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TMI Blog2010 (8) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... and rationalize the generation, transmission, distribution and supply of electricity in the state. 2.1. Section 3 of the Act provided for the establishment of the Orissa Electricity Regulatory Commission ('Commission' for short), to discharge functions including the issue of licences in accordance with the Act and determine the conditions of such licences. 2.2. Chapter VI of the Act deals with licensing of transmission and supply. Section 14(iv) of the said Act authorized the State Government to grant provisional licences for a period not exceeding twelve months, for carrying on the business of transmission or supply of electricity, as a transitional measure till the establishment of the Orissa Electricity Regulatory Commission ('Commission' for short). 2.3. Section 13 of the Act provided that the Grid Corporation of India Ltd. ('GRIDCO' for short, the appellant herein) incorporated with the main object of engaging in the business powers of the state government under Section 12 of the Act, would be the principal company to undertake the planning and co-ordination in regard to transmission and to determine the electricity requirements in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter works and sewerage pumping, (vi) commercial, (vii) domestic, (viii) railway traction supply, (ix) street lighting, (x) direct current service, (xi) power intensive industries, (xii) heavy industries, (xiii) general purpose supply, (xiv) public institutions, (xv) mini-steel plants; and (xvi) emergency power supply to captive power plants. 5. Several industries which were consumers of electricity and the Utkal Chamber of Commerce, filed writ petitions before the High Court, challenging (i) the validity of Section 14(iv) of the Act; (ii) the validity of the provisional Retail Supply and Distribution Licence issued by the State Government under Section 14(iv) of the Act to the appellant, in particular the provision of the licence which enabled the appellant to increase the tariff not exceeding on average 117% of those permitted under the interim tariff issued by the State Government; and (iii) the tariff notification dated 13.9.1996 issued by the appellant. 6. A Division Bench of the High Court disposed of the said writ petitions by the impugned judgment dated 30.10.1998. The High Court upheld the vires of Section 14 (iv) of the Act and the Notification dated 30.3.1996 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the notification dated 13.5.1996 effective from 21.5.1996 was estimated to yield a revenue of Rs. 1241.12 crore by sale of 629.1 crore units during the whole of the year 1996-97, which would mean that the average tariff would be 200.15 paise per unit. During the year 1996-97, the interim tariffs were in force for the period 1.4.1996 to 20.5.1996 and the revised tariff under notification dated 13.5.1996 was in force from 21.5.1996 to 31.3.1997. In view of it, the estimated yield of revenue during the year 1996-97 worked out to Rs. 1216.81 crore by sale of 620.1 crore units, and the average tariff for the full year 1996-97 worked out to 195.228 paise per unit. Therefore it is contended that the average increase in the tariff for the year 1996-97 over the interim tariff in force on 1.4.1996 was 14.35%, well within the permissible limits and did not violate the provisions of Clause 9.1 of the provisional supply and distribution licence. 8. This Court by interim order dated 3.4.2000 directed the Orissa Electricity Regulatory Commission to determine the tariff by two methods, that is by taking into account the observations made by the High Court in the impugned judgment, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsured is whether the increase was hit by the ceiling imposed under Clause 9 of provisional license. (emphasis supplied) The report also noticed the submission of the appellant that as the average of the interim tariff (as per OSEB Notification dated 28.10.1995) which was in force till 20.5.1996 was 171.6 paise per unit and as it was empowered to raise the average tariff to 117%, it had the mandate to raise the average tariff to 200.772 paise per unit (that is 117% of 171.6 paise); that as the interim tariff under OSEB notification dated 28.10.1995 was in operation till 20.5.1996 and the new tariff under GRIDCO notification dated 13.5.1996 was in operation from 21.5.1996 to 31.3.1997, the percentage of increase over the interim tariff with reference to the revenue receipts for the said period was only 200.166 paise, that is an increase of 16.65% and therefore, was not hit by the ceiling of 117% imposed by the provisional licence. (For this purpose, the average tariff rate (200.166 paise) was arrived at by dividing the Revenue for the period when the tariff was in force, by the total consumption during that period). The Report did not find anything unreasonable in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to pre-revision tariff rates. The appellant contended that the use of the word 'average' was intended to mean that the appellant was entitled to apply different rates to different categories of consumers provided the aggregate of revenue on account of the increases did not exceed 17% of the revenue with reference to pre-revision tariff rates. The appellant contended that the provision did not place a ceiling of 17% in regard to increase in the tariff rates for each of the categories; that it was entitled to increase the tariff rates in respect of some categories of consumers beyond 17% while restricting the increase in the tariff rates for other categories to a lesser percentage, to ensure that the total revenue for the electricity consumed during the relevant period, did not exceed 17% over the revenue for such quantum based on the previous interim tariff rates. It was therefore submitted that the tariff notification dated 13.5.1996 was valid. 