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PETITIONER: M/s.  Real Food Products Ltd. & Ors etc.etc.

       Vs.

RESPONDENT: A.P. State Electricity Board & Ors.

DATE OF JUDGMENT01/03/1995

BENCH: VERMA, JAGDISH SARAN (J) BENCH: VERMA, JAGDISH SARAN (J) PARIPOORNAN, K.S.(J) MAJMUDAR S.B. (J)

CITATION:  1995 AIR 2234            1995 SCC  (3) 295  JT 1995 (3)    88        1995 SCALE  (2)91

ACT:

HEADNOTE:

JUDGMENT: J.S. VERMA, J.: 1.These  appeals and the connected matters arise out of  the common  judgment of a Division Bench of the  Andhra  Pradesh High Court in certain writ appeals, reported in AIR 1991  AP 141  (Andhra Pradesh State Electricity Board  vidyut  Soudha and  others  vs.  The Gowthami Solvent  Oils  and  Another), preferred  against the decision of a learned  Single  Judge. High Tension (Industrial) Consumers, who are the  appellants in  this  Court filed writ petitions in the  Andhra  Pradesh High  Court challenging the revision of tariffs  in  B.P.Ms. No.  671  dated 10.6.1987 (w.e.f 15.7.1987) as well  as  the further   revision  of  tariffs  in  B.P.Ms.  No.353   dated 15.4.1989  (given  effect  from 1.6.1989).  The  history  of revision of tariffs by the Andhra Pradesh State  Electricity Board (for short "the Board") in the background of which the challenge to these B.P.Ms. has to be examined, is  mentioned in  the impugned judgment.  Accordingly, the facts  material for  consideration of the points required to be decided  are alone mentioned herein. 2.Two  questions alone arise for consideration in all  these matters by virtue of the order dated 10.9.1992 made by  this Court, which is as under:-               "In these 78 petitions under Article 136               90               of the Constitution, certain consumers of High               Tension  electricity  in the State  of  Andhra               Pradesh,  whose writ petitions  assailing  the               upward  revision of the Tariffs by  the  State               Electricity Board effective from 10.6.1987 and               15.4.1989  respectively were dismissed by  the               High Court, sock leave to appeal to this Court               from  the common order dated 2.4.1990 made  by               the Division Bench.  A leamed Single Judge had               granted prayer in the writ petitions.  But the

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             Division  Bench,  in  appeal,  dismissed   the               petitions.               (2),  We  have heard leamed  counsel  on  both               sides.   There are several contentions  raised               in  support of these petitions.  Two  of  them               prima facie, bear examination and its  appears               appropriate  that on these two  questions  the               special  Leave Petitions be disposed of  after               hearing the parties.               (3)The  two points to which the Special  Leave               Petitions should be confined are:               (1)   Whether a direction under section 784 of               the  Electricity  (supply) Act,  1948  by  the               State Government is binding on the Electricity               Board:  or whether such directions are  merely               of  guidance  and  the  Board  in  formulating               tariffs would yet to be required to apply  its               mind   independently  to  all   the   relevant               criterion.   In  the  two  impugned  revisions               there  is no -such application of mind by  the                             Board   which  has  abdicated   its   statutor y               functions and obligations.               (i)   Petitions say that while their class  of               consumers  account for consumption of  35%  of               the   electrical  energy  and  the  class   of               agricultural   consumers  favourably   created               under  the  revisions  also  consume  a   like               percentage.  the former is called upon to  pay               106   paise  for  unit  (plus  FCA)while   the               agricultural  consumers arc required to pay  a               fixed  5.04  paise  per unit;  and  that  this               preferred agricultural sector which was paying               12 paise per unit in the year 1971, 23.4 paise               per unit in 1976, now pays only 5.04 paise per               unit while the petitions who were paying  16.1               paise  per unit in the year 1971 are asked  to               pay  106 paise per unit (plus FCA).  The  cost               of  production  being 71 paise  per  unit  the               whole  of  the  burden of  the  difference  on               account   the   subsidised  supply   to   this               agricultural  sector  is  cast  on  the   High               Tension consumers.               It is urged that - whether the fixation of the               tariff  is  an administrative  function  or  a               legislative function -- this discrimination is               arbitrary   and  irrational  and  is   clearly               violative  of  the  constitutional  pledge  of               equality under Article 14.               (4)   All  other contentions in these  special               leave  petitions, in our opinion, are  covered               by earlier pronouncements of this Court and we               confine  the  hearing  of  the  special  leave               petitions,  which shall be disposed of at  the               SLP  stage,  to the  foregoing  two  questions               alone." 3.   The  two  questions, therefore, are :  (1)  Nature  and effect of the direction given by the State Government  under Section  78A  of the Electricity (Supply) Act.  1948  (here- inafter  referred  to  as  "  the  Act");  and  (2)  Is  the preferential  treatment of agricultural consumers  violative of Article 14. 4.   By virtue of a direction given by the State  Government to  the  Board under Section 78A of the Act, the  flat  rate tariff system for agricultural pump-sets was introduced, the

