Case: Grid Corpn. Of Orissa Ltd.&amp;Ors Vs. Eastern Metals &amp; Ferro Alloys &amp; Ors Etc

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 user. At the same time, the appellant had to ensure an increase in its revenue by 17%. If increase beyond 17% was not permissible in regard to any category of consumers, and if some categories had to be subjected to only small increases far below 17%, due to economic or social justice criteria, the appellant would never be able to achieve the increase anything in the range of 17%. Only by adopting the process of applying a higher than 17% increase in the case of some categories of consumers, it can offset the effect of small or marginal increase in the case of some other categories like ‘irrigation’ and ‘railway traction”. Therefore, if appellant chose to charge a lesser increase in percentage to some categories of consumers and higher increases in regard to other categories of consumers, it cannot be found fault with so long as its total revenue does not exceed 17% over the corresponding revenue with reference to the old interim tariff rates. If appellant would have realized ‘X’ amount as revenue at the interim tariff rates which were in force before 21.5.1996, the object of the increase was to provide an increase in revenue by 17% over ‘X’ after 21.5.1996. That is why the word ‘on average’ is used in Clause 9.1. This gives the discretion to appellant to charge tariff rates with different increases depending upon the category of consumers, so long as the overall increase in revenue, that is the “charges made” by the licensee, does not exceed 17%. Any other interpretation would render the words ‘on average’ otiose and have the effect of substituting the words tariff rate for the word charges. 20. In fact, the Commission has accepted this contention of the appellant to a large extent as is evident from the following observations in the report: “As there will be considerable uncovered gap between revenue requirement and revenue expected. We do not find scope to bring down the charges in any category. But in the present environment of cross-subsidy which is bound to continue for a number of years and in the absence of reliable data for calculating cost of supply and average tariff, we consider that the relative rates for different categories of consumers for the interim period as decided by GRIDCO is as good as any other alternative allocation of costs and charges.........It appears that it has not been brought 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 tariff for various categories are different because the determination is with reference to cost of supply for a particular category of consumer. The concept of uniform rate of increase for all categories of consumers is unknown because every time there is a revision the interests of different categories are rebalanced in consideration of public policy, pattern of consumption, consumer composition and revenue requirements. Viewed in this light we find some justification in Gridco’s claim that ceiling of 117% was with reference to overall average of interim tariff and overall average rate of new tariff. This logic implies that there has been no clear distinction between ‘tariff’ and ‘charges’.” 21. The reliance upon Clause (2) of Explanation to Section 26 of the Act to interpret the wording of Clause 9.1 is misconceived. The explanation to Section 26 does not define the words ‘charges made’, but defines the word ‘tariffs’. Under the erroneous assumption that the word “charges” referred to the actual tariff rates that were chargeable to different categories of consumers, the Commission ignored its own conclusions and held that Clause 9.1 placed a ceiling of 17% in respect of increases in the tariff rates applicable to different categories of consumers. It is true that the interpretation by a technical body in regard to purely technical matters deserves acceptance and will not be interfered, unless it is arbitrary or unreasonable. But in this case, on technical issues, the Commission has favoured the stand of the appellant. Having accepted the interpretation of the appellant as being technically sound and correct, it reached a different conclusion only because it thought that the word ‘charges’ had to be interpreted as ‘tariff rates’. If that is found to be without basis or erroneous, and therefore ignored, the opinion of the Commission fully favours the appellant.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]15. In this case, we have noticed above that Clause 9.1 is reasonably capable of more than one construction, that is at least three interpretations. We may therefore attempt to ascertain the true meaning of the provision by answering the four questions referred in the earlier para. On a careful consideration, the answers to the four questions posed are : (i) The purpose of Clause 9.1 is to provide for an increase in revenue by revising the tariff rates, by balancing the needs of the Licensee with the interests and needs of different categories of electricity consumers. (ii) Clause 9.1 being a fresh provision, the question of considering the position that existed before making of the said provision does not arise. (iii) The interpretation canvassed by the respondents, (that is interpretation (i) that increase in respect of anyrs cannot exceed 17%) which found favour with the High Court and the Commission, though may not lead to an absurd result, would render the words ‘onoccurring in the clause, redundant and otiose. (iv) The interpretation put forth by the appellant gives meaning to every