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THE ELECTRICITY (SUPPLY) ACT, 1948

Title : THE ELECTRICITY (SUPPLY) ACT, 1948

Year : 1948

XIX. Where in respect of any month notified by the Board (and hereinafter in this Schedule referred to as the relevant month), the scheduled effective capacity of the station is computed under paragraph X to be less than one-half of the actual effective capacity of the station, the Board may give to the licensee six month's notice in writing that on the first day of the year of account next following the date of expiration of such notice the station will be purchased by the Board.

XX. Notwithstanding anything contained in paragraph X, in computing the scheduled effective rapacity for purposes of paragraph XIX there shall be left out of account all such units of plant and works as would not reasonably have been required by the licensee for purposes other than supply to the Board had the station not been a controlled station.

XXI. Where a notice under paragraph XIX has been served by the Board on the licensee, the Board shall purchase the station or where a severance of the station from the distributing system of the licensee is not possible or is likely to affect prejudicially the interest of the licensee and the licensee so requires the entire undertaking of the licensee at the date specified in the notice and at a price determined under the Fourth Schedule.

XXII. From the date of purchase of the station or at the option of the licensee the under taking of the licensee under paragraph XXI the provisions of paragraphs I, IV and VIII shall, in relation to the station, cease to have effect, and the licensee shall be required to purchase the electricity supplied to  hi m by the Board in accordance with the provisions of Part II as modified by paragraph XXIII.

XXIII. In applying the provisions of Part II to the purchase by a licensee whose station has been purchased under this Part of electricity supplied to  hi m by the Board,-

(a) The station shall, notwithstanding that it has been purchased by the Board, be deemed to remain a controlled station;

(b) Clause (a) of paragraph XII shall be construed as if the reference therein to the provisions of the Eighth Schedule excluded a reference to clauses (b), (c) and (d) of paragraph I of that Schedule, and as if the following proviso were added to the said clause (a), namely:-

"Provided that the annual charges to be included in accordance with clauses (e) and (f) of paragraph I of the   said Schedule shall be such as would have resulted had the assets purchased by the Board under Part IV remained in the ownership of the licensee";

(c) Clause (b) of paragraph XII shall be construed as if the reference therein to clauses (b), (c) and (d) of paragraph I of the Eighth Schedule were omitted;

(d) There shall be added to the sum payable by the licensee to the Board under clause (a) of paragraph XIII in each month of the year of account a sum equal to one twelfth of the amount calculated from the expression,
"A x B
------;  Where-
C"

A=that part of the scheduled overhead charges payable by the licensee to the Board in respect of the last year of account in which the station was in the ownership  of the licensee, which relates to the items referred to in clauses (b),(c) and (d) of paragraph 1 of the Eighth Schedule;

B =the sum of the scheduled effective capacities for each month of the year of account;

C=the sum of the scheduled effective capacities for each month of the said last year of account.

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1. Substituted by Act 101 of 1956, Section 24, for certain words w.e.f. 30-12-1956.

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Schedule II

THE SECOND SCHEDULE

(See section 35

SUPPLY BOARD TO LICENSEES OWNING STATIONS OTHER THAN CONTROLLED STATIONS

I. Before the end of each year the Board shall declare to the licensee in respect of each of the two next succeeding years the maximum number of kilowatts which it will make available for the purpose of the licensee's undertaking.

II. Where the Board and the licensee agree that the number of kilowatts declared under paragraph I will be inadequate to me et the requirements of the licensee having regard to the capacity of the licensee's generating plant, the Board shall not refuse its consent under section 44, the provisions of that section notwithstanding, to the installation by the licensee of such generating plant as he may reasonably require for the purposes of hi s undertaking, unless the Board is able appropriately to amend its declaration within a reasonable time.

III. The licensee shall be entitled to demand from the Board, and the Board shall, except where prevented by causes beyond its control, be under obligation to supply to the licensee, a maximum number of kilowatts in each year not exceeding, without the consent of the Board, the maximum number of kilowatts declared under this Schedule in respect of that year.

IV. The point at which the electricity to be supplied under this Schedule shall be delivered to the licensee shall, unless otherwise agreed between the Board and the licensee, be at the licensee's generating station, and the pressure of supply shall be such as may be agreed between the Board and the licensee.

V. The Board shall bear the whole of the cost of the service apparatus required for making the supply under this Schedule available to the licensee.

VI. The price to be paid by the licensee to the Board in respect of each year for electricity supplied under this Schedule shall be the Grid Tariff.

Schedule III

THE THIRD SCHEDULE

(See section 36)

CLOSING DOWN OF GENERATING STATIONS OTHER THAN CONTROLLED STATIONS

I. Where the Board proposes under section 36 permanently to close down a generating station other than a controlled station, it shall give the licensee owning the station not less than six months, notice in writing expiring at the end of any year of account that from the first day of the next succeeding year of account thereafter in this Schedule referred to as the date of closing down) the station shall be permanently closed down.

II. From the date of closing down the Board shall be under obligation to supply to the licensee, except where prevented by causes beyond its control, and the licensee shall be under obligation to take from the Board, the whole of the electricity required by the licensee for the purposes of his undertaking, except such quantity of electricity as the licensee may for the time being be entitled under paragraph III to purchase from a source other than the Board or as he may be generating in another station, not being a controlled station.

III. Unless otherwise agreed between the Board and the licensee, the licensee shall not, where he has received a notice under paragraph I, purchase after the date of closing down any quantity of electricity from a source other than the Board:

Provided that where on the dale of the receipt of such notice the licensee is bound under any contract to purchase any quantity of electricity from some other source, he may, for a period not exceeding two years after the date of closing down or for such further period, if any, as [he Board may allow, continue to purchase electricity under the said contract from such other source.

IV. (1) The point at which electricity to be supplied by the Board shall he delivered to the licensee shall, unless otherwise agreed between the Board and the licensee, be at the licensee's generating station, and the pressure of supply shall be such as may be agreed between the Board and the licensee.

