Karnataka High Court
Indian Aluminium Co. Ltd. vs Karnataka Electricity Board on 10 September, 1800
Equivalent citations: ILR1993KAR3485, 1993(4)KARLJ412
ORDER Shivashankar Bhat, J.
1. The office is directed to prepare the cause title and preamble etc., of these cases.
In all these Writ Petitions, the petitioners challenge the demands made by the respondents for payments of fuel escalation charges. All the petitioners are H.T. consumers and are running power-intensive industries. Petitioners contend that there has been two revisions of General Tariff rates, once in the year 1990 and another in the year 1992 and at each time of the revision, cost of fuel escalation as on the time of tariff revision was absorbed in the tariff rate and therefore, the present demands without any deduction towards the said neutralisations are illegal and arbitrary. The respondents, in their statement of objections have asserted that fuel adjustment charges were levied on the basis of what the first respondent Board pays to the generating companies, who self the electrical energy to the Board, and at present there are two such suppliers, referred to as National Thermal Power Corporation (NTPC) and Karnataka Power Corporation (KPC). The respondents deny that tariff revisions made in 1990 and 1992 have already taken care of the fuel surcharge; respondents assert that the power cost adopted for fixation of power tariff in 1990 and 1992 did not include the fuel adjustment charges.
2. The details of the respective assertions and denials need not be elaborated here.
3. Following contentions were advanced by the learned Counsel for the petitioners:
(I) The levy of fuel escalation charges only on H.T. consumers is discriminatory and violative of Article 14 of the Constitution.
(II) Directions issued by this Court in the earlier batch of cases (reported in ILR 1991 KAR 2112 - para-39) has been ignored.
(ill) Demand of fuel escalation charges is contrary to the general conditions attached to the power tariff of the two years.
(IV) Cost of fuel escalation charges as on the date of the respective revisions of tariff rates in 1990 and 1992 have been considered and neutralised in the revised tariff rates and therefore, to that extent present demands are illegal.
RE. CONTENTION NO.I.
4. There is a detailed discussion on this aspect in the Decision reported in Mysore Kirloskar Ltd., case, ILR 1991 KAR 2112. I do not consider it worthwhile to expend my energy on this contention once again.
5. However, it was pointed out that a few concessions given to H.T. consumers have been withdrawn and therefore, the basis of the above decision no longer govern the present cases. While discussing contentions III and IV, a few Decisions of the Supreme Court will be referred to, wherein also a similar contention has been negatived. H.T. consumers form a distinct class and they consume a very substantial percentage of the total electricity supplied. These "power guzzlers" therefore can be separated for imposing a higher burden. Contention is rejected.
RE.CONTENTION NO.II.
6. In the concluding para of the Mysore Kirloskar Ltd., case, Court observed that, --
"If there is any ambiguity or error in the demands so made, the petitioners, instead of straightaway approaching this Court, shall approach the concerned Officers who have issued the demands and bring to their notice the error, if any, in the bills/demands and in the event the error is accepted by concerned Officer/s heahey shall issue the revised bill/s."
The above observation requires the officers of the Karnataka Electricity Board (for short the Board') to clarify any ambiguity or rectify any error. It is not a mandate to disclose the minutest details as to how the fuel escalation charges is computed. Fuel escalation charge is related to the similar charge collected from the Board by the suppliers of electricity. Further, the above observation is mainly concerned with the modified demands to be issued after deducting the neutralised escalated cost in the general tariff.
RE. CONTENTIONS III & IV.
7. These contentions require examination. In the Mysore Kirloskar Ltd., case the Court held that fuel escalation charges as on the date of revising the power tariff, would have been merged with the tariff and therefore, only further escalation can be collected from the H.T. consumers. The petitioners contend that the basic figure to compute the escalation is the fuel escalation charges on the date of the revision of the tariff.
8. It necessary to consider the relevant principles before considering these contentions, since the approach to be adopted by the Court while considering such contentions, has been Judicially evolved by the Supreme Court in several cases.
