Holding

Regulation 45‑B is valid, within the Commission’s statutory powers, and its provisions, including the agricultural exclusion, do not violate any provision of the 1998 or 2003 Acts.

Summary

The petitioners challenged the Andhra Pradesh Electricity Regulatory Commission’s Regulation 45‑B, which prescribes a formula for calculating the fuel surcharge adjustment (FSA) and excludes agricultural consumption until metering is completed. They argued that the regulation was ultra vires the Andhra Pradesh Electricity Reform Act, 1998 and the Electricity Act, 2003, violated the metering requirement of s.55(1), amounted to an unlawful subsidy under s.65, and was procedurally defective. The Court held that the Commission has statutory authority under s.26(2) of the 1998 Act and s.61, s.62 of the 2003 Act to prescribe the FSA formula, and that the exclusion of agricultural consumers is a permissible protective discrimination under s.26(7) and s.26(8). The Court further found no breach of s.65, affirmed the continued operation of the 1999 regulations through the 2004 transitory regulations, and rejected claims of vagueness or procedural lapse. Consequently, the appeals were dismissed and the orders of the Commission upheld.

Issues considered

Whether Regulation 45‑B is ultra vires s.26(9) of the Andhra Pradesh Electricity Reform Act, 1998 and s.61, s.62(4) of the Electricity Act, 2003.
Whether the exclusion of agricultural consumption from the FSA formula violates s.55(1) of the Electricity Act, 2003.
Whether the exclusion amounts to an illegal subsidy in violation of s.65 of the Electricity Act, 2003.
Whether the 1999 Regulations ceased to have effect after the commencement of the Electricity Act, 2003.
Whether the regulations were invalid for lack of prior publication under s.181(3) of the Electricity Act, 2003.
Whether the FSA formula is vague, unreasonable or beyond the scope of fuel‑cost adjustment.

Legislation cited

Andhra Pradesh Electricity Reform Act, 1998s. 26(2), s. 26(7), s. 26(8), s. 26(9)
Electricity Act, 2003s. 55(1), s. 61, s. 62(3), s. 62(4), s. 65, s. 85(3)
Electricity (Supply) Act, 1948s. 49
General Clauses Act, 1897s. 10

Subjects

fuel surcharge adjustmenttariff regulationelectricity regulatory commissionultra viresdiscriminatory tariffmetering requirementsubsidyjudicial reviewprice fixationadministrative law

Judgment

[2016] 6 S.C.R. 995

SAi BHASKAR IRON LTD. A
v.
A.P. ELECTRICITY REGULATORY COMMISSION & ORS.
(Civil Appeal No. 5542of2016)
JULY 05, 2016. B

[V..GOPALA GOWDA AND ARUN MISHRA, JJ.]
Andhra Pradesh Electricity Regulatory Commission (Conduct
of Business) Regulations, 1999:
Regn. 45-B - Constitutional validity of - Whether Regn. 45-B c
is ultra vires the provisions of s.26(9) of the Act of 1998 or ss.61
and 62(4) of the Act of 2003 - Held: Regn. 45-B deals with
determination of fuel surcharge ..:. The provisions of s. 61 contain
principles 011 which the Commission has to act- Since fuel surcharge
is not defined in the Act, as such the Commission has specified in its
D
wisdomformulafor its calculation in Regn. 45-B-Thefuel surcharge
fOrmula in Regn. 45-B is in consonance with the factors provided
under ss.61 and 62 of the Act of 2003 and also the provisions
contained in s.26 of the Act of 1998 - Andhra Pradesh Electricity
Reform Act, 1998 - s.26 - Electricity Act, 2003 - ss.55, 61, 62.
Regn. 45-B, condition (1) - FSA formula - Exclusion of E
consumption by agricultural sector till completion of metering of
agricultural services whether bad in law and contrary to the mandate
of s.55(1) of the Act of 2003 - Held: The provision made in condition
No.I of Regn.45-B cannot be said to be repugnant to s.55(1) as it
deals with the licensees obligation to supply electricity after two F
years only on the basis of metered supply - In the prevailing
conditions. in particular plight of agricultural sector and purpose
ofenactment, it is open to the Commission to make such a wholesome
_,_~provision carved out in condition No. I - Thus, there is no violation
of the provisions contained in s.55(1) of the Act of 2003 - The
consequence of s. 55 of the Act of 2003 cannot be that if metering is G
not achieved within two years the consumption in agricultural sector
cannot be provided within the purview of FSA formula ~ Andhra
Pradesh Electricity Regulatory Commission (Transitory Provisions
for Determination of Tariff) Regulations, 2004.
H
995
996 SUPREME COURT REPORTS [2016] 6 S.C.R.

A Regn. 45-B - FSA has been determined under Regn.45-B as
amended in 2003 for more than a decade - Regulations of 2005 do
not deal with determination of fuel surcharge - Submission that
FSA can be realised in terms of Regulations of 2005' cannot be
accepted since Regulations of 2005 do not deal with FSA and there
is a saving clause as provided in Regn.24 - Andhra Pradesh
B
Electricity Regulatory Commission (Terms and Conditions for
Determination of Tariff for Wheeling and Retail Sale of Electricity),
Regulation, 2005.
Electricity Act, 2003:
c s. 65 - Exclusion of farmers from meeting the fuel surcharge
adjustment charges - Whether amounts to violation of s.65 - Held:
s.65 enables the State Government to make a provision for subsidy
to any consumer or class of consumers - State Government has to
pay in advance in such manner the amount to compensate the person
affected by the grant of subsidy - Considering the pathetic condition
D of farmers and inability to face the burden, the State Government,
gave them certain concessions in the form of subsidy - However,
the Commission had excluded them from meeting the fuel surcharge
adjustment charges - Provision of s.65 relating to subsidy by the
State Government is not at all attracted - The matter involved in the
E present case is not of subsidy but determination of fuel surcharge
formula - Thus, the submission based upon the violation of the
provision of s.65 is wholly unwarranted and is liable to be rejected
as subsidy has not been included in the determination of fuel
surcharge.