(2) The Board shall bear the whole of the cost of the service apparatus required for making the supply available to the licensee.

V. The licensee shall have the option, to be exercised by a date not later than three months prior to the date of closing down, either-

(a) (i) To sell the station at any time after the date of closing down, and

(ii) To purchase the whole of the electricity supplied to him by the Board at the Grid Tariff, or

(b) (i) To require the Board to purchase the station 1 [or the entire undertaking] at the date of closing down at a price determined under the Fourth Schedule, and

(ii) To purchase the whole of the electricity supplied to him by the   Board on the terms hereafter set out in this Schedule.

VI. Where a licensee exercises his option under paragraph V in terms of clause (b) thereof, the Board shall comply with the requirement to purchase under sub-clause (i) of that clause, and the following provisions of this Schedule shall apply.

VII. As soon as practicable after the licensee has exercised his option as aforesaid, there shall be ascertained and agreed between him and the Board the following quantities in respect of each year of account subsequent to the date of closing down, namely:-

(a) The maximum capacity of the station, that is to say, the maximum capacity (expressed in kilowatts available for supply to feeders) of such plant and works appertaining to the generation of electricity at the date of closing down as would have been available for reliable and regular commercial operation on the first day of the year of account, had the station not been closed down under this Schedule and had no replacement of any major item of such plant or works been carried out subsequent to the date of closing down.

(b) The number and size of units of plant and works, forming part of the aforesaid plant and works, which would have represented reasonable standby in the station.

(c) The standby capacity of the station, that is to say, the number of kilowatts (expressed in kilowatts available for supply to feeders) by which the maximum capacity of the station would be reduced if the standby plant and works referred to in clause (b) were to be left out of account.

(d) The agreed effective capacity of the station, that is to say, the number of kilowatts by which the maximum capacity exceeds the standby capacity.

VIII. As soon as practicable after the date of closing down there shall be ascertained in agreement between the Board and the licensee in respect of each of the three consecutive years of account immediately preceding the date of closing down (hereafter in this Schedule referred to as the basic years)-

(a) The sums expended by the licensee and wholly attributable to the generation of electricity under the following heads, namely:-

(i) Fuel;

(ii) Less oil, water and stores consumed;

(iii) Salaries and wages and any contribution by the licensee for pensions, provident fund, superannuation and insurance of officers and servants;

(iv) Repairs and maintenance, and renewals not chargeable to capital account;

(v) Management, rents, rates and taxes (including super-tax payable by the licensee as a company, but excluding other taxes on profits), insurance of plant and general establishment charges;

(vi) Any other expense on revenue account;

(c) The actual effective capacity of the station on the first day of each such year agreed in accordance with the principles set out in paragraph IX of the First Schedule.

IX. As soon as practicable after the beginning of each year of account there shall be ascertained in respect of that year such annual charges by way of interest and depreciation attributable to the assets purchased by the Board under this Schedule as would have resulted from the application of clauses (e) and (f) of paragraph I of the Eighth Schedule, had those assets remained in the ownership of the licensee.

X. The licensee shall be entitled to purchase from the Board in each year of account at a price determined under paragraph XI-

(a) A number of kilowatts not exceeding the agreed effective capacity ascertained in respect of that year under paragraph VII, and

(b) A number of kilo watt-hours not exceeding the number of kilowatt-hours which bears the same proportion to the total number of kilowatt-hours required by the licensee in that year for the purposes of his undertaking as the agreed effective capacity ascertained in respect of that year bears to the total maximum demand of the licence in that year for the said purposes.

XI. The price payable by the licensee in respect of each year of account for the quantity of electricity specified in paragraph X shall be-

(a) In respect of kilowatts, a fixed charge equal to the sum of-

(i) An amount calculated from the expression,

"A   +   A   x   B;
---    ------- ----
2         2          C"
(ii) an amount calculated from the expression
"B x D
------;
C"

(iii) The annual charges by way of interest and depreciation ascertained in respect of the year of account under paragraph IX, where-

A=one-third of the total costs during the basic years under heads (ii), (iii), (iv) and (vi) set out in clause (a) of paragraph VIII;

B=the agreed effective capacity for the year of account;

C=one-third of the sum of the actual effective capacities [ascertained under clause (b) of paragraph VIII] for each of the basic years;

D=one-third of the total costs during the basic year under head (v) set out in clause (a) of paragraph VIII;

(b) In respect of kilowatt-hours, a running charge per kilowatt-hour ascertained-

(i)  By multiplying the total number of tons of fuel consumed in the station in the basic years by the estimate agreed between the Board and the  licensee of the  cost per ton which would have been incurred in delivering the handling the same quantity of fuel of equivalent calorific value to the furnaces in the station during the year of account, had the station remained in the ownership of the licensee, and

(ii) By dividing the total cost so found by the total number of units sent out from the station in the basic years.

XII. The price payable by the licensee for all electricity supplied to him by the Board in excess of the quantity specified in paragraph X shall be the Grid Tariff.

XIII. The licensee shall have the right at any time on giving the Board prior notice in writing expiring at the end of a year of account of purchase at the Grid Tariff the whole of the electricity supplied to him by the Board:

Provided that the Board in those circumstances may make it a condition that the licensee shall, until the date on which the agreed effective capacity of the station becomes nil, pay to the Board in each year of account in addition to the Grid Tariff a sum equal to such proportion as the Board may fix of the annual charges by way of interest and depreciation ascertained in respect of the year under paragraph IX:

Provided further that after the expiration of the said notice, the licensee shall not be entitled at any time to purchase electricity from the Board at the price ascertained under paragraph XI.

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1. Inserted by Act 101 of 1956, Section 25 w.e.f. 30-12-1956.
A=one-third of the total costs during the basic years under heads (ii), (iii), (iv) and (vi) set out in clause (a) of paragraph VIII;  C=one-third of the sum of the actual effective capacities [ascertained under clause (b) of paragraph VIII] for each of the basic years;the fourth schedule.

