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Fixing higher electricity tariff for self-financed educational institution legally valid

In KERALA STATE ELECTRICITY BOARD REP. BY ITS SECRETARY & ANR. vs  PRINCIPAL SIR SYED INSTITUTE FOR TECHNICAL STUDIES & ANR, the issue before the Supreme Court was the tariff notification issued by the Kerala State Electricity Regulatory Commission  segregating Self-Financing Educational Institutions (SFEI) from Government run and Government Aided Private Educational Institutions and subjecting the former to a higher category of tariff. It was urged that tariff for SFEIs could not be brought under the head “Commercial”. 

Referring to various judgments, the court decided that SFEIs are not permitted to indulge in profiteering but that does not imply they cannot generate reasonable revenue surplus to enable them to continue with their activities. While an educational institution in our ordinary perception may not be performing functions similar to the other entities who undertake business ventures, a tariff fixing body is not required to proceed on the basis of such common perception. The duty of such body is to determine which rate an organisation shall pay, and entities working in diverse fields can be clubbed together under a common umbrella to be subjected to a common rate. In that context, for exercise of this nature, the heading “commercial” cannot be constructed to restrict the entities that can come under that head on the basis of the nature of their activities, i.e. whether such activities have commercial attributes or not. Selection of heading is an exercise of convenience in fixing tariff rates and not necessarily the controlling factor in choosing the entities included under that heading. 

Agreeing with the Commission, the Supreme Court observed that writ petitioners’ contention is that the reason of their formation or existence is imparting education and this is so for the Government run and aided institutions also. On this  basis, they argue that different tariffs could not be charged to these two sets of institutions. We are, however, unable to accept this argument. The facilities provided by Govt. & Private institutions are different, it is of common knowledge, of which we take judicial notice, that the student profile of state run and state aided institutions is different from those of SFEIs. Students from comparatively modest background go to the State run or State funded institutions. The State run and State aided institutions are funded by the tax payers, which is also a material factor in making distinction between the aforesaid categories of the institutions. While funding educational institutions, the State undertakes to discharge one of its essential welfare measures. 

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