11. The respondents on the other hand contended that the word charges in clauses 9.1 referred to the tariff rates. They relied upon the definition of 'tariff' in Clause (b) of explanation to Section 26 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 17% of the interim tariff rates. Interpretation (ii): So long as the average of the different increases does not exceed 17% of the interim tariff rates, the appellant had the discretion to apply different rates of increases to different categories and some of them can exceed 17%. Interpretation (iii): The increase in tariff rates for different categories of consumers could be of different percentages, provided the average realization per unit during the relevant period (arrived at by dividing the estimated revenue during the period, by the estimated consumption during that period) was not more than 17% of the average realization per unit during the previous period when the interim tariff was in force. The first interpretation has found favour with the High Court and the Commission, having regard to the definition of 'tariff' in the Explanation to Section 26 of the Act. 14. This takes us to the correct interpretation of Clause 9.1. The golden rule of interpretation is that the words of a statute have to be read and understood in their natural, ordinary and popular sense. Where however the words used are capable of bearing two or more constructions, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (i) 16. The first interpretation of Clause 9.1 is that it permits increase in tariff rates but with a ceiling of 17% in regard to each and every category of consumers, and therefore the increase in case of no category can exceed 17%, has found favour with the High Court and the Commission. The fact that there can be different percentages of increases in tariff in regard to different categories is an accepted procedure. For example a lesser tariff is applied to agriculturists using electricity for irrigation purposes when compared to consumers using electricity for commercial or industrial purposes. Therefore, when there is a revision of tariff rates, the percentage of increase will and can vary from category to category. If the aforesaid interpretation is applied by holding that in no case, the increase can be more than 17%, and if in regard to some categories, increases are to be nominal, it will be impossible to achieve a 17% increase which is permitted and contemplated under Clause (9.1). Further, the words 'on average' would be rendered meaningless if by average 17% increase cannot be achieved and if the increases cannot exceed 17% in any case. This interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges made by the licencee are interpreted as tariff rates fixed by the licencee , then, the words 'on average' would be rendered meaningless and becomes an useless appendage. The use of the words 'charges made by the licencee' and use of the words shall not exceed on average 117% necessarily indicates that the rates fixed by the appellant should not result in an increase in realization or revenue in excess of 17% of what it would have realized with reference to the tariff rates that were earlier in force under the interim tariff. 'Charges made by the licensee' therefore refers to the total revenue of appellant by sale of electricity to the different categories of consumers. 19. The appellant, discharging the functions of the state government under the Act, had to ensure that the burden of increase on the agriculturist - consumers, that is those consuming electricity for irrigation , should be the minimum. Similarly, increase in the tariff rate for electricity consumed by railway traction had to be kept minimal in national economic interest. Similarly, the increase in tariff for residential user should be comparatively lesser than commercial u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to the notice of the Court that all along in the past varying charges for different categories of consumers has been determined in consideration of nature and purpose of use and affordability of different categories of consumers. The cost of supply, the quality of supply and affordability are widely different for different classes of consumers. Due to socio-political decision to cross-subsidize some categories, it has never been considered desirable or possible to levy uniform charges or to decide upon a uniform percentage of increase of charges.... In the practice followed by electrical utilities in the country as well as abroad, the average charges for electricity tariff is calculated by considering the total revenue realizable during a period divided by number of units estimated to be sold during the period. Percentage of increase in charges or tariff, normally refers to percentage of increase of the average rate over the overall average rate of prevailing tariff calculated in this method. This has been the practice mainly due to the prevalence of cross- subsidy in the electricity tariff structure in India. Even when there is no cross-subsidy the rate of increase in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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