F Lapse of Regulations of 1999 - Held: Regn. 2 of Regulations
of 2004 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 - Thus
submission that the Regulations of 1999 as amended in 2003 being
,\
G 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 ofproviso to s.61 of the Act of 2003 is untenable
- Andhra Pradesh Electricity Regulatory Commission (Conduct of
· Business) Regulations, 1999 - Andhra Pradesh Electricity
H Regulatory Commission (Transitory Provisions for Determination
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 997
REGULATORY COMMISSION & ORS.

of Tariffj Regulations, 2004 - Andhra Pradesh Electricity Reform A
Act, 1998.
Fuel surcharge - Determination of, taking variation in cost
of rupee in account - Held: The fuel surcharge is determined as
per the formula which takes into account the change in cost of
rupeefor a period extending in the past beyond the relevant quarter. B
Andhra Pradesh Electricity Reform Act, 1998: s.26(2) -
A/legation of discriminatory tariffs vis-a-vis agricultural section -
Held: Differential treatment is permissible within the ken of the
provisions of s.26 - As provided in s.26(8) in case consumers are
similarly placed same tariff has to be applied - Agriculturists and C
consumers like appellants cannot be said to be similarly placed -
Paying capacity is also one of the factors which can be used for
protective discrimination under discriminatory tariffs as provided
in s.26(7)(a).
Tax/Taxation: Surcharge - Meaning of - 'Sur<;,harge' is o
basically over and above main levy and is in the form of additional
charge - The nature of surcharge has to be considered as per
intendment in which it has been used in the enactment.
Administrative law: Judicial review - Fixing the rate of fuel
surcharge - Scope of interference - Discussed. E
Dismissing the appeals, the Court
HELD: 1. The 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 F
provisions of an enactment and different methodology for its
determination. [Para 17)(1030-C-D]
Commissioner of Income Tax, Kera/a v. K. Sriniva~an
1972 (4) SCC 526 : 1972 (2) SCR 309; .Sarojini Tea
Co. (P) Ltd. v. Collector of Dibrugarh, Assam and Am: G
(1992) 2 SCC 156 : 1992 (1) SCR 371; State of Orissa
& Am: v. Jayashree Chemicals & Ors. 2004 (13) SCC
594 - relied on.

H
998 SUPREME COURT REPORTS [2016] 6 S.C.R.

A In Re : Formula of FSA and its vires :
2.1. 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
B 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
c 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. Under the Act of 2003,
D Commission has adjudicatory, legislative as well as advisory
powers. It has to consider under section 6l(b), commercial
principles in regard to the generation, transmission, distribution
and supply of electricity. Under section 6l(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
E electricity in a reasonable manner. Section 62(4) of the Act of
2003 provides that no tariff or part of any tariff may ordinarily be
amended more 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
F 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
G 26 of the Act of 1998. [Para 18)(1030-E-H; 1031-A-C]
PTC India Ltd. v. Central Electricity Regulatory
Commission, through Secretary (2010) 4 SCC 603 :
2010 (3) SCR 609; National Thermal Power
Corporation Ltd. v. Madhya Pradesh State Electricity
H
SAI BHASKAR IRON LTD. v. A.P. ELECTRICITY 999
REGULATORY COMMISSION & ORS.

Board & Ors. (2011) 15 SCC 580 : 2011 (11) SCR A
651; Transmission Corporation of Andhra Pradesh Ltd
& Am: v. Sai Renewable Power Pvt. Ltd. & Ors. (2011)
11 sec 34 : 2010 (8) SCR 636 - relied on.
2.2. It is also true that administrative instructions are
binding in the absence of statutory guidelines and any breach B ·
thereof would be arbitrary. However, there is no violation of the
provisions of section 61 of the Act of 2003 and FSA regulations
are in compliance of the statutory direetives given in section 61.
[Para 19][1031-G-H; 1032-A]
Dr. Amarjit Singh Ahluwalia v. The State of Punjab & C
Ors. (1975) 3 SCC 503 : 1975 (3) SCR 82; B.S. Minhas
v. Indian Statistical Institute & Ors. (1983) 4 SCC 582
: 1984 (1) SCR 395 - relied on.
Rohtas Industries Ltd & Ors. v. Chair'!ian, Bihar State
Electricity Board & Ors.1984 (Supp) SCC 161; Bihar D
State Electricity Board v. Pulak Enterprises & Ors.
(2009) 5 sec 641 - referred to.
2.3. The 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 E
in Regulation 45B. It cannot be said to be ultra vires to the said
provisions. There is 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. [Para 22)(1037-B-C] F
Rohtas Industries Ltd & Ors. v. Chairman, Bihar State
Electricity Board & Ors. 1984 (Supp) SCC 161 - relied
on.
2.4. As the Commission has the power to specify the fuel
G
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
H·
1000 SUPREME COURT REPORTS [2016] 6 S.C.R.

