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

Sums paid in respect of the lines for insurance and as rents, rates and taxes [(including all taxes payable on income and profits)] [Substituted by Act 101 of 1956, Section 26, for certain words (w.e.f. 30.12.1956).] -,

The proportion of management and general establishment charges properly attributable to the lines;

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

[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] [Substituted by Act 101 of 1956, Section 26, for certain words (w.e.f. 30.12.1956).] :

An allowance for depreciation of an amount determined in respect of the lines in accordance with the provisions of para. VI of the sixth Schedule.

II. If the lines are used partly by [the Board or the Generating Company] [Substituted by Act 115 of 1976, Section 32 (w.r.e.f. 8.10.1976).] 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 Para. I shall be the proper proportion thereof having regard to the use made of the lines by [the Board or the Generating Company] 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.

"Depreciated cost of the lines " means original cost thereof as determined in accordance with the provisions of subparagraph (6) of para. XVII of Sixth Schedule less the amount written of 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;

The rate of interest shall be,-

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

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

THE SIXTH SCHEDULE

[(See Sections 57 and 57-A)] [Substituted by Act 101 of 1956, Section 27, for "(See Section 57)" (w.e.f. 30.12.1956).]

FINANCIAL PRINCIPLES AND THEIR APPLICATION

I. [Notwithstanding anything contained in The Indian Electricity Act, 1910 (9 of 1910) [except sub-section (2) of Section 22-A] [Substituted by Act 101 of 1956, Section 27, for certain words (w.e.f. 30.12.1956).], and the provisions in the licence of a licensee, the licensee shall so adjust his [charges] [Substituted by Act 30 of 1966, Section 21, for "rates " (w.r.e.f. 1.4.1966).] 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] [Substituted by Act 30 of 1966, Section 20, for paragraph III (w.e.f. 1.4.1966).]:

Provided that such [charges] [Substituted by Act 30 of 1966, Section 21, for "rates " (w.r.e.f. 1.4.1966).] 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 Substituted by Act 30 of 1966, Section 21, for "rates " (w.r.e.f. 1.4.1966).[charges] if the clear profit in any year of account has not exceeded the amount of reasonable return by [twenty] [Substituted by Act 101 of 1956, Section 27, for "fifteen " (w.e.f. 1.4.1957).] per centum of the amount of reasonable return:

Provided further that the licensee shall not enhance the [charges] [Substituted by Act 30 of 1966, Section 21, for "rates " (w.r.e.f. 1.4.1966).] for the supply of electricity until after the expiry of a notice in writing of not less than sixty clear days of his intention to so enhance the [charges] [Substituted by Act 30 of 1966, Section 21, for "rates " (w.r.e.f. 1.4.1966).], given by him to the State Government and to the Board :

Provided further that if the [charges] [Substituted by Act 30 of 1966, Section 21, for "rates " (w.r.e.f. 1.4.1966).] of supply fixed in pursuance of the recommendations of a rating committee constituted under Section 57-A 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 from them :]

[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.] [Inserted by Act 30 of 1966, Section 21 (w.e.f. 1.4.1966).]

[I-A. The notice referred to in the third proviso to para. 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.] [Inserted by Act 30 of 1966, Section 21 (w.e.f. 1.4.1966)]

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 [five per cent] [Substituted by Act 101 of 1956, Section 27, for "7-1/2 percent " (w.e.f. 1.4.1957).] of the amount of reasonable return, shall be at the disposal of the undertaking. Of the balance of the excess, one-half shall be 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 :

[Provided that where the undertaking is purchased by the Board or the State Government, the amount of the Reserve may be deducted from the price payable to the licensee.] [Inserted by Act 30 of 1966, Section 21 (w.e.f. 1.4.1966)]

(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 Consumer's 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 consumers 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 onequarter of one per centum and not more than one-half of one per centum of 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.

(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.] [Substituted by Act 30 of 1966, Section 21, for sub-paragraph (2) (w.r.e.f. 1.4.1966)]

V. [(1)] [Paragraph V renumbered as sub-paragraph (1) thereof by Act 101 of 1956, Section 27 (w.e.f. 1.4.1957)] 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.