part of the clause and also achieves the object of the clause. We will elaborate the reasons therefor.Re: Interpretation (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 everys, 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 ‘onwould be rendered meaningless if by average 17% increase cannot be achieved and if the increases cannot exceed 17% in any case. This interpretation, if accepted, would also prevent the licensee from creating or carving out any newof consumers andfix the tariff rate for such category. Therefore this interpretation apart from rendering the words ‘onredundant and meaningless, militates against the provisions of Clause (9.1).Re : Interpretation (ii)17. The second interpretation is that so long as the average of the different increases does not exceed 17% of the interim tariff rates, the appellant has the discretion to apply different rates of increases to different categories and increases with reference to some categories can exceed 17%. This interpretation will also lead absurd result if put into effect. Let us illustrate with reference to a hypothetical example (not with reference to actuals):S.on share out of total quantity of electricity generated and distributedPercentage in increase over the previous tariff rate1.Industry40%60%2.Domestic30%30%3.Irrigation10%1%4.Railway traction10%2%5.Public Institutions5%3%6.General purposes5%4%The average of the percentages of increase in regard to six categories will be only 16.66% which is less than 17%. But in terms of revenue realization, the increase would exceed not only 17%, but even as much as 40% with reference to revenue at the previous tariff rates. This obviously was not the object. The average should ensure that there is no increase beyond 17% in regard to the total revenue.Re : Interpretation (iii)18. The words used in Clause (9.1) aremade by the licensee shall not exceed on average 117%of those permitted under the interimIt is significant to note that the clause does not use the wordstariff rates prescribed by the licensee shall not exceed 17%of those permitted under the interimThe use of the wordsin the same clauses indicates that they were intended to signify different meanings. As rightly noticed by the Commission, the wordreferred to the schedule of rates. If the object of Clause 9.1 was to refer to ‘tariffprescribed by the Licence, there was no need to use the wordse use of the wordsle referring to 117% has also some significance. If the wordsmade by theare interpreted asrates fixed by thethen, the words `onwould be rendered meaningless and becomes an useless appendage.use of the wordse by these of the wordsnot exceed on averagenecessarily indicates that therates fixed by theappellant 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. ‘Chargestherefore 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 agriculturistconsumers, that is those consuming electricity forshould 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 user. At the same time, the appellant had to ensure an increase in its revenue by 17%. If increase beyond 17% was not permissible in regard to anys, and if some categories had to be subjected to only small increases far below 17%, due to economic or social justice criteria, the appellant would never be able to achieve the increase anything in the range of 17%. Only by adopting the process of applying a higher than 17% increase in the case of some categoriesof consumers, itcan offset the effect of small or marginal increase in the case of some other categories likeTherefore, if appellant chose to charge a lesser increase in percentage to some categoriesof consumers andhigher increases in regard to other categoriesof consumers, itcannot be found fault with so long as its total revenue does not exceed 17% over the corresponding revenue with reference to the old interim tariff rates. If appellant would have realizedamount as revenue at the interim tariff rates which were in force before 21.5.1996, the object of the increase was to provide an increase in revenue by 17% overafter 21.5.1996. That is why the word ‘onis used in Clause 9.1. This gives the discretion to appellant to charge tariff rates with different increases depending upon thes, so long as the overall increase in revenue, that is theby the licensee, does not exceed 17%. Any other interpretation would render the words ‘onotiose and have the effect of substituting the words tariff rate for the word charges.The reliance upon Clause (2) of Explanation to Section 26 of the Act to interpret the wording of Clause 9.1 is misconceived. The explanation to Section 26 does not define the words ‘chargesbut defines the wordUnder the erroneous assumption that the wordreferred to the actual tariff rates that were chargeable to different categories of consumers, the Commission ignored its own conclusions and held that Clause 9.1 placed a ceiling of 17% in respect of increases in the tariff rates applicable to different categories of consumers. It is true that the interpretation by a technical body in regard to purely technical matters deserves acceptance and will not be interfered, unless it is arbitrary or unreasonable. But in this case, on technical issues, the Commission has favoured the stand of the appellant. Having accepted the interpretation of the appellant as being technically sound and correct, it reached a different conclusion only because it thought that the wordhad to be interpreted as ‘tariffIf that is found to be without basis or erroneous, and therefore ignored, the opinion of the Commission fully favours the appellant