A provisions while enacting Regulation 45B in the year 2003. (Para
22](1037-D-E)
Scope of interference :
3.1 The scope of interference in judicial review in such
matters reserved for expert bodies is limited. The court cannot
B substitute its opinion. Price fixation is not the function of the
court. (Para 23](1037-F-G)
Association of Industrial Electricity Users v. State of
A.P. & Ors. 2002 (3) sec 711 : 2002 (2) SCR 273 -
referred to.
c
3.2. No doubt 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. However, there is a positive mandate as to FSA
D 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 said provisions. Mechanism of determination of tariff is
.different. [Para 26)(1041-B-C)
M Pentiah & Ors. v. Muddala Veerama!lappa & Ors.
E AIR 1961 1107 : 1961 SCR 295; Manna/al Khetan &
Ors. v. Kedar Nath Khetan & Ors. 1977 (2) SCC
424 : 1977 (2) SCR 190 - relied on.
In Re : Disrimination vis-a-vis Agriculture Sector :..
4. A challenge has been made to Regulation 45-B submitting
F
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-
G . 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1001
REGULATORY COMMISSION & ORS.

consumers are similarly placed same tariff has to be applied. A
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
8
is required or paying capacity of category of consumers and need
for gross subsidization. Thus paying capacity inter alift is one of
the factors which can be used for protective discrimination under
discriminatory tariffs as provided in section 26(7)(a). [Para
27)(1041-D-G] ' .
Real Food Products Ltd. & Ors. v. A.P. State Electricity
c
Board & Ors. 1995 (3) SCC 295 : 1995 (2) SCR 396
- relied on.
Hindustan Zinc Ltd. etc. etc. v. Andhra Pradesh State
Electricity Board & Ors. (1991) 3 SCC 299 : 1991 (2)
SCR 643; Association of Industrial Electricity Users D
v. State of A.P. & Ors. 2002 (3) SCC 711 : 2002 (2)
SCR 273 - referred to.
In Re : Variation in cost of Rupee:
5. The fuel surcharge is determined as per the formula E
which takes into account the change in cost of rupee for a period
extending in the past beyond the relevant quarter. There is
nothing wrong 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 F
or arbitrary at all. It is in consonance with business norms. [Para
32)(1047-E-F]
In Re : Vagueness of Formula :
6. It was also submitted that letter 'A' in the formula is
G
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 H
1002 SUPREME COURT REPORTS [2016] 6 S.C.R.

A any other event which had the financial impact can be given
appropriate treatment and can also form part of FSA. (Para
331(1047-G-H; 1048-A)
In Re : Meterine: of consumption :
7. Coming to the submission that as metering is mandated
B 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
c 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 bas not
D been achieved so far. However, electricity is being consumed
and the authorities are not able to do the complete metering of
agricultural services. 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
E 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
F submitted on behalf of the appellants. [Para 34)(1048-B-F)

· In Re : Subsidy :
8. Submission as to violation of section 65. Section 65 of
the Act of 2003 enables the State Government to make a provision
G for subsidy to any consumer or class of consumers. The State
Government b~s to pay in advance in such manner the amount to
compensate the person affected by the grant of subsidy.
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 bad given them certain
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1003
REGULATORY COMMISSION & ORS.

concessions in the form of subsidy. However the Commission A
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
B
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.
[Paras 35, 36)1048-G; 1049-D-F)
In Re : Lapse of Regulations of 1999 :
c
.
9. 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. D
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 E
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 F
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 G
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, it
could have adopted the Regulations of 1999 as amended, framed
under the Act of 1998 shall continue, to apply for future.
H
1004 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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. [Para 37)(1049-
F-H; 1050-A-E] __ _,
In Re : Procedural lapse in framing Regulations :
c 10. 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.
D 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 there is no violation of the
provision of section 181(3). The contention that there was no
previous publication is factually incorrect. [Para 38)(1050-E-G]
E Effect of Regulations of 2005 :
11. 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,
F 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
G 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. It was also submitted that Regulation 6(4) of
Regulations of 2005 provides that ARR shall contain power
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1005
REGULATORY COMMISSION & ORS.

purchase cost for each year of the controlled period. It is clear A
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. There is a saving clause contained in Regulation
B
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 c
..... 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. [Paras 39, 40, 41)[1050-H; 1051-A-
D
F]