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Schedule IV

THE FOURTH SCHEDULE

(See sections 23 and 37 and First and Third Schedules)

PRICE FOR UNDERTAKINGS, GENERATING STATIONS AND MAIN TRANSMISSION LINES PURCHASED BY THE BOARD

I. For the purposes of this Schedule-

(a) "Date of vesting" means the date on which the undertaking, generating station, main transmission line or asset forming part of such station or line, as the case may be, vests in the Board;

(b) "Original cost" of an asset means the amount of expenses certified or determined under paragraph II to have been properly incurred on and incidental to the provision of the asset for the purposes of the undertaking, generating station or main trans-mission line, as the ease may be;

1[***]

II. The price to be paid for any undertaking, generating station or main transmission line as the case may be purchased by the Board under this Act shall be such sum as may be certified by an auditor appointed by the State Government in this behalf to have been the amount properly incurred on and incidental to the establishment of the undertaking, station or main transmission line, as the case may be, less depreciation thereon2[calculated in accordance with the provisions of paragraph VI of the Sixth Schedule]:

Provided that there shall be added to such sum as aforesaid on account of such purchase of the generating station or main transmission tine such reasonable compensation as may be determined by the Board having due regard to the fact that a portion of the undertaking is to be acquired:

Provided further that if the Board or the licensee is dissatisfied with the sum so certified, the matter shall, in default of agreement between them, be determined3[by arbitration] as provided in section 76.

4[***]

IV.  The auditor appointed under paragraph II shall be a person qualified under the provisions of5section 144 of the Indian Companies Act, 1913 (7 of 1913), to act as an auditor of companies.

The auditor's cost under this Schedule shall be shared equally by the Board and the licensee concerned.

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1. Clause (c) omitted by Act 23 of 1978, Section 22 w.e.f. 3-6-1978.

2. Substituted by Act 23 of 978, Section 22, for "on the scale set out in paragraph III" w.e.f. 3-6-1978.

3. Inserted by Act 30 of 1966, Section 19 w.e.f. 16-9-1966.

4. Paragraph III omitted by Act 23 of 1978, Section 22 w.e.f. 3-6-1978.

5. See sections 224 and 226 of the Companies Act, 1956 (1 of 1956).

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Schedule V

THE FIFTH SCHEDULE
(See section 41)

CHARGES FOR USE 1*[BY BOARD OR GENERATING COMPANY OF TRANSMISSION LINES AND MAIN TRANSMISSION LINES]

I. The following charges and allowances shall be made in respect of a year of account for the use by 2 [the Board or the Generating Company] of main transmission lines or transmission lines (hereafter in this Schedule referred to as lines), namely:-

(a) The actual cost of maintenance of the lines, including renewals thereof not chargeable to capital account;

(b) Sums paid in respect of the lines for insurance and as rents, rates and taxes 3*[(in-cluding all taxes payable on income and profits)];

(c) The proportion of management and general establishment charges properly attribut¬able to the tines;

(d) Any other expenses on revenue account properly attributable to the lines;

(e) 4*[Interest on the depreciated cost of the lines shown in the books of the undertaking and properly attributable to the lines (whether defrayed out of capital or revenue) and interest on such working capital as is properly attributable to the lines]:

Provided that for the purpose of ascertaining the principal on which interest is payable within the meaning of this clause, there shall be left out of account  any part of principal interest on which is charged to capital;

(f) An allowance for depreciation of an amount determined in respect of the lines in accordance with the provisions of paragraph VI of the Sixth Schedule.

II. If the lines are used partly by 2*[the Board or the Generating Company] and partly by the licensee owning them, or if the arrangement for their use comes into force or determines otherwise than at the beginning or end of a year of account, the charges and allowances referred to in paragraph I shall be the proper proportion thereof having regard to the use made of the lines by  2*[the Board or the Generating Company] and the period of such use during the year and with the addition of the cost of such additional transmission losses as may have been incurred by the licensee as a result of the Board's user of the lines.

5*[III. For the purposes of clause (e) of paragraph I,-

(i) "Depreciated cost of the lines" means original cost thereof as determined in accordance with the provisions of sub-paragraph (6) of paragraph XVII of the Sixth Schedule less the amount written off or set aside on account of depreciation on fixed assets and the amount written off in respect of intangible assets thereof in the books of the undertaking before or after the commencement of this Act;

(ii) The rate of interest shall be,-

(a) Where the licensee owning the lines in a local authority, the average rate payable on the money raised by that authority for the purpose of constructing the lines;

(b) In any other case, the Reserve Bank rate ruling at the beginning of the year referred to in paragraph I plus two per centum.]

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1. Substituted by Act 115 of 1976, Section 32, for "BY BOARD" w.r.e.f. 8-10-1976.

2. Substituted by Act 115 of 1976, Section 32, for "the Board" w.r.e.f. 8-10-1976.

3. Substituted by Act 101 of 1956, Section 26, for "(including super-tax payable by the licensee as a company, but excluding other taxes on profits)" w.e.f. 30-12-1956.

4. Substituted by Act 101 of 1956, Section 26, for certain words w..ef. 30-12-1956.

5. Substituted by Act 30 of 1966, Section 20, for paragraph III w.r.e.f. 1-4-1966.

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Schedule VI 

THE SIXTH SCHEDULE
1*[See sections 57 and 57A]

FINANCIAL PRINCIPLES AND THEIR APPLICATION

I. 2*[Notwithstanding anything contained in the Indian Electricity Act, 1910 (9 of 1910) 3*[[except sub-section (2) of section 22A]], and the provisions in the licence of a licensee, the licensee shall so adjust his 4*[charges] for the sale of electricity whether by enhancing or reducing them that his clear profit in any year of account shall not, as far as possible, exceed the amount of reasonable return:]

5*[Provided that such 4*[charges] shall not be enhanced more than once in any year of account:

Provided further that the licensee shall not be deemed to have failed so to adjust his 4 [charges] if the clear profit in any year of account has not exceeded the amount of reasonable return by 6* [twenty] per centum of the amount of reasonable return:

Provided further that the licensee shall not enhance the 4 [charges] for the supply of electricity until alter the expiry of a notice in writing of not less than sixty clear days of his intention to so enhance the 4*[charges], given by him to the State Government and to the Board:

Provided further
that if the 4*[charges] of supply fixed in pursuance of the recommendations of a rating committee constituted under section 57A are lower than those notified by the licensee under and in accordance with the preceding proviso, the licensee shall refund to the consumers the excess amount recovered by him for them:]

7*[Provided also that nothing in this Schedule shall be deemed to prevent a licensee from levying with the previous approval of the State Government, minimum charges for supply of electricity for any purpose.]

