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M/s Ispat Profiles India Limited, Mumbai have filed a Petition dated
6th February 2003 citing Regulation 74(h) of the MERC (Conduct
of Business) Regulations, 1999, praying for the following directions
to the Maharashtra State Electricity Board (MSEB):
a)
To waive the outstanding minimum demand
charges included in the outstanding.
b)
To waive the interest and delayed payment
charged form April 1997 onwards.
c)
To waive all electricity duties levied
from April 1997 onwards.
d)
To direct the Respondent to settle the
payment of remaining arrears, i.e. after considering the above three
requests, by granting 60 instalments after 5 years from the restart
of operations carrying no interest.
e)
To waive the SLC and other charges for
reconnection of electric supply at the plant.
f)
To direct the Respondents not to charge
the minimum demand charges for a period of 5 years from restart.
g)
To supply power at a rate close to the
cost of supply at Extra High Voltage (EHV) and provide bulk discount
in the future bills.
h)
To direct the Respondent to provide immediate
reconnection of limited power to plant for non production purposes like
lighting, security, domestic use of employees residing in the plant
without for any payment.
The Petition was heard for admission on 11th June 2003.
2. According to the Petition, M/s Ispat Profiles
India Limited (IPL) have set up a plant at Sanaswadi, Taluka Shirur,
District Pune, which is notified as a backward industrial area, for
the manufacture of certain steel products. The plant was commissioned
in 1998, and was a HT consumer of MSEB.
For various reasons, the Petitioner has been incurring heavy
losses since inception. IPL suspended operations at the plant and thereafter
declared a lock out in November, 2000 which continues till today.
IPL have approached the State Government and other authorities
for waiver of certain past dues and for concessions in future dues.
3. The Petitioner states that MSEB temporarily
discontinued power in November, 2000 and permanently in January, 2002.
Outstanding arrears due to MSEB as on June, 2001 amount to around
Rs.32 crores, which includes Rs.6.47 crores on account of minimum demand
charges. IPL approached MSEB
and a package was drawn up for liquidating these arrears, but their
unit closed down, resulting in non-clearance of the dues.
IPL claim that MSEB had also agreed to waive the minimum demand
charges. However, because of
the closure, IPL were not in a position to make the payment as per the
revised schedule, and the waiver was withdrawn by MSEB. IPL contend that such withdrawal was not proper
because MSEB were aware of the closure of the unit and their inability
to pay the dues. It was also
arbitrary and bad in law because no opportunity was given to IPL to
explain their position.
4. IPL have submitted that they have accumulated
losses of Rs.242 crores as on September, 2001 and are unable to restart
the plant. However, they are
trying to reach a settlement with labour, and are drawing up a revival
package which could be successful only with the support of the State
Government and its various agencies, including MSEB.
5. As far as MSEB are concerned, IPL seek waiver
of past demand charges for the closure period, as well as interest and
delayed payment charges from April 1997 onwards. They are also seeking approval from MSEB for liquidating their remaining
arrears in sixty instalments within five years of the restart of operations,
and have asked them not to levy minimum demand charges during that period.
In view of the large investment required to restart operations,
IPL would be unable to immediately start payments of past outstandings.
Such relief is sought from MSEB also taking into account the
fact that the manufacture of steel products is power intensive, and
electricity contributes nearly 35% to its cost of production.
6. For the reasons set out above, IPL have
also sought directions to MSEB not to levy Service Line Connection (SLC)
and other charges for reconnecting the plant, particularly since they
have already earlier paid SLC charges and established facilities for
drawing power from MSEB. They
also seek the supply of power at a rate close to the cost of supply
at EHV and provide them bulk discount incentives in future bills.
7. IPL have admitted that there are different
statutory and other agencies, including MSEB, that can be approached
directly for seeking the above concessions, but the time taken by them
to formulate a viable package for restructuring the dues and enabling
restart of the plant is too long. The process of restarting the plant
would be delayed if IPL were to pursue these agencies instead of the
Commission. Under Regulation 74(h), the Commission has
to keep in view the need for healthy growth of the industry while determining
the tariff, and it is substantially under this provision that they are
seeking the Commission’s intervention with regard to their prayers.
8. In oral arguments, Counsel for IPL submitted
that their Petition seeks to invoke the Commission’s power to determine
and review the tariff in respect of arrears payable and, alternatively,
to arrive at a suitable payment schedule. With regard to the Commission’s jurisdiction
regarding the reliefs prayed for and the admissibility of the Petition,
IPL Counsel drew attention to Sections 22(1)(a) and (d) read with Section
29 of the ERC Act, and the provisions of the MERC (Conduct of Business)
Regulations. He submitted that, under Section 22(1)(a) the
Commission has to, inter alia, determine the retail tariff of electricity.
He emphasized the word “retail”
to make a connection with the tariff for individual consumers
such as the Petitioner. He also referred to Section 29(5), which provides
that the State Government can provide subsidy “to any consumer” to indicate
that the legal scheme allowed a dispensation in the case of an individual
consumer with regard to tariff and other related matters affecting him.
Section 22(1)(d) mandates the promotion of “economy” in the activities
of the electricity industry, and he sought to relate this to the prayers
for a dispensation regarding arrears payable by IPL to MSEB.