9. In M/s. ROHTAS INDUSTRIES LTD. AND ANR. ETC. v. THE CHAIRMAN, BIHAR STATE ELECTRICITY BOARD AND ORS., imposition of fuel surcharge by the respondent was challenged. The levy only on consumers of low tension industrial service, high tension service, extra high tension service, and-railway traction service and excluding others, was upheld, and the plea of arbitrariness and discrimination was rejected. Another contention pertained to the basis adopted to compute the fuel surcharge; the consumers contended that the Board was entitled to levy the surcharge that can only be for the purpose of recouping the amounts actually paid by the Board by way of 'fuel surchage' to Damodar Valley Corporation and U.P.S. Electricity Board; etc. The respondent Board asserted that the increase in expenditure referable to the enhancement in cost of the energy generated on other accounts such as wages, maintenance etc., was not taken into consideration and this increased cost has been considered while revising the basic general tariff. The assertion of the respondent was accepted by the Court, with the following observations, at page 661:
"Though the nomenclature given to" the levy is fuel surcharge' it is really a surcharge levied to meet the increased cost of generation arid purchase of electricity and this is made absolutely clear in the formula given in para 16.7.2."
The Court accepted the assertion made in the counter affidavit of the Board as could be seen from the following observations at page 660:
"From the counter affidavit filed on behalf of the Board, it is seen that in respect of the increase in the cost of production 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 not been taken into account in the fuel surcharge."
10. Another contention was that the increased fuel surcharge upto the date of tariff revision had already been neutralised in the new general tariff; this contention was also negatived. At page 661, the Court held:
"It was strongly urged on behalf of the appellants that the provision in C1. for increase in the average rate of price of energy from the D.V.C. to be calculated with respect to the base year 1977-78 is arbitrary inasmuch as in fixing the basic tariff as per the Impugned notification of 1979, the difference in cost between year 1977-78 and the current year 1979-80 has already been taken into account, From the counter affidavit and the statements filed in the High Court on behalf of the respondent Board which form part of the record before us in these appeals, it is seen that only the fuel surcharge accrued during the year 1977-78 had been merged while fixing the revised rates for energy and it was specifically mentioned in paragraph 2.5 of the resolution of the Board containing the proposals for the tariff revision, 1979, which the Board forwarded to the State Government that only the fuel surcharge that had accrued during 1977-78 was being merged in the revised tariff rates and that the subsequent increase or decrease in the cost of fuel or the cost of imported energy will, therefore, reflect in the fuel surcharge hereafter'. Similar is the position with respect to the tariff revision effected in 1981. Hence there is no factual foundation for the argument that there has been a double neutralisation of the increase in the fuel surcharge in respect of the energy purchased by the Board from outside sources."
The above observation shows that, it is permissible for the Board not to merge the escalated cost of the energy paid to the producer of the electricity, while revising the general tariff. In fact, on two occasions, general tariff was revised in the above case; general tariff was revised with reference to the base year 1977-78. The increased fuel costs by way of surcharge paid to the suppliers/producers of energy during 1977-78 and 1979-80 were not taken into account while revising the general tariff in the year 1979; similar was the situation in the case of revision of tariff done in the year 1981.
11. Therefore, it is, permissible for the Board not to neutralise the escalated fuel charge while revising the general tariff, and the entire escalated fuel charge could be collected from one set of consumers (such as H.T. consumers), taking an anterior year as the base year.
12. The attempt of the petitioners to have the process of the fixation of the tariff rate (fuel surcharge) Judicially scrutinised, failed and in this regard the Supreme Court observed at page 663:
"..... in the ultimate analysis, the mechanics of price fixation is necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of persons, the processual basis of price fixation is to be accepted in the generality of cases as valid.
Some of the appellants have endeavoured to persuade us to go into the minutest details of the mechanism of the 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 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 limitions."
13. From the above Decision, following principles emerge:
(1) A set of properly classified consumers can be selected for the levy of a higher tariff rate.
(2) The assertion of the Board in its counter affidavit may be accepted by the Court as to the factors considered by the Board while revising the general tariff rate and computing the rate of fuel surcharge.
(3) It is open to the Board to revise the general tariff rate keeping an anterior year as the base year a(sic) may not merge in the revised general tariff, the increased cost incurred towards the fuel purchase. Therefore, it cannot be assumed that, whenever there is a revision of general tariff rate, the increase in the fuel surcharge in respect of the fuel purchased by the Board has been merged in it and the increased fuel surcharge got neutralised.
(4) The Court cannot in the exercise of its Writ jurisdiction analyse and go into the minutest details of the mechanism of tariff fixation, and this mechanics of price fixation has to be left to the judgment of the Board.