7*[IA. The notice referred to in the third proviso to paragraph I shall be accompanied by such financial and technical data in support of the proposed enhancement of charges as the State Government may, by general or special order, specify.]

II. (1) If the clear profit of a licensee in any year of account is in excess of the amount of reasonable return, one-third of such excess, not exceeding 8*[five per cent.] of the amount of reasonable return, shall be at the disposal of the undertaking. Of the balance of the excess, one-half shall he appropriated to a reserve which shall be called the Tariffs and Dividends Control Reserve and the remaining half shall either be distributed in the form of a proportional rebate on the amounts collected from the sale of electricity and meter rentals or carried forward in the accounts of the licensee for distribution to the consumers in future, in such manner as the State Government may direct.

(2) The Tariffs and Dividends Control Reserve shall be available for disposal by the licensee only to the extent by which the clear profit is less than the reasonable return in any year of account.

(3) On the purchase of the undertaking under the terms of its licence any balance remaining in the Tariffs and Dividends Control Reserve shall be handed over to the purchaser and maintained as such Tariffs and Dividends Control Reserve;

9*[Provided that where the undertaking is purchased by the Board or the Slate Government, the amount of the Reserve may be deducted from the price payable to the licensee.]

10*[(4) On the purchase of the undertaking after the expiry, or on the revocation, of its licence or otherwise, all amounts of rebate lying undistributed to the consumers on the date of such purchase, shall be handed over to the purchaser who, in turn, shall enter the same in his books of account, under the heading Consumers' Rebate Reserve and any amount lying undistributed in that Reserve shall be carried forward for distribution to the consumer concerned:

Provided
that the share of money in the Consumers' Rebate Reserve payable to the con¬sumers who are not traceable or who have ceased to be consumers in relation to that undertaking, may be utilised in the development works of the purchaser.]

III. There shall be created from existing reserves or from the revenues of the undertaking a reserve to be called "Contingencies Reserve".

IV. (1) The licensee shall appropriate to Contingencies Reserve from the revenues of each year of account a sum not less than one-quarter of one per centum and not more than one-half of one per centum to the original cost of fixed assets, provided that if the said reserve exceeds, or would by such appropriation, be caused to exceed, five per centum of the original cost of fixed assets, no appropriation shall be made which would have the effect of increasing the reserve beyond the said maximum.

11*[(2) The sums appropriated to the Contingencies Reserve shall be invested in securities authorised under the Indian Trusts Act, 1882 (2 of 1882) and such investment shall be made within a period of six months of the close of the year of account in which such appropriation is made.]

V. 12 [(1)] The Contingencies Reserve shall not be drawn upon during the currency of the licence except to meet such charges as the State Government may approve as being-

(a) Expenses or loss of profits arising out of accidents, strikes or circumstances which the management could not have prevented;

(b) Expenses on replacement or removal of plant or works other than expenses requisite for normal maintenance or renewal;

(c) Compensation payable under any law for the time being in force and for which no other provision is made.

13*[(2) On the purchase of the undertaking, the Contingencies Reserve, after deduction of the amounts drawn under sub-paragraph (1), shall be handed over to the purchaser and maintained as such Contingencies Reserve:

Provided that where the undertaking is purchased by the Board or the State Government, the amount of the Reserve computed as above shall, after further deduction of the amount of compensation, if any, payable to the employees of the outgoing licensee under any law for the time being in force, be handed over to the Board or the State Government, as the case may be.]

14*[VA. (1) There shall be created a reserve to be called the Development Reserve to which shall be appropriated in respect of each accounting year a sum equal to the amount of income-lax and super-tax calculated at rates applicable during the assessment year for which the accounting year of the licensee is the previous year, on the 15*[amount of investment allowance] to which the licensee is entitled for the accounting year 16 [under section 32A of the Income-tax Act, 1961 (43 of 1961)]:

Provided
that if in any accounting year, the clear profit [excluding the special appropriation to be made under item (va) of clause (c) of sub-paragraph (2) of paragraph XVII] together with the accumulations, if any, in the Tariffs and Dividends Control Reserve less the sum calculated as aforesaid falls short of the reasonable return, the sum to be appropriated to the Development Reserve in respect of such account year shall be reduced by the amount of the shortfall.

(2) Any sum to be appropriated towards the Development Reserve in respect of any accounting year under sub-paragraph (1), may be appropriated in annual installments spread over a period not exceeding five years from the commencement of that accounting year.

(3) The Development Reserve shall be available only for investment in the business of electricity supply of the undertaking.

(4) On the purchase of the undertaking, the Development Reserve shall be handed over to the purchaser and maintained as such Development Reserve:]

9*[Provided that where the undertaking is purchased by the Board or the State Government, the amount of the Reserve 17*[(whether such amount is in the form of cash or other assets)] may be deducted from the price payable to the licensee.]

18*[VI. (a) The licensee shall provide each year for depreciation such sum calculated in accordance with such principles as the Central Government may, after consultation with the Authority, by notification in the Official Gazette, lay down from time to time.

(b) Where in any particular year depreciation cannot be adjusted against revenues, the same may be carried over to subsequent years.

(c) The provisions of this paragraph shall apply to the charging of depreciation for the year in which the Electricity (Supply) Amendment Act, 1978 (23 of 1978), comes into force.]