(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.] [Substituted by Act 30 of 1966, Section 21, for sub-paragraph (2) (w.e.f. 1.4.1966).]

[Added by Act 115 of 1976, Section 33 (w.r.e.f. 8.10.1976)]

State Amendment- [West Bengal.]- In its application to the State of West Bengal, (a) in Sch. VI,—

(a) after para. V (1), Sub para. (1 -A) namely:—

"(1-A)The licensee may, with the previous approval of the State Government, take an advance from the Contingency Reserve during the currency of the licence to meet such charges and on such terms and conditions as the State Government may determine ".

(b) Sub-paragraph. 2, substituted the following sub-para., namely :-

"(2) On the purchase of the undertaking the following amounts shall be handed over to the purchaser and maintained as Contingency Reserve-

(a) The Contingency Reserve after deduction of the amount drawn under sub-para (1): and

(b) The amount which has not been repaid out of the taken from the Contingency Reserve under sub-paragraph (I -A), together with the interest, if any, payable on the advance:

Provided that where the undertaking is purchased by the Board or the State Government, the amounts referred to in Cls. (a) and (b) above, shall after 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 ".-W.B. Act, 42 of 1979, Section 3 (w.e f. 17th March, 1980).

V-A. (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-tax 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 [amount of investment allowance] [Substituted by Act 23 of 1978, Section 23, for "amount of development rebate " (w.e.f. 3.6.1978)] to which the licensee is entitled for the accounting year 2 [under Section 32-A of the Income-tax Act, 1961 (43 of 1961)] [Substituted by Act 23 of 1978, Section 23, for "under clause (vi-b) of sub-Section (2) of Section 10 of the Indian Income-tax Act, 1922 (11 of 1922)" (w.e.f. 3.6.1978).]:

Provided that if in any accounting year, the clear profit [excluding the special appropriation to be made under item (va) of Cl.(c) of sub-paragraph (2) of para. 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 accounting 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 instalments 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 busiess 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 :

[Provided that where the undertaking is purchased by the Board or the State Government, the amount of the Reserve [(whether such amount is in the form of cash or other assets)] [Inserted by Act 30 of 1966, Section 21 (w.r.e.f. 1.4.1966)] may be deducted from the price payable to the licensee.]

[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 revenue 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.]

(a) In respect of the first Rs. 1 lakhs of such net profits - 10 percent. and

(b) In respect of all net profits in excess of Rs. 2 lakhs - 7 percent.

(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, provided 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.

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

(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:

[Provided that where a rating committee has been constituted under Sec57-A, 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.] [Added by Act 101 of 1956, Section 27 (w.e.f. 1.4.1957)]

Definitions

XVII. For the purposes of this Schedule-

(1)

"Capital base " means the sum of-

(a) [ the original cost of fixed assets available for use and necessary for the purpose of the undertaking subject to the provisions of para. XII in respect of servicelines, and the excess amount referred to in the proviso to sub-paragraph (2) of para. VII in respect of any fixed asset which has ceased to be available for use;] [Substituted by Act 101 of 1956, Section 27, for Clause (a) (w.e.f. 1.4.1957)]

(b) The cost of intangible assets [including expenses on account of new capital issue] [Inserted by Act 30 of 1966, Section 21 (w.r.e.f. 1.4.1966)];

(c) The original cost of works in progress:

(d) [ The amount of investments compulsorily made under para. 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:] [Substituted by Act 101 of 1956, Section 27, for Clause (d) (w.e.f. 1.4.1957)]

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

(i) The amount written off 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; [***] [The word "and " omitted by Act 101 of 1956, Section 27 (w.e.f. 1.4.1957)]

(ii) The amount of any loans advanced by the Board [***] [The word "under the provisions of sub-parapraph (2) of paragraph I of the First Schedule " omitted by Act 101 of 1956, Section 27 (w.e.f. 1.4.1957)];

(iii) [ The amounts deposited in cash with the licensee by consumers by way of security;] [Inserted by Act 101 of 1956, Section 27 (w.e.f. 1.4.1957)]

