it.   It  is  true government  can to cater to the popular demand in order  to earn its legitimate favour, give any such policy direction, but it should have to be within permissible limit.

   It   seems  Board  initially,  in  order  to   maintain cordiality  and cohesion in functioning did honour the said assurance  by issuing B.P.Ms.  No.  110 dated 5.6.1995  and reducing the tariff to Rs.  50/- per H.P.  with effect from 1.4.1995.   However, subsequently, in view of the aforesaid facts, the Board it seems did bring it to the notice of the State  by consulting it and thereafter issued the aforesaid impugned  increased  tariff B.P.No.40 dated 3rd  September, 1995.  On the facts of this case the policy decision by the State  Government,  for the year in question, can  only  be construed to mean to supply the electricity to ryots at the subsidised  and concessional tariff rates.  The other  part of the assurance, namely, to supply electricity at the rate of  Rs.   50/- per H.P.  per annum which results  into  the aforesaid  loss to the Board cannot be construed to be part of  the policy direction under Section 78 A.  The  reliance by  Mr.   Rao that in Real Food Products Ltd.  (supra)  the flat  rate of charging tariff has been held to be a  policy decision  cannot be construed to be so on the facts of  the present  case.   In that case first we find there is  clear order  under Section 78 A, which leaves no room of doubt it to  be  so.   The relevant portion of the  same  is  quoted hereunder:

   With  a  view  to  mitigating hardship  to  small  and marginal farmers depending solely on well irrigation and to give  a fillip to agricultural production in the State, the Government  under Section 78-A of the Electricity  (Supply) Act,  1948 direct that, in supersession of the instructions issued  in  the letter cited (dated 20.1.1982),  the  APSEB shall revise the electricity tariff for irrigation wells to Rs.   50 per H.P.  per annum, and that this rate shall take effect from 1.11.1982.

   But even this direction was only approved by this Court because  such  direction  of  the  State  was  held  to  be acceptable  by the Board, as there was no material in  that case to indicate that the flat rate @ Rs.50/- per H.P.  per annum  was  so  unreasonable that it could  not  have  been considered  appropriate by the Board.  In the present case, the  Board  has  accepted broadly the policy of  the  State Government  to  supply  electricity  to the  Ryots  at  the subsidised  and  concessional  rate   but  could  not  have accepted the rate @ Rs.50/- per H.P.  per annum as it would have  run  contra to Section 59.  In the present case,  for the  year 1996-97, according to the Board its fixed  assets were Rs.  135 crores and after taking into consideration of all  the  expenses,  as  aforesaid, the net  amount  to  be harnessed by the Board was to the tune of Rs.1,668/- crores in  terms of Section 59, which could not have been achieved if the aforesaid direction is question was applied.

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   In  fact,  if flat rate as a policy was to be  charged, the  submission of Mr.  Rao is, the Board could have  fixed at  200, 300 etc.  H.P.  per annum in order to overcome the deficit  then it would have been in consonance with  policy decision.  This submission lacks merit.  If this would have been  implemented, it would have put heavy burden on  small farmers  who  are using minimum electricity and would  have run  contra  to  the  central theme of  the  policy.   Even submission  of  Mr.  Rao, the small agriculturist  who  get water  at the deeper level has to consume more  electricity than  bigger  farmers who get water at higher  level,  thus consuming  more electricity and paying more in slab system, though  at  the  first  look is attractive  but  cannot  be accepted.   Big  farmers have to irrigate larger area  than small  farmers and have to consume more electricity.  There may be small range of farmer, in the situation as submitted but  for  this  there  are no material on  the  records  to sustain such a submission.  The imposition, on the facts of this case, of the slab system is in keeping the interest of small  farmer  to pay less for consuming  less  electricity hence is reasonable and cannot be faulted.  In doing so, it also  does  not  violate Section 49 as  submitted,  by  not framing  uniform  tariff.  Firstly, the pattern  of  tariff fixed  is  uniform, even otherwise in terms of  sub-section (3)  of Section 49, Board could make departure from it, for any relevant factor.  Hence we do not find any illegality.

   So,  we  may conclude, on the facts of this  case,  the aforesaid  letter of the Government following assurance  of the  Chief Minister, could not be construed to be a binding direction under Section 78 A, except to the extent which is implicit,  to  supply  electricity  to  the  Ryots  at  the subsidised  and  concessiosnal  rate, which the  Board  has followed.

   Another  submission on behalf of the appellant is, High Court  committed  error, when it decided by  accepting  the misrepresented  figures placed by the Board.  According  to the  learned counsel, the figure accepted by the High Court for the year 1996-97 was deficit of Rs.  1,533 crores while the  very  Board  while issuing  its  statistics  published through  Power  Development in Andhra Pradesh  (Statistics) 1997-98  it showed the figure of Rs.  1,049 crores and  Rs. 1,777.48   crores  for  the   years  1996-97  and   1997-98 respectively   as  surplus.   We   have   considered   this submission  and  as per the submission for the  Board,  the figure  recorded by the High Court was based on the figures in  the counter affidavit filed by the Board, which  showed these  figures  as  projected loss, not actual  loss.   The submission  is this projected loss was shown in case if the assurance  of charging tariff at the rate of Rs.  50/-  per H.P.   per  annum  would have been accepted, while  in  the 1997-98  statistics published the actual figure is shown to be in surplus.  This resulted on account of upward revision of  tariff.   The  relevant  portion of  the  said  counter affidavit is reproduced below:

   The  projections for 1996-97 have revealed a  revenue deficit  of  Rs.   1,533/-  crores with  reference  to  the revenues  expenses  to  be  met  as  per  provisions  under Section.   59  of  Supply Act.  Further  the  said  section refers  to a three per cent return on the fixed assets  for which  another  R.   135/-  crores have  to  be  earned  as

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revenue.   Thus an amount of Rs.  1,668/- crores have to be mobilised  through tariff revision to achieve the three per cent statutory surplus prescribed in the Act.

   For  the  said reason the submission for the  appellant has  no force.  We do not find any mis-representation  made by the Board before the High Court.

   The  last submission by Mr.  Rao with vehemence is that the  loss incurred by the Board is on account of theft  and transmission  loss  which is as high as 33% on average  and Board if not able to control this, the burden should not be passed   on   to   the   consumers   including   the   poor agriculturists.  It is true transmission losses by theft is on high side.  It is a matter of concern.  It is an onerous duty  of  the  Board to be vigilant and keep on  guard  and check  such transmission losses.  The Board must take steps at  the  highest level to see these transmission losses  of such high order does not take place in future, as this high percentage  of loss is bound to have impact on the rate  of tariff  and  the  total revenue of the Board.   The  person found  responsible  should be dealt with strictly  so  that there  is  no  future reoccurrence.  However,  such  losses itself  would  not be sufficient for this Court  to  strike down the impugned tariff.

   So,  out  of  the  two questions posed,  to  the  first question  (a), we hold, the Board has not put an end to any policy  decision  of the State.  In fact, it  has  followed such  direction  falling  under Section 78A,  by  supplying electricity  to  the Ryots at subsidized  and  concessional rate,  and imposition of tariff based on slab system cannot be  said  to  be illegal.  To the second question  (b),  we hold,  this  slab system applied by the Board on the  facts and  circumstances  of this case is not discriminatory  but has rationale behind it in the interest of smaller farmers.

   Taking  into  consideration  the   overall  facts   and circumstances  of the present case, in view of the findings we  have  recorded, we hold the impugned  revised  increase tariff  to be valid and uphold the order of the High Court, for  the  reasons  stated above by  us.   Accordingly,  the aforesaid appeals are dismissed with costs.