Case Law Reference
1972 (2) SCR 309 relied on Para 15
1992 (1) SCR 371 relied on Para 15
E
2004 (13) sec 594 relied on Para 16
2010 (3) SCR 609 relied on Para 18
2011 (11) SCR 651 relied on Para 18
2010 (8) SCR 636 relied on Para 18
1975 (3) SCR 82 relied on Para 19 F
1984 (1) SCR 395 relied on Para 19
1984 (Supp) sec 161 relied on Para22
(2009) 5 sec 641 referred to Para 21
1961 SCR 295 relied on Para 26
G
1977 (2) SCR 190 relied on Para26
1995 (2) SCR 396 relied on Para28
1991 (2) SCR 643 referred to Para30
2002 (2) SCR 273 referred to Para 31
H
1006 SUPREME COURT REPORTS . [2016] 6 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5542
of2016
From the Judgment and Order dated 11.04.2014 of the High Court
of Judicature ofAndhra Pradesh at Hyderabad in Writ Petition No. 11240
of2014.
B WITH
C.A. No. 8249 of2015
CA Nos.5543-5544, 5545, 5546-5571, 5572-5575, 5576-5578,
5579-5583, 5584-5586, 5587, 5588, 5589-5598, 5599, 5600-5601, 5602,
c 5603-5611,5612,5613-5618,5619,5620,5622,5623-5625,5626,5630-
5631,5632-5663,5666,5667,5668,5670,5671,5672,5673,5674,5675,
5676,5677,5678-5685,$686,5687,5688,5689,5690,5692-5703,5704,
5705, 5706, 5707-5709, 5710, 5711, 5712-5731, 5732-5745, 5746, 5747,
5748, 5749, 5750, 5751, 5752, 5753, 5754-5755, 5756, 5757-5768, 5169~
5776, 5777, 5778, 5779, 5780, 5781-5786, 5787-5789, 5790, 5791, 5792-
D 5793, 5794, 5795, 5796-5798, 5799-5800, 5801-5804, 5806-5809, 5810-
5811, 5812, 5813, 5814, 5815-5818, 5819-5822, 5823, 5824, 5825-5826,
5827,5828,5829,5830,5831-5832,5833,5834-5835,5836,5837,5838-
5839,5840,5841,5842,5843,5844,5845,5846,5847,5848,5849,5850,
5851, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859, 5860 and 5861 of
E 2016.
P. P. Rao, V. Giri, Dr. A. Francis Julian, Sr. Advs., Gopal
Choudhary, Ms. Liz Mathew, (For Mis. MCLM & Co.), C. S. N. Mohan
Rao, Abhijit Sengupta, Sudhir Naagar, Prashant Khatana, Y. Raja Gopala
Rao, Nagarjuna Babu, Hitendra Nath Rath, Challa Gunaranjan, Ms. Y.
F Vismai Rao, Hitendra Nath Rath, Ananga Bhattacharyya, Mukund P.
Unny, B. Ramana Murthy, M. Srinivas R. Rao, Abid Ali B., Arun Devdas,
(For Mrs. Sudha Gupta), Rakesh Dahiya, Shantanu Jugtawat, B. Rama
Krishn Rao, Sumit Nain, D. Mahesh Babu, Suchitra Hrangkhwal, Amit
K. Nain, T. V. Bhaskar Reddy, M. P. Shorawala, M. Rambabu, N. Eswara
Rao, (For Mis. M. Rambabu & Co.), Senthil Jagadeesan, Venkateswara
G Rao Anumolu, Goli Rama Krishna, Shashwat Goel, G Umapathy, Roh it
K. Singh, M. A. Venkata Subramanian, Ms. R. Makhala, S. Ram
Subramai;iian, Shishir Pinaki, Rajiv Kumar sinha, Sanjay Jain, Vikas
Mehta, Rajat Sehgal, Varun Singh, UpendraGupta, Danish Zubair Khan,
Ad vs. for the Appellant.
H
' SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1007
REGULATORY COMMISSION & ORS.

B. Adinarayana Rao, Sr. Adv., Sooyuj, Ms. Sangita Chauhan, Ms. A
Surabi, Rakesh K. Sharma, K. V. Mohan, K. V. Balakrishnan, R. K.
Raghavan, Raj iv Nanda, G S. Makker, B. Krishna Prasad, G N. Reddy,
S. Udaya Kumar Sagar, Prashant Kr. Tyagi, (For Mis. Venkat Palwai
Law Ass.), Advs. for the Respondents.
The Judgment of the Court was delivered by B
ARUN MISHRA, J. I. 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 c
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( I) of the Act of 1998, Andhra Pradesh Electricity Regulatory
Commission has been established bestowed with the power to grant D
Iicences 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 E
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
F
same time protecting the rights of the consumers. Section 62(3) of the
Act of2003 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, , G
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
H
1008 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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
B
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 ofBusiness)Amendment Regulations, 1 of2003. They came
into force w.e.f. 1.4.2003. The amended Regulation 45-B provided a
c formula for working out the FSA. Condition No. I' 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 of2003, the Commission has
D
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 of2004 was notified by theA.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
E Act of2003 called theA.P. Electricity Regulatory Commission (Transitory
Provisions for Detennination of Tariff) Regulations, 2004 (in short
"Regulations of2004"). 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
F -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
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1009
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

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
B
were filed before the High Court challenging the vires of section 26(2)
of the Act of 1998, and the validity of Regulation 45-8 of Regulations of
1999 as substituted in 2003. The Commission detennined the FSA for all
the eight quarters for the period from 20 I 0 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 c
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 tenns of order dated 24.2.2014
hence the special leave petitions have been filed in this Court.
D
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 E
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 F
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. G
It was also submitted that providing for exclusion of agricultural
consumption till metering of agricultural services are complete as
contained in Condition l of Regulation 45-8 is bad in law and contrary to
the mandate of section 55(1) of the Act of 2003; more so, after a lapse
of2 years' period. Time mandated under section 55( I) for metering the
H
JOJO SUPREME COURT REPORTS [2016) 6 S.C.R.

