If a State assures entrepreneurs of uninterrupted power supply every day for five years to get them to open units, it cannot wriggle out of its liability by bringing in a policy that the incentive will be extended only if the supply is reduced to less than 50% on a particular day, the Supreme Court has held .

A Bench of Justices Anil R Dave and A.K. Sikri said: “Before laying down any policy to give benefits to its subjects, the State must think about the pros and cons and its capacity. Without proper appreciation of all relevant factors, the State should not give any assurance, not only because that would be in violation of the principles of promissory estoppel but it would also be unfair and immoral not to act as per its promise.”

(The doctrine of promissory estoppel prevents one party from withdrawing a promise made if the second party has reasonably relied on that promise.)

In the instant case, S.V.A. Steel Re-rolling Mills Ltd. set up a steel rolling mill in Kerala, going by the government’s promise to provide it uninterrupted power for five years. The company was aggrieved by an order passed later, saying the incentive would be extended only if the power cut was less than 50 per cent. The Kerala High Court upheld the State’s contention.

Allowing the company’s appeal against this order, the Supreme Court said the State would supply the company assured electricity for an extended period at a specified tariff. “The State was not wholly fair when it extended the benefit to the appellants only for the period during which electricity supply was reduced to less than 50 per cent on certain days. The State ought to have extended the period even for the days when the supply was more than 50 per cent but not 100 per cent as assured under the G.Os. dated May 21, 1990 and February 6, 1992. We, therefore, direct the respondents to give [the company] the benefit by extending the period of incentive accordingly.”

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