14. KERALA STATE ELECTRICITY BOARD v. S.N. GOVINDA PRABHU & BROTHERS AND ORS. ETC., recognises the power of the Board to generate surplus funds, without allowing its character as a public utility undertaking to be changed into that of a profit motivated trading or manufacturing house. The Supreme Court once again reiterated that if the revision of tariff was neither arbitrary nor result of application of wrong principle, the Court will not examine the price structure in minute detail. The Court also upheld the favoured treatment given to low tension domestic and agricultural consumers at ' the cost of the rest of the consumers.
15. In HINDUSTAN ZINC LTD. ETC. ETC. v. ANDHRA PRADESH ELECTRICITY BOARD AND ORS., it was held that failure to seek advice of the consultative council before revision of the tariffs does not invalidate the revised tariffs. It was further held that generation of surplus by adjusting the tariffs by itself is not illegal, unless the surplus is such that the character of the Board as a public utility undertaking would be altered into that of a profit making private trader; the gradual withdrawal of the concessional tariffs provided' earlier to the power intensive consumers was upheld. It was contended that there was no justification to revise the tariffs or to have any fuel surcharge. The contention that the additional burden became unbearable for the power intensive consumers was rejected by the High Court and this view of the High Court was upheld. The High Court had held that the inability of the industry to survive was not a compelling consideration for deciding the Board's power in adjusting the tariffs. As to the plea that the levy of fuel cost adjustment only on H.T. consumers, the Court held:
"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 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 H.T. consumers was unreasonable and discriminatory since the burden of rise in fuel cost was placed only on the H.T. consumers. In our opinion, this argument has no merit. The H.T. consumers, including the power intensive consumers, are known power guzzlers and in power intensive industries, electricity is really a raw material. This category of consumers, therefore, forms a distinct class separate from other consumers like L.T., 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 of a concessional tariff for quite some time, which too is a relevant factor to justify this classification. Placing the burden of fuel cost adjustment on these power guzzters, who had the benefit of concessional tariff for quite sometime and have also a better capacity to pay cannot, therefore, be faulted since the consumption in the power intensive industries accounts for a large quantity."
Again, Court observed:
"It is not unreasonable to take the view that the thermal power has become costlier on account of the increase in fuel cost and could nationally be allocated to the consumption by H.T, and power intensive consumers, and, therefore, the fuel cost adjustment is made applicable to them alone. In our opinion, the argument on behalf of the Board in this behalf is not unreasonable."
As to the fuel cost adjustment and the term 'other charges' referred to in the relevant memo, Court held:
"The expression 'other charged is wide enough to include within its ambit the fuel cost adjustment admittedly made applicable to all H.T. consumers as a result of the escalation in fuel prices. The method adopted was to prescribe a formula linking it to the increase in fuel cost so that it was not necessary to revise the tariffs each time as a result of increase in fuel prices, the same being taken care of by the relevant factors in the formula for cost adjustment."
16. These Decisions indicate that the term 'fuel escalation charge', 'fuel surcharge' or 'fuel cost adjustment', normally convey the idea of an extra charge levied to meet the increased cost of the fuel purchased by the Board, over and above the agreed price payable to the supplier; it may also include other costs. These costs are fluctuating in character and ft is not possible to crytalise the rate of this cost with a reasonable certainty and therefore, normally it is not considered while revising the general tariff.
For example, the fuel adjustment charges paid by the Karnataka Electricity Board to NTPC from October 1985 (as given in ILR 1991 KAR. 2112 at p.2151 etc.), show that the charge varied between 0.84 Ps. per unit to 10.56 Ps. between October 1985 to August 1989. In February 1987, the rate was 2.83 Ps. in March 1987 it was only 2,28 Ps, and in December 1987 it was 2.10 Ps. Therefore, if 2.83 Ps, is taken into consideration and it is merged in the general tariff, the problem will be to reduce the rate, when this charge got reduced subsequently. Neutralisation of a particular rate of the fluctuating cost is possible, if, it is always certain that the said charge payable to NTPC would under no circumstances get reduced subsequently. This is one aspect of the problem involved in working out the adjustment at the time of revising the general tariff.
17. Nothing prevents the Board from keeping apart for a different treatment, all increased payments in excess of the specified price in the agreement with the supplier. It will not only be convenient, but also would reduce the burden on other consumers, if this increased payments are charged subsequently, on the 'power guzzlers'.