(iv) The amount standing to the credit of the Tariffs and Dividends Control Reserve 8 [at the beginning of the year of account];

(v) [ The amount standing to the credit of the Development Reserve at the close of the year of account;] [Inserted by Act 30 of 1966, Section 21 (w.r.e.f. 1.4.1966)]

(vi) The amount carried forward [at the beginning of the year of account] [Inserted by Act 101 of 1956, Section 27 (w.e.f. 1.4.1957)] in the accounts of the licensee for distribution to the consumers under para. 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-

(b) [Expenditure properly incurred on] [Substituted by Act 101 of 1956, Section 27, for "expenditure incurred on " (w.e.f. 1.4.1957)]-

(v) Interest on security deposits;

(vi) Legal charges;

(vii) Bad debts;

(viii) Auditor's fees;

(ix) Management including managing agent's remuneration as provided for in para. XIII;

(x) Depreciation, computed as [hereinbefore] [Substituted by Act 101 of 1956, Section 27, for "hereinafter " (w.e.f. 1.4.1957)] set out;

(xi) Other expenses [(excluding interest on debentures and loans)] [Inserted by Act 101 of 1956, Section 27 (w.e.f. 1.4.1957)], admissible under the law for the time being in force in the assessment of Indian Income-tax and arising from and ancillary or incidental to the business of electricity supply;

(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; [Substituted by Act 30 of 1966, Section 21, for sub-Clause (xii) (w.r.e.f. 1.4.1966)]

(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 [permitted by the State Government] [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)];

(ii) All taxes on income and profits;

(iii) Instalments 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 books of the undertaking: provided that the amounts so appropriated shall not exceed the amount found by dividing the writtendown 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 [herein before] [Substituted by Act 101 of 1956, Section 27, for "hereinafter " (w.e.f. 1.4.1957)] set out;

(v) Contributions towards arrears of depreciation;

(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 such preliminary 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 proprietors' account or accounts whether in capital personal or any other account howsoever called and properly 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;

(b) [ Interest charges on capital expenditure incurred, during the period between the date of the 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 date of such supply as well as interest incurred on outlays for subsequent expansions;] [Substituted by Act 50 of 1991, Section 14, for Clause (b) (w.e.f. 15.10.1991)]

(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 term as are sufficient to qualify it for such description.

[***] [Clause (8) omitted by Act 23 of 1978, Section 23 (w.e.f. 3.6.1978)]

(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;

(b) [ The income derived from investments other than those included in the capital base under provisions of Cl. (d) of sub-paragraph (1);] [Substituted by Act 101 of 1956, Section 27, for Clause (b) (w.e.f. 1.4.1957)]

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

(d) [ An amount equal to one-half of one per centum on the accumulations in the Development Reserve created under para. V-A of this Schedule;] [Inserted by Act 101 of 1956, Section 27 (w.e.f. 1.4.1957)]

(e) [ Such other amount as may be allowed by the Central Government, having regard to the prevailing tax structure in the country.] [Inserted by Act 30 of 1966, Section 21 (w.r.e.f. 1.4.1966)]

(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 [capital base for that year, the Reserve Bank rate ruling at the beginning of that year plus-

(11)

"Written-down cost " means-

Original cost less the amounts set aside or written-off on account of original in the books of the undertaking.

THE SEVENTH SCHEDULE

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

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 contribution by the licensee for pensions, provident fund, superannuation and insurance 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 [including all taxes payable on income and profits)] [Substituted by Act 101 of 1956, Section 29, for "(including super-tax payable by the licensee as a company but excluding other taxes on profits)" (w.e.f. 1.4.1957)];

(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) [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] [Substituted by Act 101 of 1956, Section 29, for certain words (w.e.f. 1.4.1957)]:

(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.

(i) "depreciated cost of the station " 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) 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, [the Reserve Bank rate ruling at the beginning of that year plus two per centaur] [Substituted by Act 30 of 1966, Section 22, for certain words (w.r.e.f. 1.4.1966)].