A consumption has not been extended. Mandate of compulsory metering
·has taken effect from 10.6.2005. Consequently, condition No.I 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 I 0.6.2004 after one year from the date of
B
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
c was no previous publication of the draft. Regulation 9 of 2004 made
under the Reform Act with retrospective effect of I 0.6.2004, the
Commission has no power to make regulations with retrospective effect.
Regulation 458 casts an additional burden without authority of law.
Condition No. I 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
D
State Government to compensate the supplier of electricity affected by
the grant of subsidy made to the agricultural sector. Condition No. I 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
E 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 of2003, the Act of 1998
is saved, in the Schedule at serial No.3. Consequently, the provisions of
F 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 of2005 reflects that the Regulations
of 1999 framed under the Act of 1998 are still in operation. Regulation
12.4 of Regulations of2005 provides for levy of FSA. The fuel surcharge
has not been defined under the Act of 1998 or the Act of2003 or in the
G Regulations of2005 framed thereunder. The meaning and scope offuel
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. lt is incorrect to submit that
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1011
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

FSA should be confined to variation of fuel cost. Condition Nos. I, 5, I 0 A
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
B
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 of2003. FSA is a
related surcharge levied to meet the increased cost of generation and
purchase of electricity. The vi res of section 62(4) of the Act of 2003
have not been questioned and the challenge to the vires of the provisions c
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 D
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 E
functions. Section 11 deals with the functions of the Commission. It has
the power under section 11 (I )(c) to issue licences and determine the
conditions to be included in the licences. Under section 1l(l)(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 F
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 G
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.
H
1012 SUPREME COURT REPORTS [2016] 6 S.C.R.

A (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.
B
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,
c 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
D 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
E 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
F be to ensure that the objectives and purposes of the Act
are duly achieved.
(5) Every licensee shall provide to the Commiss.ion in
a format as specified by the Commission at least 3 months
before the ensuing financial year full details of its calculation
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1013
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

the information that the Commission requires, the A
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 8
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 c
specified in its Iicence 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. D
(6) Each holder ofa 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 E
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
F
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 G
promote economic ~fficiency 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.
H
1014 SUPREME COURT REPORTS [2016] 6 S.C.R.

A (8) The Commission also shall endeavour to fix tariff in such
a manner that, as far as possible, simila~Jy 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
B 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 tariffthe 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
c determine whether the tariff or amended tariff would satisfy the provisions
of sub-section (7). If the Commission considers thatthe 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
D 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.

E (JO) 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
F accordance with the provisions of this Act.
Expf<tnatiim :- In this section, -
(a) the expected revenue from charges" means the total
00

revenue which a licensee is expected to recover from
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1015
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

specified services provided to the type or types of A
customers specified in the tariff notification(
Section 26(9) specifically allows changes in fuel s'µrcharge 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 B
Gazette, inter a/ia, 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 c
licensed area. As per the provision in section 26(8) the Commission shall
endeavour to fix tariffin 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 fin1mcial year except
FSA. Section 39 provides for appeals against the orders of the D
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. E
I 0. The provision contained in section 185(3) of the Central Act
of2003 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 F
provided in this Act, the Indian Electricity Act, 1910 (9 of
1910), the Electricity (Supply)Act, 1948 (54 of1948) and
the Electricity Regulatory Commissions Act, 1998 (14 of
_ 1998) are hereby repealed.
(2) Notwithstanding such repeal,- G
(a) anything done or any action taken or purported to
have been done or taken including any rule,
notification, inspe()tion order or notice made or issued
or any appointme~t, confirmation or declaration made
H
1016 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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
(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 (c) the Indian Electricity Rules, 1956 made under Section 37
:- 0f 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 (I) of section 69 of the
D Electricity (Supply)Act, I 948 (54 of! 948) 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 ,
E
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,
F 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.

G (5) Save as ot!Jerwise provided in sub-section (2), the
mention of particular matters in that section, shall not be
held to prejudice or affectthe general application of section
6 of the General Clauses Act, 1897 (I 0 of 1897), with regard
to the effect of repeals.

H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1017
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

THE SCHEDULE A
<S>:---

ENACTMENTS

[See sub-seciion (3) of Section 185]
1. The Orissa Electricity Reform Act, 1995 (Orissa Act No.2 of
B
1996).

2. The Haryana Electricity Reform Act, 1997 (Haryana Act No.
l 0of1998).

3. The Andhra Pradesh Electricity Reform Act, 1998 (Andhra
Pradesh Act No. 30 of 1998). C

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). D

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). E

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)."
F
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 of2003, the provisions of the Act of 1998, which are
not inconsistent with the provisions of the Act of2003 are in vogue.
11 . In the aforesaid backdrop, we proceed to take note of the G
Regulations of 1999 framed by the Commission under the provisions of
sections 9 and 54 of the Ac;t 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, Reg~lation 45-B has been inserted providing for
H
1018 SUPREME COURT REPORTS [2016) 6 S.C.R.

A ·fuel surcharge adjustment formula.
Regulation 45-B had been substituted in 2003 which is extracted
hereunder:
"45-B:

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' l' shall be detennined as per the following formula,
aggregated for the quarter ' 1'.
c
Fi= (Pix Ei +FCi + Z +Ai)

Qi
D Where
Pi is the difference in the Weighted Average Variable Cost in
Rupees adjusted to four decimal points, of power purchase
cost in quarter 'l' for the power purchase quantity
mentioned in the tariff order compared to the Weighted
Average Variable Cost adopted in the tariff order.
E
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
F the generating stations from the b<\se 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.
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1019
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

account of controllable factors or any other events the A
financial impact of which, in the Commission's view, should
be given appropriate treatment.
Condition (I )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 B
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 c
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 D
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 E
, 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.
F
(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. G
(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
H
1020 SUPREME COURT REPORTS [2016) 6 S.C.R.