In this context, another Decision of the Supreme Court in SHRI SITARAM SUGAR & CO. LTD. v. UNION OF INDIA AND ORS., AIR 1990 SC 127 may be referred. The Court was examining the price fixed for the levy sugar. Court Held that price fixation was in the nature of legislative action even when it is based on objective criteria founded on relevant material; however, Government cannot fix an arbitrary price on extraneous considerations. At page 1299, the Supreme Court observed;
"Judicial review is not concerned with matters of economic policy. The Court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the 'feel of the expert' by its own views. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In ail such cases, judicial inquiry is confined to the question whether the findings of fact are reasonably based on evidence and whether such findings are consistent with the laws of the land. As stated by Jagannatha Shetty, J. in Gupta Sugar Works (supra):
'the court does not act like a chartered accountant nor acts like an income tax officer. The court is not concerned with any individual case or any particular problem. The court only examines whether the price determined was with due regard to considerations provided by the statute. And whether extraneous matters have been excluded from determination."
Price fixation is not within the province of the courts. Judicial function in respect of such matters is exhausted when there is found to be a rational basis for the conclusions reached by the concerned authority. As stated by Justice Cardozo in Mississippi Valley Barge Line Company v. United States of America (1933) 292 US 282-290; 78 Law ed 1260, 1265;
'The structure of a rate schedule calls in peculiar measure for the use of that enlightened judgment which the Commission by training and experience is qualified to form..... It is not the province of a court to absorb this function to itself... the judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body."
18. Therefore, if the Board, as a matter of policy decided not to consider the fuel escalation charges at all, while revising the general tariff, it is not open to this Court to substitute its own views. If as a fact, the Board had taken into consideration a particular part of the fuel escalation charge for neutralisation by merging it with the general tariff, a second neutralisation of that part by way of collecting the entire fuel escalation charge again may be arbitrary. However, whether, the Board has in fact neutralised a part of the fuel escalation charge by taking it into consideration white revising the general tariff, is entirely a question of fact.
19. The process of price fixation resulting in the tariff rate for the supply of electricity, is a complicated one. The Board has to bear in mind not only the normal cost factor, but also several imponderable factors like wage hike, cost of maintaining and repairing the lines, loss of energy in transmission etc. This apart, the. Board has to perform a balancing exercise while fixing different tariff rates on different classes of consumers to meet the policy of the Government; If all these are considered, and still the total revenue is found to be on the deficit side, the Board may have to borrow from others or seek subsidy from the Government,
20. When it is shown that revenue expenditure of the Board far exceeds the total income of the Board, it has to be assumed that prima facie the tariff rate fixed is not unreasonable, similarly, it has to be assumed that a part of the expenditure incurred or incurrable by the Board has not been provided for in the income-generating exercise done by the Hoard.
Therefore, if it is shown that the Board has been suffering deficit year after year and its statutory surplus is the result of bounty on the part of the State Government, and if the Board asserts that while revising the general tariff, the Board had not taken into consideration the cost incurred by way of paying fuel escalation adjustment charges to the suppliers of electricity, such as NTPC, the assertion cannot be lightly ignored.
21. While revising the general tariff, the Board, would have before it, the global picture of its finances, A reference to several sources of income and expenditure by itself is no ground to hold that, white actually computing the tariff rate, a particular item of expenditure went into the mechanics of computation. The actual computation leading to the price fixation/power tariff cannot be dissected Judicially, Judicial scrutiny cannot partake the character of a minute auditing of the process of price fixation.
