2009 (4) TMI 1060 - SC - Indian Laws

Supreme Court Upholds Exclusion of TVNL in Fuel Surcharge, Orders Rs. 100 Crores Adjustment for 1998-99 Calculations

Bihar State Electricity Board Versus Pulak Enterprises and Ors.

The SC dismissed the appeals by the Board, affirming the HC's conclusions regarding the exclusion of TVNL from fuel surcharge calculations and the ... - Issues Involved:1. Validity and calculation of fuel surcharge.2. Method of calculation and rate of fuel surcharge.3. Inclusion of TVNL as a source for fuel surcharge.4. Deemed supply by DVC to TISCO.5. Non-accounting of Rs. 100 crores paid by Coal Companies.Issue-wise Detailed Analysis:1. Validity and Calculation of Fuel Surcharge:The Supreme Court confirmed that the validity of the fuel surcharge had been upheld in previous decisions, particularly in the case of Bihar State Electricity Board v. Bihar 440 Volt Vidyut Upbhokta Sangh. The dispute before the High Court was related to the method of calculation and the rate of fuel surcharge. The 1993 Tariff Notification, effective from 1.7.1993, provided the formula for the levy and collection of fuel surcharge to neutralize the increased cost of generation and purchase of power.2. Method of Calculation and Rate of Fuel Surcharge:The formula for calculating the fuel surcharge, as laid out in Clause 16.10.3 of the 1993 Tariff, was detailed and involved several variables, including units generated and purchased, and the increase in average cost. The High Court had formed a High-Level Committee to calculate the fuel surcharge, which resulted in differing rates calculated by different committee members. The Board's amendments to the formula, changing the base year from 1992-93 to 1991-92, were also considered.3. Inclusion of TVNL as a Source for Fuel Surcharge:The High Court found that the inclusion of TVNL (Tenughat Vidyut Nigam Limited) as a component of H3 was incorrect since TVNL came into existence only in 1996-97, while the base year for calculation was 1991-92. The Supreme Court agreed with the High Court's conclusion that TVNL could not be treated as a source for calculating the increase in the average unit rate of purchase of electricity.4. Deemed Supply by DVC to TISCO:The High Court noted that under a tripartite agreement, electricity supplied by DVC to TISCO was treated as a deemed supply by the Board to TISCO. However, the rates charged by DVC and the Board differed, and the High Court held that there could not be two rates for the same source. The Supreme Court upheld this view, stating that the Board could not treat the sale of electricity by DVC to TISCO as a separate category for computing D3.5. Non-accounting of Rs. 100 Crores Paid by Coal Companies:The High Court observed that the Rs. 100 crores paid by Coal Companies to the Board in settlement of claims should be accounted for in the calculation of the fuel surcharge for the year 1998-99, not 1997-98. The Supreme Court directed that the actuals be worked out within three months and the adjustment of Rs. 100 crores be made accordingly.Conclusion:The Supreme Court dismissed the appeals filed by the Board, agreeing with the High Court's conclusions on the inclusion of TVNL and the deemed supply by DVC to TISCO. The Court also directed the adjustment of Rs. 100 crores paid by Coal Companies to be worked out for the year 1998-99. The judgment emphasizes the importance of adhering to the prescribed formula and ensuring transparency and accuracy in the calculation of fuel surcharge.