Supreme Court Upholds Coal India's Dual Pricing Policy, Says 20% Hike For Non-Core Sectors Justified

In a crucial development, the Supreme Court on Friday (Sep.12) upheld Coal India Ltd.'s (“CIL”) 2006 interim policy that introduced a 20% price hike for non-core sector consumers. The Court validated CIL's “dual pricing” approach, reasoning that core sectors such as power and steel must be shielded from price increases due to their vital public utility functions, whereas higher prices for non-core industries, producing non-essential goods, can be justified given their minimal impact on the public.

“we observe that the Interim Coal Policy made a reasonable classification between the linked industries of the core and non-core sectors and was introduced with the legitimate aim of ensuring an adequate supply of coal in the market by reinforcing the financial capabilities of the appellant company to sustainably operate and invest in the production of coal. Therefore, it can be no gainsaying that the Interim Coal Policy fulfilled the test of reasonable classification and hence, was not contrary to Article 14 to this extent.”, the court observed.

The Court dismissed the non-core consumer companies' contention that the coal price hike was arbitrary and discriminatory. It held that core and non-core sectors cannot be placed on the same footing, and differential pricing for non-core industries is both reasonable and permissible.

“We are, however, not inclined to accept the allegations of discriminatory pricing made by the respondents on the ground that all linked industries/consumers must be treated alike. The linkage system as described in the aforesaid was a purely administrative decision and had no constitutional or statutory backing. It was introduced by the Government and the appellant company to ensure a steady supply of coal reserves to the core sector and to certain industries or manufacturers of the non-core sector. The factum of linkage vested no right in a particular industry, manufacturer or consumer to receive a definite quantity of coal from a specific mine or company. “Linkage” acted only as a clearance to the linked coal company (either the appellant or one of its subsidiaries) to supply coal to a unit, subject to the availability of the commodity as well as regulatory directives given in respect of such unit or linked coal mine. Therefore, such system was a purely policy decision with logistical ease as its sole objective. Such policy was subject to the discretion of the Government and could be reversed at any point in time. It is noteworthy that the said system was in fact rolled back by the Government upon the introduction of the new Coal Distribution Policy, 2007. Thus, the factum of linkage cannot serve as the basis for treating the industries of the core and non-core sectors alike.”, the court said.

“We are of the considered view that the increase of 20% in the notified prices for the non-core linked sector which mitigated the increase in operational costs to the extent of 1.2% of the total increase, was a measure that fulfilled the objective of sustainable operation, maintenance and development of coal mines by the appellant without engaging in excessive profiteering.”, the court added.

A bench of Justice JB Pardiwala and Justice R Mahadevan delivered a judgment in a case where the controversy dates back to CIL's 2006 Interim Policy, which raised coal prices by 20% for linked consumers in the non-core sector. The Respondents, particularly non-core sector industries, argued that CIL lacked authority to unilaterally impose the hike and that the measure was discriminatory.

The Calcutta High Court ruled in favour of the Respondents, ordering refunds, leading CIL to appeal to the Supreme Court.

Setting aside the High Court's decision, the judgment authored by Justice Pardiwala extensively referred to Pallavi Refractories v. Singareni Collieries Co. Ltd., (2005) 2 SCC 227, reasoning that shielding essential sectors like power and steel from price hikes prevents a cascading effect on the economy and protects the common citizen from inflated prices of essential goods. In contrast, a price increase for non-core, non-essential industries has a negligible public impact.

