The Gujarat High Court is hearing an important case related to the appointment of the Lokayukta in Gujarat. The issue is whether the Governor can appoint the Lokayukta at his discretion or whether appointment can be made only upon obtaining the aid and advice of the Council of Ministers led by the Chief Minister. During the period 2006-2010, the Gujarat state government submitted names of two prospective appointees for the post of Lokayukta to the Governor. But no appointment was made during this period. On August 26, 2011 the Governor appointed retired judge R.A.Mehta as Lokayukta, whose name was not among those submitted by the state government. The Gujarat state government moved the High Court to quash the appointment on the ground that the Governor made the appointment without the aid and advice of the Council of Ministers led by the Chief Minister. Section 3 of the Gujarat Lokayukta Act, provides in part that “the Governor shall by warrant under his hand and seal, appoint a person to be known as Lokayukta”. The Governor acted under this section to make the appointment of Lokayukta. However, the state government has argued that section 3 has to be understood in light of Article 163(1) of the Constitution. Article 163(1) provides that the Governor shall be aided and advised in the exercise of his functions by a Council of Ministers with the Chief Minister at the head. Thus, as per this line of argument, the Governor violated the provision of Article 163(1) when she failed to take the aid and advice of the Council of Ministers led by the Chief Minister before exercising the function of appointing the Lokayukta. At the time of writing this post, news reports suggested that the two judges hearing the case are divided over the issue. It remains to be seen whether this issue will be referred to a larger bench. The outcome of this case could have wider implications on the constitutional role of governors if it sets guideposts on the extent to which they act independent of the advice of the council of ministers.
Reports suggest that a debt restructuring plan is being prepared for power distribution companies (discoms) in seven states - Uttar Pradesh, Punjab, Rajasthan, Haryana, Andhra Pradesh, Tamil Nadu and Madhya Pradesh. According to some estimates, the combined outstanding debt for discoms is Rs 2 lakh crore. Discoms have been facing heavy losses. According to a Planning Commission Report, the cost of supplying electricity increased at a rate of 7.4 per cent annually between 1998-99 and 2009-10. The average tariff has also increased at an annual rate of 7.1 per cent over the same period. However, the report shows that the average tariff per unit of electricity has consistently been much lower than average cost of supply per unit. Between 2007-08 and 2011-12, the gap between average cost and average tariff per unit of electricity was between 20 and 30 per cent of costs.
Average cost and average tariff per unit of electricity (Rs per kWh)
|
Year |
Unit cost |
Average tariff per unit |
Gap between cost and tariff |
Gap as percentage of unit cost |
| 2007-08 |
4.04 |
3.06 |
0.98 |
24% |
| 2008-09 |
4.6 |
3.26 |
1.34 |
29% |
| 2009-10 |
4.76 |
3.33 |
1.43 |
30% |
| 2010-11 |
4.84 |
3.57 |
1.27 |
26% |
| 2011-12 |
4.87 |
3.8 |
1.07 |
22% |
Source: “Annual Report 2011-12 on the Working of State Power Utilities and Electricity Departments”, Planning Commission State discoms have been losing money due to higher costs than revenues, as well as high transmission and distribution (T&D) losses. The commercial losses for discoms in India (after including subsidies) increased from Rs 16,666 crore in 2007-08 to Rs 37,836 crore in 2011-12. Reports suggest that the restructuring plan being prepared will be worth Rs 1.2 lakh crore in short-term liabilities. Half of the proposed amount would be issued as bonds by the discoms, backed by a state government guarantee. Banks and financial institutions would reschedule the remaining Rs 60,000 crore of debt, with a moratorium of three years on payment of the principal amount. State governments that adopt the financial restructuring plan would not recover any loans given to discoms before they start showing profits. Under a proposed transition finance mechanism, the central government would reimburse 25 per cent of the principal amount of bonds to states that fully implement the plan. Also, states that achieve a reduction in T&D losses above a targeted level in three years may be given grants. Newspaper reports also suggest that states will have to prepare plans for eliminating the gap between the average cost and average tariff per unit of electricity.
