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Policy Decision as regards Pricing :
Reasonableness of dual pricing :
Price fixation has a direct relationship with the fiscal health of the country. Finance is one of the most important catalysts. The modality of price fixation will depend upon the nature of the commodity, the provisions of the concerned statute governing the same and other relevant factors. When price is fixed in terms of the provisions of the Essential Commodities Act, the State would be governed by the doctrine of public necessity. It may in terms of its statutory power and having regard to the penal provisions engrafted therein compel a manufacturer or a dealer of an essential commodity to sell it to the public at a reasonable price or at no profit. Price fixation by the State for its own benefit, however, have an element of profit. Whenever a dual price is resorted to, the same must be rational. The formula for fixing the dual price may be reasonable only under certain circumstances. [See Union of India and Others etc. v. Hindustan Development Corpn. and Others [(1993) 1 SCC 467].
"It is, however, not necessary here to enter into a discussion of this and the earlier cases because those cases were primarily concerned with the question whether the price fixation had been made in consonance with the requirements of the relevant legislation fixing prices of essential commodities in the interests of the general public and also because ONGC does not deny that, as a State instrumentality, its price fixation should be based on relevant material and should be fair and reasonable. None of these decisions hold that the cost plus method is the only relevant method for fixation of prices. On the contrary, there are indications in some judgments to indicate that not a minimum but a reasonable profit margin is permissible. Even in relation to a public utility undertaking like the State Electricity Boards where the duty not to make undue profits by abusing its monopoly position is clear"

Can the consumer be expected to derive any such benefit from a monopoly concern? Would a situation of this nature lead to a hybrid situation where a coal company is allowed to fix its own price which may not be a fair price? These are some of the questions which were required to be kept in mind by the coal companies before formulating a policy of fixing price of an essential commodity.

The State when exercises its power of price fixation in relation to an essential commodity, has a different role to play. Object of such price fixation is to see that the ultimate consumers obtain the essential commodity at a fair price and for achieving the said purpose the profit margin of the manufacturer/producer may be kept at a bare minimum. The question as to how such fair price is to be determined stricto sensu does not arise in this case, as would appear from the discussions made hereinafter, as here the Central Government has not fixed any price. It left the matter to the coal companies. The coal companies in taking recourse to E-Auction also did not fix a price. They only took recourse to a methodology by which the price of coal became variable. Its only object was to see that maximum possible price of coal is obtained. The Appellants do not question the right of the coal companies to fix the price of coal. Such prices had been fixed on earlier occasions also wherefor legally or otherwise the Central Government used to give its nod of approval. The process of price fixation by the Central Government in exercise of its powers under the 1945 Order continued from 1996 to 2004.

In fact the decisions of this Court on price fixation also point out that although a reasonable profit may be permissible, profiteering would not be.
The coal companies evolve price fixation but admittedly they have been doing so at the instance of the Central Government. The Central Government seeks to exercise its statutory power. Such a power, however, is confined to four-corners of the 2000 Order. When there is no control over price, the Central Government is forbidden to issue any direction which will have an impact thereover.