XII. Where contributions are made by consumers towards the cost of construction of service lines constructed after the date on which this Act comes into force only the net cost of such service lines after deducting such contributions shall be included in the cost of fixed assets for the purposes of arriving at the capital base:

Provided that for the purposes of depreciation under paragraph VI, the total original cost of construction of the service lines shall be taken into account.

XIII. (1) Subject to the provisions of sub-paragraph (2) the ordinary remuneration of a managing agent excluding the office allowance mentioned in sub-paragraph (3) but including purchasing commission, if any, shall be based on a percentage of net profits 19*[as determined in accordance with the provisions of section 349 of the Companies Act, 1956 (1 of 1956)], and shall not exceed-

(a) In respect of the first Rs. 5 lakhs of such net profits-10 per cent.; and

(b) In respect of all net profits in excess of Rs. 5 lakhs-7 per cent.

(2) The amount paid to a managing agent shall be subject to a minimum payment on account of ordinary remuneration not exceeding two rupees per annum for each complete thousand rupees of paid up share and debenture capital, provide that for purposes of computing the minimum payment should the share and debenture capital be less than rupees five lakhs it shall be taken as rupees five lakhs and should the said capital be greater than rupees one crore it shall be taken as rupees one crore.

(3) An office allowance drawn by a managing agent which shall include the salaries and wages of all persons employed in the office of the managing agent, but not the salaries of the engineering staff employed for purposes of the undertaking, shall be a percentage of the operating expenditure and the expenditure during the year of account on capital works. The office allowance so drawn shall not exceed-

(a) In respect of the first rs. 1  lakh of operating expenditure-8 per cent.

In respect of the next Rs. 2 lakhs of operating expenditure-5 per cent.

In respect of the next Rs. 7 lakhs of operating expenditure-2.5 per cent.

In respect of all operating expenditure in excess of Rs. 10 lakhs-1.5 per cent,; and

(b) In respect of the first Rs. 1 lakh of capital expenditure incurred during the year of account-4 per cent.

In respect of the next Rs. 2 lakhs of capital expenditure incurred during the year of account- 3 per cent.

In respect of the next Rs. 7 lakhs of capital expenditure incurred during the year of account-1.5 per cent.

In respect of all capital expenditure in excess of Rs. 10 lakhs incurred during the year of account-1 per cent.

Operating expenditure for the purposes of sub-paragraph (3) (a) above shall mean the sum of the items of expenditure as defined in sub-paragraph (2) (b) of paragraph XVII with the omission of those under clauses (i), (iv), (ix) and (x) thereof.

20*[Explanation. -For the purposes of this paragraph, the expression "managing agent" shall include every person, by whatever name called, who is in charge of the management of the whole, or substantially the whole, of the undertaking and where more persons than one are placed in charge of the management of the whole, or substantially the whole, of the undertaking, the total remuneration payable to all such persons shall not in the aggregate exceed the limits specified in this paragraph.]

XIV. The Board of Director of an undertaking shall not contain more than ten directors,

XV. (1) Where at any time within three years before the next option of purchase under the licence arises, the licensee proposes to make any capital expenditure which exceeds 7*[in any year of account,] twenty-five thousand rupees or two per centum of the capital base, whichever is more, in respect of which any amount would in the event of purchase under the option be payable by the purchaser to the license, the licensee shall, before giving effect to such proposal, apply to the Board or where no Board is constituted, the State Government for its concurrence.

(2) If the Board or the State Government, as the case may be, does not within one month from the receipt of such application, consent to such expenditure, the licensee may refer the matter to the arbitration of the Authority.

XVI. Any dispute or difference as to the interpretation or any matter arising out of the provisions of this Schedule shall be referred to the arbitration of the Authority:

20*[Provided that where a rating committee has been constituted under section 57A, no such dispute or difference shall be referred to the arbitration of the Authority during the period between the date of the constitution of such committee and the date of the order of the State Government made on the recommendations of the committee.]

Definitions

XVII. For the purposes of this Schedule-

(1) "Capital base" means the sum of-

7*[(a) The original cost of fixed assets available for use and necessary for the purpose of the undertaking subject to the provisions of paragraph XII in respect of service lines, and the excess amount referred to in the proviso to sub-paragraph (2) of paragraph VII in respect of any fixed assets which has ceased to be available for use;]

(b) The cost of intangible assets 7 [including expenses on account of new capital issue];

(c) The original cost of works in progress;

21*[(d) The amount of investments compulsorily made under paragraph IV of this Schedule together with the amount of such investments made after the commencement of this Act from contributions towards depreciation as in the opinion of the Authority could not be utilised for the purpose of the business of electricity supply of the undertaking;]

(e) An amount on account of working capital equal to the sum of-

(i) One-twelfth of the sum of the book cost of stores, materials and supplies including fuel on hand at the end of each month of the year of account;

(ii) One-twelfth of the sum of 22*[cash and bank balances (whether credit or debit)] and call and short-term deposits of the end of each month of the year of account, not exceeding in the aggregate an amount equal to one-quarter of the expenditure under sub-paragraph (2) (b) of this paragraph excluding23*[sub-clauses (i), (iv), (iva), (ivb) and (x)]; less-

(i) The amounts written of or set aside on account of depreciation of fixed assets and amounts written off in respect of intangible assets in the books  of the undertaking before or after the commencement of this Act; 24 [***]

(ii) The amount of any loans advanced by the Board  25 [***];

7*[(iia) The amount of any loans borrowed from organisations or institutions approved by the State Government;

(iib) The amount of any debentures issued by the licensee;]

26*[(iii) The amounts deposited in cash with the licensee by consumers by way of security;]

14*[(iv) The amount standing to the credit of the Tariffs and Dividends Control Reserve 7*[at the beginning of the year of account];]

27*[(v) The amount standing to the credit of the Development Reserve at the close of the year of account;]

14*[(vi) The amount carried forward 7*[at the beginning of the year of account] in the accounts of the licensee for distribution to the consumers under paragraph II.]

