Karnataka HC Strikes Down Subsidy Denial To Farmer Societies | Arbitrary Classification Violates Article 14 | Cooperative Farming Must Be Protected
Safiya Malik
The High Court of Karnataka at Dharwad, Single Bench of Justice Sachin Shankar Magadum declared that the exclusion of registered farmer societies from receiving agricultural power tariff subsidies was arbitrary and unconstitutional. The Court held that the impugned government order, which denied subsidy benefits to collectives based solely on aggregate electricity consumption, violated Article 14 of the Constitution. It consequently directed the State Government and distribution companies to amend the subsidy policy to treat farmer societies on par with individual farmers.
The petitioners, secretaries of two registered farmer societies under the Karnataka Societies Registration Act, 1960, approached the High Court seeking various reliefs against a demand notice issued by the Hubli Electricity Supply Company Limited (HESCOM). These societies had established lift irrigation schemes for collective irrigation, sourcing electricity through HT-3A(II) tariff installations. They contended that, despite being metered consumers and serving marginal farmers, they were excluded from the government subsidy extended to individual farmers for electricity used in agriculture.
The petitioners cited substantial financial investments in their lift irrigation projects, aiming to support around 200 and 103 acres of farmland, respectively. They submitted that the collective consumption by their societies, though higher in aggregate, remained well within the per capita limit for individual farmers, each typically consuming below 10 HP.
They argued that such exclusion constituted hostile discrimination, as the State Government continued to release subsidies for unmetered individual installations based on estimated consumption, in breach of Section 55 of the Electricity Act, 2003. The petitioners submitted that the policy, by granting subsidies to unmetered installations and denying them to societies using metered installations, was both irrational and contrary to statutory and regulatory provisions.
Legal submissions also referenced Supreme Court precedents asserting that arbitrary classifications which lack rational nexus to the objective of the policy violate constitutional guarantees. The petitioners relied on authorities including EP Royappa v. State of Tamil Nadu, DS Nakara v. Union of India, and Maneka Gandhi v. Union of India, underscoring that arbitrariness is incompatible with equality under Article 14.
The respondents, including the State of Karnataka, Karnataka Electricity Regulatory Commission, and HESCOM, contended that subsidy schemes were designed exclusively for individual farmers operating 10 HP connections or less. They maintained that societies, having voluntarily entered into HT category supply agreements, were bound by the agreed tariffs and could not claim subsidy benefits retrospectively.
HESCOM denied that electricity supply was interrupted during the COVID-19 pandemic and argued that bills were raised proportionately. It further submitted that the petitioners had not complied with interim court directions requiring them to deposit outstanding dues. The State contended that farmers within societies could individually avail the scheme by setting up separate eligible connections.
In addressing the issue of exclusion of farmer societies from the benefit of agricultural power tariff subsidies, the Court undertook a detailed constitutional and statutory analysis. The primary point for consideration was whether denying subsidies to collectives, while extending the same to individual farmers, constituted an arbitrary and unreasonable classification.
The Court first explained the nature of the discriminatory practice: “The current classification between individual farmers and farmer societies is arbitrary and lacks a rational nexus with the objective of the subsidy.”
It clarified that the intelligible differentia relied upon by the State—collective versus individual consumption—had no reasonable connection to the stated objective of the subsidy scheme, which is to support marginal farmers.
“The denial of the subsidy to the collectives, based solely on their collective consumption exceeding the 10 HP limit, is discriminatory and irrational because it defeats the purpose of supporting small and marginal farmers.”
Elaborating on the fundamental principle of equality, the Court referred to constitutional guarantees:
“Article 14 of the Constitution guarantees equality before the law and ensures that every individual is entitled to equal protection under the law.”
The Court applied the well-established two-part test for permissible classification:
“i. Intelligible Differentia: The classification must be based on an intelligible difference that distinguishes between the classes. ii. Rational Nexus: There must be a rational nexus between the differentia (the basis for classification) and the objective that the statute or policy seeks to achieve.”
Upon examining the facts, the Court found that the petitioner societies were formed by marginal farmers and their per capita consumption was within the prescribed limits. In this context, it held that the existing classification lacked justification: “The marginal farmers who form collectives are the same group of individuals who would be eligible for the subsidy if applying individually.”
The Court noted that such policy implementation contradicts its stated aims: “By denying subsidies to societies that form for collective action, the government contradicts its own policy objectives and fails to support sustainable agricultural practices.”
Referring to the statutory mandate under Section 55 of the Electricity Act, 2003, the Court noted the obligation to supply electricity through metered installations. However, it found that the respondents continued to support unmetered installations contrary to this mandate:
“Despite this clear breach of statutory duty, respondent No. 2 (the Commission) has been permitting the disbursement of subsidies by respondent No. 1 (the State Government) for unmetered installations through its tariff order.”
On this point, the Court recorded a significant observation regarding the data submitted by the petitioners: “The total subsidy outlay for HT-3(a) category was Rs. 54.2 crore as against the total IP set subsidy claim of Rs. 3995.18 crores and disbursement of Rs. 4067.69 crores.”
The Court concluded that such disproportionate subsidy disbursement, particularly where based on estimated consumption, violated the statutory and regulatory framework:
“The practice of estimating consumption for unmetered installations is not only legally problematic, but also undermines the intended purpose of the subsidy system.”
Drawing attention to the principle laid down by the Supreme Court in EP Royappa v. State of Tamil Nadu, the Court noted: “Arbitrary actions violate the Constitutional right guaranteed under Section 14 of the Indian Constitution.”
Finally, the Court stressed the inconsistency in the State's approach, highlighting that collective arrangements are often more efficient and environmentally sustainable:
“Penalizing farmers who organize into collectives discourages cooperative farming, which is a critical aspect of ensuring long-term sustainability in Indian agriculture.”
The Court held that the impugned Government Order No. EN 55 PSR 2008 dated 4th September 2008, insofar as it excluded farmer societies from subsidy benefits on account of collective consumption exceeding 10 HP, was unconstitutional.
It directed the State Government and distribution companies to review and amend the policy framework governing agricultural power subsidies. The revised eligibility criteria should be based on per capita consumption, total landholding, or aggregate HP entitlements of society members.
“The authorities are also directed to ensure that no policy or regulation is allowed to inadvertently discourage collective action or undermine the potential benefits of cooperative farming.”
The Court further ordered that guidelines be framed and notified within a reasonable period—preferably within six months—to extend subsidies to registered farmer societies in a manner that aligns with constitutional equality, cooperative promotion, and sustainability goals.
While allowing the writ petition in part, the Court directed the petitioners to pay pending arrears and permitted them to submit representations seeking subsidy under the revised framework. HESCOM was instructed to process these applications expeditiously once dues are cleared.
However, the Court rejected prayers seeking to quash the demand notice dated 16 January 2021 and declare the COVID-19 lockdown period as a Force Majeure event. It observed that electricity was consumed during the said period and contractual obligations under the HT power agreement remained binding. The Court held that mere pandemic-related restrictions, without proof of supply disruption, did not justify waiving electricity bills.
Advocates Representing the Parties
For the Petitioners: Sri. Shridhar Prabhu, Advocate
For the Respondents: Sri. Ashok T. Kattimani, Additional Government Advocate; Sri. B.S. Kamate, Advocate; Sri. Shivaraj P. Mudhol, Advocate
Case Title: Shrishail Irappa Kempwad and Another v. State of Karnataka and Others
Neutral Citation: 2025:KHC-D:7109
Case Number: WP No. 103671 of 2021
Bench: Justice Sachin Shankar Magadum
[Read/Download order]
