Electricity Tariff Dispute: Supreme Court Upholds Surcharge on Industrial Consumers

The Supreme Court’s ruling in Waryam Steel Castings Pvt. Ltd. vs. Punjab State Power Corporation Ltd. addressed a longstanding dispute regarding the imposition of a surcharge on induction furnace industries that failed to upgrade their power supply infrastructure. The case revolved around whether these industries could be compelled to pay an additional 17.5% surcharge if they continued drawing power from an 11KV supply line rather than upgrading to a 66KV supply as mandated by the Punjab State Electricity Board (PSEB).

The dispute arose when the PSEB issued a circular in 1995 requiring all industries with an electricity load above 1500 KVA to switch to a 66KV supply. The regulation was introduced to improve the efficiency of electricity transmission and reduce losses incurred by the state power infrastructure. However, in 1999, an exemption was granted to industries established before June 1995, allowing them to continue operating on 11KV without paying the surcharge.

In 2003, with the enactment of the Electricity Act, a new regulatory framework was introduced, granting the Punjab State Electricity Regulatory Commission (PSERC) the exclusive authority to determine electricity tariffs and surcharges. The PSERC reintroduced the surcharge in 2004, arguing that it was necessary to cover increased transmission costs and power losses associated with supplying high-load industries at a lower voltage level.

Background of the Case

Electricity consumption in industrial sectors is categorized based on the voltage at which power is supplied. In Punjab, consumers were classified into three main categories:

Low tension (LT): 440 volts, mainly for domestic and small commercial users.
High tension (HT): 11,000 volts (11KV), generally used for large industrial supply.
Extra high tension (EHT): 66,000 volts (66KV), supplied to very large industrial consumers.

Since induction furnace industries consume a significant amount of power, the PSEB required them to shift to a 66KV supply. However, many industrial units did not make the transition, leading to the imposition of a 17.5% surcharge on those continuing to operate at 11KV.

Petitioner’s Arguments

The petitioners, comprising several induction furnace industries, contested the imposition of the surcharge on the following grounds:

The exemption granted under Circular No. 25/99 should continue to remain valid despite the enactment of the Electricity Act, 2003.
The surcharge was discriminatory, as similar industries had been exempted in the past.
The cost of switching to a 66KV supply was significantly lower than the cumulative financial burden imposed by the surcharge.
The Punjab State Power Corporation Ltd. (PSPCL) was acting beyond its jurisdiction by enforcing the surcharge without direct approval from the state government.

Respondent’s Arguments

The Punjab State Power Corporation Ltd. (PSPCL), the successor to PSEB, justified the surcharge by arguing:

The Electricity Act, 2003, gave regulatory commissions exclusive authority over tariff-related matters, thereby invalidating previous exemptions.
The surcharge was necessary to offset the additional transmission costs and losses incurred due to high power consumption at lower voltage levels.
The power grid’s efficiency was compromised when large industrial consumers continued to draw power from 11KV instead of transitioning to 66KV.
Regulatory commissions had consistently upheld the surcharge as part of tariff orders issued since 2004.

Supreme Court’s Judgment

The Supreme Court bench, comprising Ranjan Gogoi and Navin Sinha, upheld the imposition of the surcharge, emphasizing that regulatory commissions have the authority to determine tariff structures. The court ruled:

“The levy of surcharge being compensatory in nature is fully justified. The transmission losses and other charges incurred by the Board in providing power at the required load to induction furnace units from an 11KV supply line must be recovered from defaulting units.”

The court further held that the 1999 exemption had effectively been rendered void by the new regulatory regime established under the Electricity Act, 2003. It was determined that past concessions granted by government bodies could not supersede statutory provisions.

Impact of the Judgment

The ruling reaffirmed the authority of state electricity regulatory commissions in determining tariffs and imposing surcharges. It also set a precedent that industries must comply with regulatory frameworks and cannot rely on past administrative relaxations indefinitely.

The court clarified that surcharges imposed by electricity boards are not arbitrary but are intended to compensate for additional costs incurred in power transmission. The judgment underscored the need for industrial consumers to align their infrastructure with regulatory standards to avoid financial penalties.

Conclusion

The Supreme Court’s decision in this case has far-reaching implications for industrial power consumers. It highlights the importance of adhering to statutory regulations and recognizing the authority of regulatory commissions in tariff matters. By dismissing the appeals, the court effectively reinforced the principle that surcharge policies should be governed by rational economic considerations rather than historical exemptions.

This judgment serves as a critical reference point for future disputes concerning electricity tariff structures and industrial compliance with energy regulations.

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