(2) "Clear profit" means-

The difference between the amount of income and the sum of expenditure plus specific appropriations made up in each case as follows:-

(a) Income derived from-

(i) Gross receipts from sale of energy, less discounts applicable thereby;

(ii) Rental of meters and other apparatus hired to consumers;

(iii) Sale and repair of lamps and apparatus;

(iv) Rents, less outgoings not otherwise provided for;

(v) Transfer fees;

(vi) Investments, fixed and call deposits, and bank balances;

(vii) Other general receipts accountable in the assessment of Indian income-tax and arising from the ancillary or incidental to the business of electricity supply;

(b) 28*[expenditure properly incurred on]-

(i) Generation and purchase of energy;

(ii) Distribution and sale of energy;

(iii) Rents, rates and taxes, other than all taxes on income and profits;

(iv) Interest on loans advanced by the Board 29 [***];

7*[(iva) Interest on loans borrowed from organisations or institutions approved by the State Government;

(ivb) Interest on debentures issued by the licensee;]

(v) Interest on security deposits;

(vi) Legal charges;

(vii) Bad debts;

(viii) Auditors' fees;

(ix) Management including managing agents' remuneration as provided for in para XII;

(x) Depreciation, computed as 30*[here in before] set out;

(xi) Other expenses 14 [(excluding interest on debentures and loans)], admissible under the law for the time being in force in the assessment of Indian Income-tax and arising from ancillary or incidental to the business of electricity supply;

31*[(xii) Contributions to provident fund, staff pension and gratuity computed under any law for the time being in force or any such scheme as is approved by the State Government;

(xiia) Expenses on apprentice and other training schemes;]

14*[(xiii) Bonus paid to the employees of the undertaking-

(a) Where any dispute regarding such bonus has been referred to any tribunal or other authority under any law for the time being in force relating to industrial or labour disputes, in accordance with the decision of such tribunal or authority;

(b) In any other case, with the approval of the State Government;]

(c) Special appropriations sufficient to cover-

(i) Previous losses (that is to say excess of expenditure over income) which have arisen from the business of electricity supply to the extent in any year 32*[permitted by the State Government];

(ii) All taxes on income and profits;

(iii) Installments of written down amounts in respect of intangible assets and new capital issue expenses to the extent in any year actually appropriated for the purpose in the book of the undertaking:

Provided that the amounts so appropriated shall not exceed the amount found by dividing the written down cost of such assets by the number of complete years remaining before the next option of purchase under the licence arises;

(iv) Contributions to the Contingency Reserve, computed as 30 [here in before] sert out;

(v) Contributions towards arrears of depreciation;

14*[(va) Contributions to the Development Reserve referred to in paragraph VA;]

33*[vb) Debt redemption obligation of the private licensees which may be done on a year to year basis, taking into account the requirement of debt redemption and resource generation through depreciation, retained sur¬plus,]

(vi) Other special appropriations permitted by the State Government.

(3) "Debenture capital" means-

capital raised against debentures or other instruments creating a charge or lien on the assets of the undertaking.

(4) "intangible assets" means-

Underwriter's commission and suchpreliminary and promotional expenditure shown as a debit in the capital account of the undertaking, as has fairly arisen in promoting the business of electricity supply excluding any amount paid on account of goodwill.

(5) "ordinary capital" means-

In the case of a company, the amount of ordinary capital paid up and attributable to the undertaking of the licensee;
in other cases the net amount standing to the credit of the proprietor or proprietor's account or accounts whether in capital, personal or any other account howsoever called and property attributable to the business of electricity supply.

(6) "Original cost" means in respect of any asset the sum of-

(a) The cost of the asset to the licensee, including the cost of delivery and all charges properly incurred in erecting and bringing the asset into beneficial use,

34*[(b) Interest charges on capital expenditure incurred during the period between the date of grant of the licence and the date when the undertaking commences supply, from borrowed money and properly attributable to the assets as actually accrued up to the dale of such supply, as well as interest incurred on outlays for subsequent expansions,]

(c) A proper addition on account of supervision not exceeding fifteen per centum of the cost referred to in sub-paragraph (a),
so, however, that the original cost of any asset shall not in any case exceed the original cost attributed thereto in the books of the undertaking,

(7) "Preference Capital" means-

the amount of paid up capital attributable to the undertaking of the licensee, issued on such preferred terms as are sufficient to qualify it for such description.

35 [***]

(9) "Reasonable return" means-

In respect of any year of account, the sum of the following:-

(a) The amount found by applying the standard rate to the capital base at the end of that year,

36*[(b) The income derived from investments other than those included in the capital base under the provisions of clause (d)of sub-paragraph (1);]

(c) An amount equal to one-half of oneper centum on any loans advanced by the Board 37[***];

7*[(c-1) An amount equal to one-half of one per centum on the amounts borrowed from organisations or institutions approved by the State Government;

(c-2) An amount equal to one-half of one per centum on the amounts realised by the issue of debentures;]

14*[(d) An amount equal to one-half of one per centum on the accumulations in the Development Reserve created under paragraph VA of this Schedule;]

7*[(e) Such other amount as may be allowed by the Central Government, having regard to the prevailing tax structure in the country.]

38*[(10) "standard rate" in respect of any year of account means-

(a) In relation to that part of the capital base for that year of account which is equivalent to the capital base as on the 31st day of March, 1955, seven per centum per annum;

(b) In relation to the remaining 39 [capital base for that year, the Reserve Bank rate ruling at the beginning of that year plus-

(i) Two per centum for investment made up to the dale of the commencement of the Electricity Laws (Amendment) Act, 1991; and

(ii) Five per centum for investments made thereafter;]

Provided that the Central Government may, by notification in the Official Gazette, and with effect from such date as may be specified therein, increase or decrease the standard rate specified in clause (b), if, after consultation with the Authority, that Government considers it necessary so to do to ensure that any rise or fall in the Reserve Bank rate does not affect the reasonable return in any subsequent year of account in relation to that part of the capital base which is equivalent to the capital base as computed on the last date of the previous year of account:)

(11)"Written down cost" means-original cost less the amounts set aside or written off on account of depreciation in the books of the undertaking.