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rate  being  varied from time to time.  This  direction  was given  first  in 1981 and laterrevised w.e.f  1.11.1990  and then from 1.1.1992 and 1.12.1992. The rea- 91 sons  together  with the direction contained in  the  letter dated  15.12.1982  of the State Government to the  Board  is quoted  in  the  impugned judgment of  the  High  Court,  as under:-               "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 pumpset 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.               2.    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,               supersession of the instructions issued in the               letter cited (dated 201-1982), the APSEB shall               revise  the elcctricity tariff for  irrigation               wells to Rs.50/ - per H.P. per annum, and that               this rate shall take effect from 1-11-1982.               3.    The  A.P.  State  Electricity  Board  is               requested  to take immediate necessary  action               accordingly." 5.   The  variation was made later in the flat rate  Rs.50/- per  H.P. annum from time to time which is not material  for decision of the points involved. 6.   The    Board   then   introduced   the    concept    of "FuelAdjustment  Cost" (FCA) by amending the  H.T.  tariffs, the  details of which are not material for the present  pur- pose.   The concept of FCA and the flat rate  tariff  system was  then made a permanent feature by the Board. A batch  of writ petitions was filed in the Andhra Pradesh High Court in 1984  questioning inter alia the levy of FCA only upon  H.T. consumers   and  the  fixation  of  flat  rate  tariff   for agriculturists,  by  certain "power intensive  units".   The High  Court  rejected the challenge and dismissed  the  writ petitions.   It was held that it was neither irrational  nor unreasonable to pass on the burden of rise in fuel cost only to  H.T.  consumers;  and the flat rate  tariff  system  for agricultural  pump sets being a concession in favour  of  an under-privileged category of consumers was a policy decision which was not open to challenge.  The decision was upheld by

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this Court in Hindustan Zinc Ltd. etc.etc. v. Andhra Pradesh State Electricity Board and Others (1991) 3 S.C.C. 299. 7.   In  Hindustan  Zinc Ltd. etc.  etc.(supra),  a  similar challenge  on  the  ground of  discrimination  between  H.T. consumers,  including  the power  intensive  consumers,  and other  like L.T. consumers and agriculturists was  repelled. It  was held that the H.T. consumers form a  distinct  class separate  from  the L.T. consumers;  and  that  concessional tariffs to the agriculturists does not violate Article 14 of the Consti- 92 tution  of  India.  In our opinion, the claim  of  the  H.T. consumers  to  be classified along  with  agriculturists  is untenable.   This  question being concluded by  the  earlier decision  of  this  Court,  does  not  require  any  further consideration. 8.The  only surviving question is with regard to the  nature and  effect of the direction given by the  State  Government under  Section  78A  of the Act.  The  question  has  to  be examined  in  the context of the facts of the  present  case which is confined to the charging of the flat rate per  H.P. for  agricultural pump sets.  The nature of the function  of the  Board  in  fixing the tariffs and  the  manner  of  its exercise has been considered at length in the earlier  deci- sions  of  this Court and it does not  require  any  further elaboration  in  the  present case.  Section  78A  uses  the expression "the Board shall be guided by such directions  on questions  of  policy  as may be given to it  by  the  State Government."  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.  In the context of the  function of the Board of fixing the tariffs in accordance Section  49 read with Section 59 and other provisions the Act, the Board is  to  be  guided  by  any  such  direction  of  the  State Government.  Where the direction of the State Government, as in  the present case, was to fix a concessional  tariff  for agricultural  pump  sets at a flat rate per  H.P.,  it  does relate to a question of Policy which the Board must  follow. 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 direction on the question of policy,  which the Board, if its conclusion be different may not be obliged to be bound by.  But where the Board considers even the rate suggested  by  the  State  Government and  finds  it  to  be acceptable  in the discharge of its function of  fixing  the tariffs,  the  ultimate decision of the Board would  not  be vitiated  merely because it has accepted the opinion of  the State  Government even about the specific rate.  In  such  a case  the  Board  accepts the suggested  rate  because  that appears  to  be appropriate on its own view.   If  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 9.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.  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.  We do not consider it  necessary

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to  go into the larger question of the exact area of  policy in the context of Section 78A except to indicate broadly  as we have already done.  We do not find any merit even in this point urged on behalf of the appellants. 10.Consequently, the appeals are dismissed. 97