Counsel for IPL also referred to Section 29(2)(e), which requires
that the interest of consumers be safeguarded and that they pay for
the use of electricity in a reasonable manner, and sought to relate
this provision to his prayer for granting a reasonable repayment schedule
for arrears. Finally, Counsel drew attention to section 29(3), which allows the
geographical position of any area to be taken into account while determining
the tariff, and pointed out that the IPL unit is located in an area
recognised by the State Government as industrially backward.
9. In response, MSEB have submitted, in their
written reply and in oral arguments by Counsel, while opposing admission,
that IPL are no longer their consumer since the power supply has been
permanently disconnected and their agreement is no more in force. MSEB pointed out that IPL have suppressed the
fact that their case is before the Board for Industrial and Financial
Reconstruction (BIFR). That statutory authority is yet to conclude whether
IPL can be rehabilitated and, if so, the reliefs that should be granted
by various agencies. Until such
time, it would not be appropriate to consider the reliefs prayed for. Moreover, no convincing or detailed justification has been provided
for the various reliefs in arrears and future payments, and the manner
in which they are related to the revival of the unit. IPL had approached MSEB for some of these reliefs in the year 2001
and, after due deliberation, MSEB had decided to permanently disconnect
power supply with effect from the earlier date on which it was temporarily
disconnected, thereby resulting in reduction in the arrears payable. MSEB also allowed IPL to pay the balance arrears
in 12 monthly instalments. However,
IPL did not pay even the first instalment under this dispensation, so
the relief given in terms of demand charges was withdrawn. MSEB also submitted that, in view of the Orders
of the High Court (Nagpur Bench) and the large arrears accumulated by
IPL, any scheme for payment of the balance amount would require ratification
by that Court upon an application by the Petitioner.
10. With regard to IPL’s reference to Regulation
74(h), which requires the Commission to keep in view, while determining
the tariff, the need for the healthy growth of the industry, MSEB Counsel
submitted that the healthy growth of an industry does not depend on
the electricity tariff alone. By
IPL’s own admission, they have been incurring losses right from inception
and faced labour unrest, leading to closure of the unit, unrelated to
the electricity tariff. MSEB have pointed out that all concerned, including
IPL, were given the opportunity to be heard by the Commission in the
process leading to the two tariff Orders issued so far, and the tariff
was set in accordance with this process.
Such opportunity would again become available to the Petitioner
before the tariff is next revised, and that would be the appropriate
occasion to make tariff related submissions concerning the Petitioner.
In any case, MSEB submitted that Regulation 74(h) envisages a
general policy of healthy growth of industries, and is not intended
for invocation of jurisdiction for an individual consumer to approach
the Commission exclusively for his personal gain.
11. With regard to IPL Counsel’s attempt to relate
various words in Sections 22 and 29 to the prayers and the admissibility
of the Petition, Counsel for MSEB submitted that the word “retail” is
defined in Black’s Law Dictionary as “the sale of goods or commodities
to ultimate consumers as opposed to sale for further distribution”. The use of the term in the legal provisions
cited by IPL Counsel only means that the Commission can decide the retail
tariff, but says nothing to support a separate tariff for each individual
consumer. Section 22(1)(a) does
not contemplate that a separate distinction can be made on the basis
of the specific facts and circumstances connected with IPL. Section 29(3) deals with differentiation between classes of consumers,
and enables the Commission to look at different segments of industry
or society for differential tariff treatment. However, he submitted
that this is not a tariff matter. Instalments
were given to IPL, and they defaulted on that also.
As far as the reference to Section 29(2)(e) is concerned, it
sets out one of the factors that the Commission must consider for tariff
determination. However, we are
not at that stage in these proceedings.
He submitted that there is no case for admission and urged that
the Petition be dismissed with costs.
12. By IPL’s own admission there are various statutory
authorities and other agencies which are concerned with the reliefs
and concessions that IPL feel are necessary for enabling them to restart
their operations, including BIFR and, more particularly in the case
of most of the specific reliefs sought in the Petition, the MSEB. It
will be clear from the prayers that what IPL are seeking are matters
for commercial negotiations with MSEB (and within the purview entirely
of the State Government with regard to electricity duty), and not with
the Commission. The Commission’s jurisdiction cannot be invoked merely on the grounds
that the statutory and other authorities which are actually concerned
may take time, or that MSEB are not willing to extend the reliefs applied
for, when no such jurisdiction exists and recourse can be had to the fora of the Courts.. This is quite apart from the admitted fact
that that some reliefs were granted by MSEB, but did not subsist on
account of default by IPL for various reasons.
As far as the attempt to stretch the ambit of the legal scheme
in Sections 22 and 29 of the ERC Act and the Commission’s Regulations,
and the nexus sought to be established between various expressions used
and the maintainability of their case, Counsel for MSEB’s rebuttal reflects
the evidently correct position. On tariff-related matters, as it happens, the
process of determination of MSEB’s tariff for 2003-04 has already begun
separately, and on such matters IPL could use that opportunity to have
their say. The Commission accordingly
rejects admission of the Petition with these observations.
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| Sd/- | Sd/- | Sd/- | |
| (Jayant Deo) | (Dr Pramod Deo) | (P. Subrahmanyam) |
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| Member | Member | Chairman, MERC |
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| (A.M. Khan) | |||
| Secretary, MERC | |||
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