Court’s Decision
The Kerala High Court dismissed the writ petition filed by a private hospitals’ association that challenged the decision of the State Government and Kerala State Electricity Regulatory Commission (KSERC) to reclassify electricity tariffs for private hospitals under the high-tension (HT) commercial category. The Court upheld the Commission’s tariff policy, ruling that:
“Private Hospitals cannot be equated with Government Hospitals or Charitable Institutions. Merely because a service is rendered does not mean it is not a commercial activity.”
The Court found no arbitrariness or illegality in the tariff order and refused to interfere with the Commission’s policy decision, thereby denying the relief sought by the petitioners.
Facts
The petitioner, an association representing private hospitals across Kerala, challenged a KSERC order that reclassified electricity tariffs applicable to private hospitals. The revised tariff clubbed private hospitals under the high-tension commercial category along with other profit-oriented entities, removing their earlier classification that enjoyed concessional rates.
The association contended that this change adversely impacted their operational costs, especially given their healthcare role during the COVID-19 pandemic. The petitioners argued that private hospitals play a vital public service role and should not be treated on par with other commercial establishments for the purposes of tariff.
Issues
- Whether the KSERC’s classification of private hospitals under the commercial category for electricity tariffs is arbitrary and violative of Article 14 of the Constitution?
- Whether private hospitals providing essential healthcare services are entitled to concessional electricity tariffs on par with government or charitable institutions?
- Whether the tariff order is liable to be struck down for being discriminatory and in violation of the right to life under Article 21?
Petitioners’ Arguments
The petitioners argued that private hospitals provide critical healthcare services and function as an essential extension of the public health system. They contended that the reclassification of electricity tariffs violated Articles 14 and 21 by imposing unfair financial burdens and undermining their ability to provide affordable treatment.
It was also submitted that the tariff was discriminatory since it treated hospitals at par with purely profit-driven commercial entities, without acknowledging the public service nature of their operations. Reliance was placed on the doctrine of proportionality and the need for rational classification in policy decisions affecting fundamental rights.
Respondents’ Arguments
The KSERC and State Government defended the tariff reclassification by asserting that private hospitals operate as commercial entities generating income from patients. The Commission emphasized that the tariff order followed public consultation and due regulatory procedure. It maintained that hospitals operating for profit could not claim exemption from commercial classification merely because they render medical services.
The respondents distinguished private hospitals from government and charitable institutions, pointing out that the latter offer services free or at subsidised rates without profit motives. They argued that there was a reasonable classification, and the tariff structure was in line with the Electricity Act and National Tariff Policy.
Analysis of the Law
The Court scrutinised the statutory role of the KSERC under the Electricity Act, 2003, noting that tariff determination is a specialised legislative function subject to limited judicial review. The Court reiterated that policy matters involving fiscal implications and regulatory classifications should not be interfered with unless manifest arbitrariness, illegality, or irrationality is shown.
The doctrine of classification was analysed with respect to Article 14. The Court held that there existed an intelligible differentia between private profit-based hospitals and government/charitable institutions, and the classification had a rational nexus with the object of the tariff policy — namely, ensuring cost recovery from commercial consumers.
Precedent Analysis
- P.U.C.L. v. Union of India (2005) – Cited for the scope of Article 21 in ensuring access to essential services like healthcare. The Court, however, clarified that Article 21 does not confer a right on private entities to claim a subsidy or exemption from economic policies.
- Modern Dental College v. State of Madhya Pradesh (2016) 7 SCC 353 – Referred to establish that reasonable regulation of private sector involvement in healthcare or education is permissible.
- Tata Power Co. Ltd. v. Reliance Energy Ltd. (2009) 16 SCC 659 – Cited to explain the scope of regulatory power and tariff fixation under the Electricity Act, and the limited scope of judicial review.
Court’s Reasoning
The Court observed:
“The object of the Electricity Act is to ensure competition and commercial viability in electricity supply. Public subsidy cannot be expected for all private actors merely because they claim to serve the public.”
It held that the KSERC was within its statutory powers to determine tariffs based on commercial activity. The Court emphasised that the petitioners failed to demonstrate any procedural violation or discrimination unsupported by reasonable classification.
The Court further held that no enforceable right was violated under Article 21 since the imposition of a commercial tariff did not affect the existence or core functioning of private hospitals.
Conclusion
The writ petition was dismissed, with the Court affirming the validity of the tariff classification. It upheld the KSERC’s power to treat private hospitals as commercial consumers and rejected the claim that such classification infringed fundamental rights.
Implications
- Reinforces regulatory autonomy of Electricity Commissions in tariff matters.
- Clarifies that private hospitals, despite their public function, remain commercial entities in regulatory classifications unless charitable in nature.
- Establishes limits of judicial intervention in policy-driven fiscal classifications impacting commercial operations.
FAQs
Q1. Can private hospitals claim subsidised electricity rates under Article 21 of the Constitution?
No. The right to life under Article 21 does not entitle commercial entities like private hospitals to claim subsidies or exemptions from regulatory tariffs.
Q2. Is treating private hospitals as commercial consumers for electricity tariffs unconstitutional?
No. The Court upheld such classification as valid, based on the distinction between profit-driven entities and charitable/government institutions.
Q3. Can the High Court interfere with electricity tariff orders?
Only in cases of manifest illegality, arbitrariness, or irrational classification. Regulatory decisions are generally immune to judicial review unless constitutionally flawed.