The Court observed:

“In Pallavi Refractories (supra), the petitioners had argued that dual pricing caused hostile discrimination to the detriment of the non-core/unlinked sector. Therefore, this Court examined whether the imposition of the 20% additional price on the non-core/unlinked sector was discriminatory in terms of Article 14 of the Constitution. It was observed therein that:

a) First, the core sector industries constituted nearly 90% of the entire consumer base of the appellant company herein and their usage of coal was of paramount importance to nation-building activities. Since, the industries belonging to the core sector produced and provided essential goods and services, any increase in the price of coal which was used as a raw material or energy source for such industries would lead to a cascading effect on every category of consumer. An increase in price of coal which in itself was an essential commodity at that point of time would result in higher prices for majority of goods and services and thus, increase the basic cost of living for a large section of the population. On the other hand, increasing the price of coal for industries in the non-core/unlinked sector that were involved in the production of goods such as paint, lime, etc. would not result in an adverse cost impact on the end consumers, as such products are not of everyday concern for the common man.

b) Secondly, the consumption of coal in the core sector industries such as electricity, cement, steel, etc. was quite high whereas, in the case of unlinked industries, the coal consumption was minimal. Therefore, an increase in the price of coal for the unlinked/non-core sector would not result in any appreciable increase in the cost of products manufactured by the industries therein.

c) Thirdly, the avowed objective of dual pricing was to ensure that the appellant company herein could get an adequate return for its products and cover its financial deficit without placing an undue burden of price increase on a large section of the public.

d) Lastly, it could not be said that dual pricing was an exercise inherently at loggerheads with any law. The only test to ensure that there was no arbitrariness or unfair discriminatory practices at play, was to see whether such dual price fixation was based on reasonable classification in terms of Article 14 of the Constitution.”

“On a plain reading of the observations of this Court in Pallavi Refractories (supra), it is limpid that the classification of the consumer base of the appellant company herein, into core and non-core sector industries, was not an instance of treating equals unequally. Therefore, the plea of hostile discrimination by the petitioners therein was of no avail to them.”, the court added, justifying differential pricing for non-core consumers.

Accordingly, the appeal was allowed.

Cause Title: COAL INDIA LTD. AND ORS. Versus M/S RAHUL INDUSTRIES AND ORS. (and connected case)

Citation : 2025 LiveLaw (SC) 907

Click here to read/download the judgment

Appearance:

For Petitioner(s) : 44 Mr. Kedar Nath Tripathy, AOR

44.1 to 44.5, Mr. Ravindra Shrivastava, Sr. Adv. (Through VC)

44.7 to 44.14 Mr. Manish Kumar Saran, AOR Mr. Divanga Singh, Adv. Mr. Sanya Shukla, Adv. Mr. Aditya Mani Saran, Adv. Mr. Sidhant Sharma, Adv. Mr. Baudhik Garg, Adv.

44.6 Mr. Chinmoy Pradip Sharma, Sr. Adv. Mr. Amit Meharia, Adv. Ms. Tannishtha Singh, Adv. Mr. Abinash Agarwal, Adv. Mr. Irfan Hasieb, Adv. Mr. Krishnajyoti Deka, Adv. Mr. Sambhav, Adv. Mr. Vijay Deora, Adv. M/S. Meharia & Company, AOR

For Respondent(s) : Mr. Ranjit Kumar Singh, Sr. Adv. Mr. Devashish Bharuka, Sr. Adv. Mr. Ravi Bharuka, AOR Mr. Rohit Agarwal, Adv. Ms. Aishwarya Bhati, A.S.G. Mr. Gp. Capt. Karan Singh Bhati, AOR Mr. Hemendra Sharma, Adv. Mr. Abhijeet Singh, Adv. Mr. Anirudh Singh, Adv. Mr. Yogeshwar Krishna Purohit, Adv. Mr. Shiv Autar Singh Sengar, Adv. Mr. Aishwary Mishra, Adv. Mr. Dhananjai Shekhwat, Adv. Ms. Anjali Saxena, Adv. Mr. Dashrath Singh, Adv. Mr. Anupam Lal Das, Sr. Adv. Mr. Amit Sharma, AOR Mr. Dipesh Sinha, Adv. Mr. Dipesh Sinha, Adv. Ms. Pallavi Barua, Adv. Ms. Pallavi Barua, Adv. Ms. Aparna Singh, Adv.

INT Mr. Manish Kumar Saran, AOR