A 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
B 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.
C (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
D
but also of single part tariff wherever applicable".
(By Order of the Commission)
S. SURYA PRAKASA RAO,
Secretary to Commission
E . ·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:
F "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
G 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,
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1021
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

efficiency, economical use of the resources, good A
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; B

(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; c
(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
D
tariff under the Electricity (Supply) Act, 1948 (54of1948),
the Electricity Regulatory Commissions Act, 1.998 (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, E
whichever is earlier.
62. Determination of tariff.-( I) 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 F
distribution licensee:
Provided that the Appropriate Commission may, in case
of shortage of supply .ofelectricity, fix the minimum and
maximum ceiling of tariff for sale or purchase pf
electricity in pursuance of an agreement, entered into G
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;
H
1022 SUPREME COURT REPORTS [2016] 6 S.C.R.

A (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
B 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.
c
(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
D 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
E respect of any changes expressly permitted under the terms
of any fuel surcharge for~ula 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
F 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
G equivalent to the bank rate without prejudice to any other
liability incurred by the licensee."
Section- 62( I) 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.
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1023
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

Section 62(3) enables the Commission to differentiate according to A
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 of2003 is akin to
section 26(7) of the Act of 1998 and permits change in fuel surcharge as
B
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
· h 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 of2003, the Commission
decided to make a transitory regulation to be in force till new regulations c
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 of2003 and other powers enabling the Commission in that behalf, it D
framed the Regulations of2004 which came into force with effect from
I 0.6.2004 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 :
E
"ANDHRA PRADESH ELECTRICITY REGULATORY
COMMISSION
Regulation No. 9 of2004
INTRODUCTION
F
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 G
has not framed the National Electricity Policy and tariff
policy till date, the Commission has not finalized the
aforementioned terms and conditions forthe determination
of tariff. The Commission is also in the process of finalizing
various other Regulations under the Electricity Act, 2003.
H
r

1024 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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
B
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
c the Electricity Act, 2003 (Act 36 of2003) and other powers
enabling the Commission in that behalf, the Commission
here makes the following Regulation, namely:
1. (i) This Regulation may be called the A.P. Electricity
Regulatory Commission (Transitory Provisions for
D Determination ofTarift) Regulation, 2004.
(ii) This shall be deemed to have come into force on
I0 111 June,2004.
2. The existing Regulations notified by the Andhra Pradesh
E Electricity Regulatory Commission, including the A.P.
Electricity Regulatory Commission (Conduct of Business)
Regulation, 1999, incorporating the provisions relating to ·
detennination of tariff and tenns 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
G by the Commission under the Electricity Act, 2003.
(BY ORDER OF THE COMMISSION)
S. SURYA PRAKASA RAO,
Secretary"

1-1
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1025
REGULATORY COMMISSION & ORS. (ARUN MISHRA, J.)

14. The Commission has framed the Regulations of 2005 under A
section 181 read with sections 61 and 62 of the Act of-1003. 'ARR' is
defined in Regulations under section 2( I )(2) thus :

"2. DEFINITIONS AND INTERPRETATION
B
I. In this Regulation, unless the context otherwise requires:
I. xxx xxx xxx

2. "Aggregate Revenue Requirement: (ARR) means the
revenue required to meet the costs pertaining to the licensed c
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. D
Same is extracted hereunder :
"3. EXTENT OF APPLICATION
I. This Regulation shall apply to all the Distribution Licensees
in the State for a) Distribution Business and b) Retail Supply
Business. E
2. 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.
F
3. The ARR determined for Distribution Business will be the
basis for the fixation of the wheeling tariff/charges.
4. 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."
G
The expenditure of the Distribution Licensee considered as
"controllable" and "uncontrollable" has been specified in Regulation I 0.
The cost of power purchase is uncontrollable. It is also provided in
Regulation I 0(4) that the Distribution Licensee shall be eligible to claim
variations in "uncontrollable" items in the ARR. Regulation 24 of
H
1026 SUPREME COURT REPORTS [2016] 6 S.C.R.

A Regulations, 2005 deals with the saving. Same is extracted hereunder :
"24. SAVING
1. 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
B abuse of the process of the Commission.

2. 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
c 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.

3. Nothing in this Regulation shall, expressly or by implication,
D 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."
E 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' :
F 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, Kera/av. 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 Am: (1992) 2 SCC 156 in which this Court has considered
G
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
H
SAI BHASKAR IRON LTD. v. A.P. ELECTRICITY 1027
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

the said levy. According to the Shorter Oxford English A
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 : sec p. 170, para 11)
B
"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 I 0 per cent on the power
tariff. It was argued that surcharge was unknown to the c
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,
D
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 E
to fix or revise the rates oftariffunder the provisions of
the Act."
12. Similarly, in C!Tv. 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 F
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 G
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 forthe special addition to taxes on income H
1028 SUPREME COURT REPORTS [2016] 6 S.C.R.