22. DELHI CLOTH & GENERAL MILLS CO. LTD., KOTA v. RAJASTHAN STATE ELECTRICITY BOARD AND ORS., was relied on by the learned Counsel for the petitioners, in support of their contention that the Board has a duty to disclose the basis for the levy of fuel escalation charge. However, the actual observations of the Court found at page 143 were as follows:
"Neither there is any provision under any law, nor in the Tariffs for giving an opportunity of personal hearing to the petitioners. In the provisions for fuel adjustment clause itself it is mentioned that the decision of the Board will be final and binding on the consumers. In a matter where the Board works out the fuel surcharge on the basis of a formula which is already contained in the tariff, it is already known to every consumer that the same would be worked out on the basis of the formula given in the tariff. However, when such demand is made retrospectively for a number of years and the liability goes to several lacs of rupees, it is the duty of the Board to atleast give out the figures for calculating each component of the formula. There is neither any question of public policy involved nor anything sacrosanct in not furnishing such information to a consumer if the same is demanded from the Board. Even under the principles of ordinary law of contract if a purchaser wants the details of the price of the goods worked out by the seller, he is entitled to get the same, in these cases also when the calculations were given in the court, then it was revealed that the interest was wrongly charged in working out the final rate of fuel surcharge. Most probably this unnecessary litigation could have been avoided in case such information would have been given to the consumers before hand. Be that as it may, this ground of violation of principle of natural justice has lost its force after the furnishing of calculations of fuel surcharge during the course of arguments before this Court."
Nowhere the Count has stated that the Board should disclose to the consumer minutest details of working out the revision of general tariff. The observations were made in the context of a demand of fuel escalation charges retrospectively covering several years and the Court observed that "figures for calculating such component of the formula" shall be furnished. In the instant cases, before me, the basic question is whether any part of the fuel escalation charges has been neutralised at the time of the two revisions of general tariff. In fact at an earlier part of the Judgment, the learned Judge held, at page 142:
"Neither it is feasible nor in the public interest nor it is a legal right of the petitioners to see the complete record with regard to the various figures submitted by the Board in forking out each component of the formula."
The formula with the components to work out the fuel surcharge is found in para-14 of the Judgment and the observations were in the context of the said formula
23. The petitioners strongly relied on the Decision in MYSORE KIRLOSKAR LTD. v. KARNATAKA ELECTRICITY BOARD in support of their contention that the fuel escalation charges as on the date of revision of power tariff stood merged in the said revision. In the above case the Court referred to General condition No. 3 pertaining to H.T. consumers regarding 'fuel adjustment charges' which was as follows:
'Adjustments in fuel escalation charges based on accepted formula for power from Thermal stations will be made by the Board as and when required and recovered from industrial installations'.
This was amended further to read as:-
"Adjustments in fuel escalation charges and other increases due to operation expenses etc., will be made by the Board as and when required and recovered from industrial installations."
The words 'based on accepted formula for power from Thermal stations' were absent in the amended condition.
The Court negatived the plea that H.T. consumers were discriminated and held that the classification in this regard was valid. Court also held that fuel escalation charges claimed by the NTPC was indisputable and Karnataka State Electricity Board was bound by it, as it is to be based on an agreed formula. Thereafter, at page 2133, the Court held:
"A close reading of Clause 8 of the General Conditions pertaining to H.T, consumers as it stood prior to 23.6.1987, makes it clear that the KEB is entitled to recover fuel escalation charges from industrial installations as and when the same is recovered by the NTPC based on the formula accepted by the KEB and the NTPC. In addition to this as has been already pointed out the fuel escalation charges also form part of the power Tariff. Therefore, the question of agreement between the consumer and the KEB does not arise. It is open to the KEB to determine the power tariff and the consumer has no option, but to accept it."
Court also held that electricity consumed by the petitioners in respect of their pollution controlling unit and housing colony are part of the electrical consumption by the industrial undertaking of the petitioners and hence fuel escalation charges, are leviable in respect of those units also.
However, as to the scope of Condition No. 8, the Court held, at page 2147:
"A reading of Condition No. 8 does not leave any doubt that what the KEB is entitled to recover by way of fuel escalation charges is the increase in the fuel escalation charges that has taken place after the coming into force of the Power Tariff 1987."
Again at page 2148, the learned Judge held:-
"I 'have already pointed out that in General Condition No. 8, pertaining to H.T. consumers, whether prior to 1987 or subsequent thereto what the KEB is entitled to recover under the heading fuel escalation charges, is only the escalation in the fuel charges that has taken place after the coming into force of the Tariffs and not those escalations which were in existence on the date of the Power Tariff was introduced because in the determination of the power tariff, the entire increase in cost which the KEB incurred in purchasing power from NTPC, other systems and other States had gone into it."