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1. Substituted by Act 101 of 1956, sec,Section 27, for "(See section 57)" w.e.f. 30-12-1956.

2. Substituted by Act 101 of 1956, Section 27, for certain words w.e.f.30-12-1956.

3. Inserted by Act 32 of 1959, Section41 w.e.f. 5-9-1959.

4. Substituted by Act 30 of 1966,Section 21, for "rates" w.e.f. 1-4-1966.

5. Substituted by Act 101 of 1956,Section 27, for the proviso w.e.f. 1-4-1966.

6. Substituted by Act 30 of 1966,Section 1, for "fifteen" w.e.f. 1-4-1966.

7. Inserted by Act 30 of 1966, Section21, w.e.f. 1-4-1966.

8. Substituted by Act 101 of 1956, Section27, for "7-5 per cent." w.e.f. 1-4-1957.

9. Added by Act 30 of 1966, Section 21 w.e.f. 1-4-1966.

10. Inserted by Act 115 of 1976, Section 33 w.r.e.f. 8-10-1976.

11. Substituted by Act 30 of 1966, Section 21, for sub-paragraph(2) w.e.f. 1-4-1966.

12. Paragraph V re-numbered as sub-paragraph (1) thereof by Act 101of `956, Section 27 w.e.f. 1-4-1957.

13. Sub-paragraph (2) Inserted by Act 101 of 1956, Section 27 w..ef.1-4-1957.

14. Inserted by Act 101 of 1956, Section 27 w.e.f. 1-4-1957.

15. Substituted by Act 23 of 1978,Section 23, for "amount of development rebate" w.e.f. 3-6-1978.

16. Substituted by Act 23 of 1978,Section 23, for "under clause (vib) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922)." w.e.f. 3-6-1978.

17. Inserted by Act 23 of 1978, Section21 w.e.f. 1-4-1966.

18. Substituted by Act 23 of 1978,Section 23, for paragraphs VI, VII, VIII, IX, X and XI w.e.f. 3-6-1978.

19. Substituted by Act 101 of 1956, Section27, for "as defined in section 87C (3) of the Indian Companies Act, 1913 (7 of1913)" w.e.f. 1-4-1957.

20. Added by Act 101 of 1956, Section 27w.e.f. 1-4-1957.

21. Substituted by Act 101 of 1956, Section 27, for clause (d)w.e.f. 1-4-1957.

22. Substituted by Act 30 of 1966, Section 21, for "cash and bank balances" w.e.f. 1-4-1966.

23. Substituted by 30 of 1966, Section 21, for "clauses (i), (iv)and (x)" w.e.f. 1-4-1966.

24. The word "and" omitted by Act 101 of 1956, Section 27 w.e.f.1-4-1957.

25. The words "under the provisions of sub-paragraph (2) of paragraph I of the First Schedule" omitted by 101 of 1956, Section 27, w.e.f.1-4-1957.

26. Sub-clause (iii) Inserted by Act 101 of 1956, Section 27 w.e.f.1-4-1959 and Substituted by Act 31 of 1966, Section 21 w.e.f. 1-4-1966.

27. Sub-clause (v) Inserted by Act 101 of1956, Section 27 w.e.f. 1-4-1957 and again Substituted by 30 of 1966, Section 21w.e.f. 1-4-1966.

28. Substituted by Act 101 of 1956, Section 27, for "expenditure incurred on" w.e.f. 1-4-1957.

29. The words "under sub-paragraph (2) of paragraph I of the First Schedule" omitted by Act 101 of 1956, Section 27 w.e.f. 1-4-1957.

30. Substituted by Act 101 of 1956, Section 27, for"hereinafter" w.e.f. 1-4-1957.

31. Substituted by Act 30 of 1966, Section 21, for sub-clause (xii)w.e.f. 1-4-1966.

32. Substituted by Act 101 of 1956,Section 27, for "actually appropriated for the purpose in the books of the undertaking" w.e.f. 1-4-1957.

33. Inserted by Act 50 of 1991, Section14 w.e.f. 15-10-1991.

34. Substituted by Act 50 of 1991,Section 14, for clause (b) w.e.f. 15-10-1991.

35.Clause (8) omitted by Act 23 of 1978,Section 23 w.e.f. 3-6-1978.

36. Substituted by Act 101 of 1956,Section 27 for clause (b) w.e.f. 1-4-1957.

37.The words "under sub-paragraph (2)of paragraph I of the First Schedule" omitted by Act 101 of 1956, Section 27w.e.f. 1-4-1957.

38. Sub-paragraph (10) Substituted by Act 101 of 1956, Section27 (1-4-1957) and again Substituted by Act 30 of 1966, Section 21, w.e.f.1-4-1966.

39. Substituted by Act 50 of 1991, Section 14, for certain wordsw.e.f. 15-10-1991.

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Schedule VII

THE SEVENTH SCHEDULE

[Omitted by the Electricity Supply (Amendment) Act,  1978, (23 of 1978), Section 24 (w.e.f. 3-6-1978).]

Schedule VIII

THE EIGHTH SCHEDULE

(See the First and Third Schedules)

DETERMINATION OF COST OF PRODUCTION OF ELECTRICITY AT GENERATING STATIONS

I. For the purposes of the First and Third Schedules, the cost of production of electricity at a generating station shall be ascertained by calculating and taking into account the following costs, charges and allowances in respect of the year of account, namely:-

(a) Sums expended for fuel, oil, water and stores consumed, for salaries and wages, and any contribution by the licensee for pensions, provident fund, superannuation and insurance of 1 [officers and other employees], for repairs and maintenance and for renewals not chargeable to capital account;

(b)  Sums paid in respect of the station for insurance and as rents, rates and taxes 2 [(including all taxes payable on income and profits)];

(c) The proportion of management and general establishment charges properly attributable to the station;

(d) Any other expenses on revenue account properly attributable to the station;

(e) 3*[Interest on the depreciated cost of the station shown in the books of the undertaking and properly attributable to the station (whether defrayed out of capital or revenue) and interest on working capital properly attributable to the station and the production of electricity therein]:

Provided that for the purpose of ascertaining the principal on which interest is payable within the meaning of this clause, there shall be left out of account any part of principal on which interest is payable out of capital;

(f) An allowance for depreciation of an amount determined in respect of the station in accordance with the provisions of paragraph VI of the Sixth Schedule.