A imposed in September 1931. The Government of India
Act, 1935, Part VII, contained provisions relating to
finance, property, contracts and suits. Sections 13 7 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
B
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
c the revenue of the federation. Sub-section (3) of Section
138 which dealt with taxes on income related to
imposition ofa surcharge."
13. It was further observed at page 315 of the report: (SCR
p. 315: sec p. 530, para 10)
D "The meaning of the word 'surcharge' as given in the
Websters 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
E 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
F 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
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1029
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

of the surcharge levied. If therefore, a surcharge levy A
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 B
Vishwesha Thirtha Swamiar v. State of Mysore ( 1972) 3
SCC 246. Jn 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 c
surcharge was but an additional imposition ofland 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 thatthe surcharge fell squarely within-Entry
45 of the State List, namely, land revenue. It was observed: D
(SCC pp. 249-50, paras I 0 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 E
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 ....
F
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 I 00 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, G
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
H
1030 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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."
B
16. In State of Orissa & Am: 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.
c
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
D 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
E 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
F 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 of2003 the Commission has the
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1031
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

of consumers' interest and at the same time, recovery of the cost of A
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
8
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 oftheActof2003 and also the provisions contained in section
26 of the Act of 1998. The fixation is as per law laid down by this Court c
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. " Central Electricity
Regulatory Commission, through Secretary (2010) 4 SCC 603 and
National Thermal Power Corporation Ltd. " Madhya Pradesh State
D
Electrici~y Board & Ors. (2011) 15 SCC 580. In Transmission
Corporation of Andhra Pradesh Ltd. & Am: 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 E
the tariffin 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 detennination F
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 G
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 of2003 and we have
found FSA regulations are in compliance of the statutory directives given
H
1032 SUPREME COURT REPORTS [2016] 6 S.C.R.

A in section 61.
20. In Rohtas Industries Ltd. & Ors. v. Chairman. Bihar State
Electr_icity 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
B 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
c 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
D 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 :

E "9. The next argument advanced on behalf of the appellants
was that even ifthe 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
F 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
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1033
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

not been taken into account in the fuel surcharge. Such A
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,
B
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 c
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
D
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:
E

(Al xA3 +Bl x B3 +Cl x C3 +DI x 03 +El x E3)
S= -----------------------------------------------------
(A2 + B2 + C2 + 02 + E2)
F
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 G
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"
H
1034 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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
' B 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.
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
E 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
F 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
G 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 c';;aC
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
H
SAI BHASKAR IRON LTD. v. A.P. ELECTRICITY 1035
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

increase in cost per unit incurred by the Board has been included in the A
computation offuel 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
B
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 ofelectricity can be realized
under the head of fuel surcharge.
21. This Court has considered the question oflevy offuel surcharge
c
again in Bihar State Electricity Board v. Pulak Enterprises & Ors.
(2009) S 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 D
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:
E
"11. In order to appreciate the facts to be stated hereinafter
it wmild be appropriate to notice the formula for computation
of the fuel surcharge laid down in Clause 16.10.3 as under:

Sl=Al xA3+Bl xB3+Cl xC3+Dl xD3+El xE3
F
+ FI x F3 + GI x G3 + HI x H3

(A2 + B2 + C2 + 02 + E2 + F2 + G2 + H2) ....

Whereas,
SI =Average fuel surcharge per unit in paise
G
applicable during the financial year.
Al, Bl, Cl =Units generated from PTPS, BTPS and
MTPS respectively.
Dl, El, Fl, GI, Hl=Units purchased from DVC, U.P. SEB, OSEB,
H
IOJ6 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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
Ieviable.
D2, E2, F2, G2, H2=Units sold, out of purchased from DVC, U.P.
B
SEB, OSEB, NTPC, PGCIL and any other
source respectively during the year in which
fuel surcharge is leviable.
AJ, BJ, CJ .= Increase in average cost of fuel surcharge
in paise per unit computed for Board's
c generation at PTPS, BTPS and MTPS.
DJ, EJ, FJ, GJ, HJ= 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.
D
The said increase to be calculated with
respect to the year l 992- l 99J (after .
amendment, read 1991-1992 ).

(In the above, PTPS stands for Patratu Thermal Power
E
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
F Electricity Board, NTPC for National Thermal Power
Corporation and PGCIL for Power Grid Corporation oflndia
Ltd. They are external sources of supply of electricity to
the Board.)"
This Court has laid down that fuel surcharge has to be calculated
G strictly within the framework ofthe fonnula 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.
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1037
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

22. This Court in Pulak Enterprises (supra) has reaffirmed the A
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
B
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 of2003 or any other provisions of
the Act of2003. 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 c
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
D
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 Pu/ak E
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 F
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 G
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 ofnaturaljustice would not be ap~icable and

H
1038 SUPREME COURT REPORTS [2016] 6 S.C.R.

A the scope_ofjudicial review would also be limited to plea of
discrimination i.e. violation ofArticle 14 of the Constitution
of India. As a general proposition, the law on the point is
settled.
30. In Prag Jee and Oil Mills v. Union of India ( 1978) 3
B 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
C 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. BiharSEB (1984) Supp. SCC 161 and KeralaSEB
D 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" (Kera/a SEB case,
sec p. 214, para IO).
32. As regards the nature of the function, in Saraswati
E Industrial Syndicate Ltd. v. Union ofIndia (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 ofnaturaljustice has not been
F followed in fixing the price. In Prag Jee 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
G 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."
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1039
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

33. In Union of India v. Cynamide India Ltd. ( 1987) 2 A
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
B
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 c
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 D
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
E
activity."

Reference may also be made to a Constitution Bench
decision in Shri Sitaram Sugar Co. Ltd. v. Union of India
(1990) 3 sec 223.