Decision of the Supreme Court in M/s. Rohtas Industries Case was then quoted. In Rohtas Industries case, the Board had admitted that increase in fuel cost upto 1977-78. had been merged in the general tariff. Applying the said analogy, the Court proceeded to say at page 2149:
"Therefore, in addition to this the wording in General Condition No. 8 pertaining to H.T. consumers is also to the effect that what the KEB is entitled to recover under the heading fuel escalation charges is only the additional expenditure or escalation that takes place after the introduction of the Power Tariffs 1987,."
The Court proceeded to say further:
"However, it is tried to be contended on behalf of the KEB that in determining electric power tariffs 1987, the fuel escalation charges had not been taken into account even upto the date of determining the power tariff. In the power tariff report 1987, at para-7, it is stated that the adjustment in fuel escalation charges based on accepted formula for power from thermal station will be made by the KEB as and when required and recovered from the industrial consumers. This observation also goes to show that escalation as and when required may be charged and recovered. It means the escalation that takes place subsequent to the introduction of the power tariff alone should be recovered. While determining the power tariff also the Tariff Committee has taken into account the cost of he energy generated in the State as well as imported from the neighbouring States and also from NTPC and the power loss in the transmission and distribution of energy and all other relevant factors which go to determine the cost of energy and has also further provided certain amount of profit which the KEB is required to make statutorily. This is demonstrated from the various Annexures annexed to the Power Tariff Committee Report of 1987."
Same approach resulted in holding that transmission and distribution loss on the date of Committee's report must have been considered and merged in the General Tariff - (vide para 32 of the Judgment). The Court held that Power Tariff 1987 came into force on 2.5.1987 and, -
"Therefore, basis for recovering the fuel escalation charges shall have to be taken as it stood in the month of November 1986, the date on which the Report of the Tariff Committee was made. In February 1987, the fuel escalation charges were paid by the KEB to the NTPC at the rate of 2.83 paise per unit. Therefore, this has to be taken as the basis for claiming fuel escalation from 2,5.1987, the date on which the Tariff 1987 came into force. To this, the KEB is entitled to add 22% of power loss during the course of transmission and distribution of power to high tension consumers, of the power which is imported from the NTPC. It is not in dispute that the fuel escalation charges are recovered from the petitioners not taking the basic figure of fuel escalation charges as 2.83 paise per unit plus transmission and distribution loss, but it has claimed the amount as and when claimed by the NTPC as per the details of fuel adjustment charges paid by the KEB upto 1985."
Court inter alia, directed recomputation of the fuel escalation charges payable by the petitioners after deducting 2,83 paise per unit.
24. Petitioners contend that the power tariff 1990 came into force on 6.9.1990 and again, it was revised on 18.7.1992. Therefore, fuel escalation charges as on 6.9.1990 should be the basic figure, in excess of which only the Board may claim from the petitioners after 6.9.1990; similarly after 18.7.1992 fuel escalation charge leviable is the one in excess of the fuel escalation charges as on 18.7.1992, Annual Accounts for the year 1990-91 and 1991-92 were placed before the Court for perusal. For the year 1990-91, surplus is shown to be Rs. 2,131 lakhs, this is achieved because of the Revenue Subsidies and Grants from the Government to the extent of Rs. 8,859 lakhs; similarly, the surplus for the year 1991-92 shown as Rs. 2,429 lakhs is due to the Subsidy and Grant of Rs. 8,918 lakhs. But for these subsidies, no surplus would have been available. Report of the Committee on Power Tariffs 1990, reveals that the Committee had before it the entire global picture of the finances of the Board, It is not clear whether, while estimating the Revenue expenditure and the cost of the electricity purchases, fuel escalation charges have been Included, though, there is no specific statement in that regard. However, it is impossible to infer that these fuel escalation charges payable to the suppliers of electricity were sought to beneutralised while revising the general tariff. The Report indicates that the Committee was trying to reduce the burden of the tariff rate on the general consumers. Admittedly, recommendations of the Committee are not binding on the Board and the Board therefore cannot be fastened to the process of Tariff revision followed by the Committee, For the tariff revision of the year 1992, there was no Committee at all.