II. 4*[For the purposes of clause (e) of paragraph I-

(i) "Depreciated cost of the station" means original cost thereof as determined in ac-cordance with the provisions of sub-paragraph (6) of paragraph XVII of the Sixth Schedule less the amount written off or set aside on account of depreciation on fixed assets and the amount written off in respect of intangible assets thereof in the books of the undertaking before or after the commencement of this Act;

(ii) The rate of interest shall be,-

(a) On such part of the principal on which interest is payable within the meaning of the said clause as has been advanced on loan by the Board under paragraph I of the First Schedule, the actual rate charged by the Board plus one-half of one per centum per annum on the loan in the year of account;

(b) On the balance of the said principal-

(i) Where the licensee owning the station is a local authority, the average rate payable in the year of account on the money raised by that authority for the purposes of the station;

(ii) In any other case, 5 [the Reserve Bank rate ruling at the beginning of that year plus two per centum].

---------------------------------------------------------------------------------------------------------------------------------------------------------

1. Substituted by Act 23 of 1978, Section 25, for "officer and servants" w.e.f. 3-6-1978.

2. Substituted by Act 101 of 1956, Section 29, for "(including super-tax payable by the licensee as company but excluding other taxes on profits)" w.e.f. 30-12-1956.

3. Substituted by Act 101 of 1956, Section 29, for certain words w.e.f. 30-12-1956.

4. Substituted by Act 30 of 1966, Section 22, for certain words w.e.f. 1-4-1966.

5. Substituted by Act 101 of 1956, Section 29, for "5 per centum per annum" w.e.f. 30-12-1956.

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Schedule IX

THE NINTH SCHEDULE
(See the First Schedule)

ALLOCATION OF COSTS OF PRODUCTION AT GENERATING
STATIONS

I. For the purposes of this Schedule-

(a) the average load factor of a station shall be expressed as a percentage, and shall be ascertained by multiplying the number of kilo watt-hours supplied from the station during the year of account by 100, and dividing the product so obtained by the product of the average monthly maximum demand multiplied by the number of hours during which the station was in commission in the year of account;

(g) The average monthly maximum demand shall be the arithmetical average of the monthly maximum demands on the station in those calendar months during which the station was in commission in the year of account;

(c) A station shall be deemed to be in commission when the whole or any portion of the plant in the station is generating electricity or is in readiness to generate electricity upon demand;

(d) "Cost of fuel" means the sums expended for fuel consumed plus the cost of any transport, handling, preparation or treatment incurred in connection with the delivery of fuel to the boiler hoppers, furnaces or engines and in connection with the disposal of the products or residues of combustion, plus the proportion of salaries and wages and any contributions made by the owner of the station for pensions, provident fund, superannuation and insurance of officers and servants properly attributable to such delivery or disposal, less any sums received from the sale of any products or residues of combustion;

(e) "Cost of oil, water and stores" means the sums expended for oil, water and stores consumed;

(f) "Cost of repairs, maintenance and renewals" means the sums expended for repairs and maintenance and for renewals not chargeable to capital account, together with the proportion of salaries and wages and any contributions made by the owner of the station for pensions, provident fund, superannuation and insurance of 1[officers and other employees] properly attributable to repairs, maintenance and renewals;

(g) "Salaries and wages" means the sums expended for salaries and wages and any contributions made by the owner of the station for pensions, provident fund, superannuation and insurance of officers and servants, less the proportion of such sums properly attributable to the cost of fuel under clause (d) and to the cost of repairs, maintenance and renewals under clause (f).

II.Of the cost of production of electricity at a generating station ascertained in accordance with the Eighth Schedule, the following costs, charges and allowances in respect of the year of account shall be allocated as "fixed costs",namely:-

(a) Of the costs,charges and allowances set out in clause (a) of paragraph 1 of the said Schedule, portions calculated from the appropriate formulae set out in paragraph III;

(b) The whole of the costs, charges and allowances set out in the remaining clauses of paragraph 1 of the said Schedule.

III.The portion of the following costs, charges and allowances to be allocated as fixed costs shall be ascertained from the formula hereinafter set out against each, namely: -
                    100
(a)cost of fuel__________;
100+12.8L
                    100
(b)cost of oil, water and stores__________;
100+9.66L
    100
(c)salaries and wages__________;
100+0.38L
100
(d)cost of repairs, maintenance and renewals__________;
100+0.0001NL
Where-

2 [L=the percentage average load factor of the station;]
N=the number of hours during which the station was in commission in the year of account.

IV.The amount of the difference between the costs of production at a generating station ascertained in accordance with the Eighth Schedule and the fixed costs in respect of the year of account determined in accordance with this Schedule shall be allocated as "running costs".

V.The foregoing provisions of this Schedule shall not apply in any case where it is agreed between the Board and the owner of the station that the circumstances or conditions of operation in the station, whether temporary or continuing, are such that the said provisions ought not reasonably to he applied; and in such case the allocation between fixed costs and running costs shall be made in such manner as the Board and the said owner may agree.

----------------------------------------------------------------------------------------------------------------------------------------------------------

1. Substituted by Act 23 of 1978, Section 25, for "officers and servants" w.e.f. 3-6-1978.
2. Substituted by Act 30 of 1966, Section 23, for "L=the average load factor of the station" w.e.f. 16-9-1966

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Last updated on July, 2016

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