34. In a sense, fixing rate of fuel surcharge under Clause F
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 G
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

H
1040 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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. I 0.3 provides the formula. In
simple words, the formula envisages addition of units
B 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 SI
in the fo1mula. The whole exercise, it would appear, involves
arithmetical accounting. There is no scope for exercise of
c 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."
D
24. In National Thermal Po11•er 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
E have been held to be adjudicatory, advisory and legislative. The powers
and functions enumerated under section 178 of the Act of2003 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
F
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
G
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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1041
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

a matter of policy and normally a court would refrain from A
inte1fering 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 B
used as legislative devise to make a statute imperative as laid down by
this Court in M Pel11iah & Ors. v. Muddala Veeramallappa & Ors.
AIR I961 I l 07 and as emphasized by th is Court in Manna/al Khetan
& Ors. v. Kedar Nath Khetan & Ors. I 977 (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
c
tariff as contemplated under the aforesaid provisions. Mechanism of
determination of tariff is different.
In Re : Disrimination vis-a-vis Agriculture Sector :
27. A challenge has been made to Regulation 45-B submitting D
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 E
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 F
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 G
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
H
1042 SUPREME COURT REPORTS [2016) 6 S.C.R.

A 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
B 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
c 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
D 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
E consumers into I 0 categories, viz. "domestic", "commercial
(i)",_ "commercial (ii)", "street light", "irrigation", "light
tension industrial" (small scale industrial upto I 00 h.p.), "I I
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
F 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
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1043
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

unit, "agricultural" consumers at 29 paise per unit, "low A
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
B
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 c
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
D
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 E
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
F
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 G
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
H
1044 SUPREME COURT REPORTS [2016] 6 S.C.R.

A which is legally valid and permissible for the grant of a
concession in the basic rates will equally hold good for the
purpose ofa 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
B
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
c 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
D 1979 tariff is arbitrary and violative of Article 14 of the
Constitution."
30. In Hindustan Zinc Ltd etc. etc. v. Andhra Pradesh State
Efectricity Board & Ors. ( 1991) 3 SCC 299 placing burden of enhanced
tariff on high tension consumers including power intensive industries
E 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
F character and there is a limited scope ofjudicial review and this Court
further laid down that there is a Iimited judicial review in the matter of
price· fixation. The relevant portion is extracted hereunder :
"26. lt is, therefore, obvious that mere generation of surplus
by the Board as a result of adjusting its tariffs when the
G quantum of surplus has not been specified by the State
Govemment 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1045
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

character. In other words, ifthe profit is made not merely A
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
B
consumers made in the present case, was for the purpose
of better discharge ofits 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. c
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
D
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 E
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 F
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 G
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
H
1046 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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 ofa concessional
B
tariff for quite sonie 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
c the consumption in the power intensive industries accounts
for a large quantity."
The decision in Hindustan Zinc Ltd. (supra) has been followed
in Pulak Emerprises (supra).
31. This Court in Association of Industrial Electricity Users v.
D State ofA.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
E 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
F 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
G 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 tariffand charges payable keeping in
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1047
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

view both the interest of the consumer as well as the A
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
B
domestic consumers c·an 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 op in ion, the view expressed by the High Court calls for c
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 : D

32. It was also submitted on behalfofthe 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 s,u_pply 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 E
surcharge is determined as per the formula which takes into accountthe
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 F
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 G
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
H
1048 SUPREME COURT REPORTS [2016) 6 S.C.R.

A 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 P11lak
Enterprises (supra).
In Re : Metering of consumption :
B 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 of2003 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
c 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. I of Regulation 45-B cannot be said to be repugnant
to section 55( I) as it deals with the licensee's obligation to supply
electricity after two years only on the basis of metered supply. It has not
D 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
E No. I. 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 I did not cease to have effect after
I 0.6.2005 as submitted on behalf of the appellants.
F
In Re : Subsidy :
35. Coming to submission of violation of section 65, section 65 of
.the Act of2003 which enables the State Government to make a provision
for subsidy to any consumer or class of consumers. The State Government
G 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
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1049
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

any consumer or class of consumers in the tariff determined A
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
B
State Commission may direct, as a condition for the Iicence
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 ifthe payment is not made in accordance
with the provisions contained in this section and the tariff c
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 D
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 E
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.
F
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 I 0.6.2004 after one year from
the date of coming into force of the said Act, by reason of proviso to G
section 61 of the Act of2003. 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 of2003 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
H
1050 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 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.
B
Regulation 2 of said Regulations of2004 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 I 0.6.2004
c 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.
D
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 45-8 was implemented subsequently and had been again
amended in the year 2013. It has operated for more than a decade for
determination of FSA.
E 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
F 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 18 I(3). The contention that there was no
G 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 of2005 do not deal with FSA and there is a saving clause as
H
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY 1051
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]

provided in Regulation 24. Moreover, the Act of 1998 had not been A
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 of2005 after framing ofthe 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
B
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
c
Regulations of2005 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 D
Regulations of2005. 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 1110/U or based on the filing made by the institution
company as the Commission may deem fit. The provisions of the Act E
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.
F
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
G
Regulation 458 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
1-1
1052 SUPREME COURT REPORTS [2016) 6 S.C.R.

A interest; if no other rate is prescribed at the rate of8 percent 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.

B Devika Gujral Appeals dismissed.