25. Annexure XIV to the Committee's report of the year 1990, gives the cost of power obtained from various bodies like NTPC, NIC and MAPP, As against NTPC the cost is shown as 60 paise. Mr. Sundaraswamy, the learned Counsel for the Board pointed out that this figure did not include fuel escalation charges at all and placed before me the Note-sheet wherein the cost was worked out This is with reference to the cost per unit of NTPC power as shown in page 137 of the Tariff Committee Report 1990 (i.e., Annexure XIV). The Note points out that the actual purchase price works out to 62.41 paise/unit as follows;-
Basic rate = 43.00 paise/unit Transmission charges = 9.24 paise/unit Cost of T & D loss 19.48% on 52.24 = 10.17 paise/unit Total = 62.41 paise/unit The fuel escalation charge was thus not considered at all by the Committee while recommending the revision of the Tariff rate.
26. The above Note also states that with regard to the year 1992, the cost of power from NTPC actually came to 95,15 paise de hors fuel escalation charges. The working figures are:
Fixed charges = 33.59 paise/unit Variable charges = 37.66 -do-
Transmission charges = 9.08 -do-
Cost of T & D loss at 18.45% = 14.82 -do-
Total = 95.15 paise/unit However, while revising the Tariff rate, this element is taken at 85 paise per unit only. The Note-sheet is signed by the Financial Advisor and Chief Accounts Officer of the Board.
27. It is also necessary to note here that NTPC collects fuel escalation charges showing it as an independent item in its bills, from the KEB. Government Order dated 4.9.1990 issued in connection with the revision of power tariff in the year 1990 states in para-3 - "further, if there is any increase in cost of power purchase because of new, generating units, proportionate revision of rates may be undertaken with the prior approval of Government. However, regarding fuel escalation charges, the existing system may continue." The existing system was to shift this burden of fuel escalation charges only on a few H.T.consumers. The last sentence in the above quoted passage, therefore, clearly directs the Board to confine the levy of fuel escalation charges on the consumers like the present petitioners. Electric Power Tariff 1990 has its General Conditions governing High Tension Supply. Condition 1 (i) is similar to Condition No. 8 referred to in the Mysore Kirloskar Ltd.'s case and reads:
"Adjustment in fuel escalation charges and other increases due to operational expenditure etc., will be made by the Board as and when required, which shall be recovered from all H.T.consumers."
Condition No. 4 governing H.T.Term Supply in electric power tariff 1992 is almost similar;
"Adjustment of fuel escalation charges and other increases due to operational expenditures etc., will be made by the Board as and when required, which shall be recovered in addition to the rates specified in H.TSchedule of rates from all H.T.consumers, except H.T.3 category."
28. The term fuel escalation charge' has been understood in a particular manner. It represents the escalated cost price payable to the suppliers of electrical energy, such as NTPC, and the cost occasioned by the transmission loss.
29. Escalation referred in the above conditions can be understood as the escalation over and above the Tariff rates. It also can be understood as related to the escalation cost of the fuel. If it is the 'escalation' in excess of the Tariff rates, then the petitioners can succeed only by showing that a part of the impugned demands has already been neutralised in the general Tariff rate. If the 'escalation' is referable to the actual cost factor of fuel, then, normally, the basic figure will be the basic price payable to the suppliers of the electricity to the Board.
30. In the Mysore Kirloskar ltd. case there is an observation that fuel escalation charge is referable to the increase of the cost after the revision of tariff rate. This observation was made, obviously because of the particular facts of the case. The Court found that, as a matter of fact, while revising the general tariff, fuel escalation charges as on the date of the revision of tariff was merged in the general tariff.
31. NTPC does not merge the fuel escalation charge with the agreed basic price, whenever there is a revision of tariff by the Board; NTPC collects fuel escalation charge as an independent item in its bills.
32. Reverting back to Mysore Kirloskar Ltd. case, the basic fact found by the Court at page 2148 is quite relevant, which I have already extracted above. Because the entire cost which KEB incurred in purchasing power from NTPC etc., had gone into the revision of general tariff, Court held that, thereafter, the Board can collect only the further escalated costs, I do not consider the said Decision as laying down a definite proposition of universal application that under all circumstances, the Board has to necessarily merge the existing fuel escalation charges in the general tariff rate, white revising it.
33. In the present cases, I find that while revising the general tariff rate in the year 1990 and then in the year 1992, the Boarded not consider it fit to neutralise the fuel escalation charges as on the respective dates of revision. It will not be in the larger interest of the public, to deny the right in the KEB to reimburse itself of the escalated costs, by charging them on the H.T. consumers,
34. In the result, for the reasons stated above, these Petitions are dismissed. Rule, if any, is discharged. No costs.