The Commission in its order stated that MSEDCL was in a precarious financial condition and was not able to generate sufficient revenue due to huge arrears of agricultural consumers. It observed that a distribution licensee was empowered to disconnect defaulting consumers after following due procedures. The Commission stated MSEDCL could disconnect consumers improve its recovery but procedures prescribed in the Electricity Act, 2003, should be followed strictly.
An MSEDCL official said that recovery from rural areas had increased significantly after this policy was implemented. "Not only have the farmers started paying, theft has also reduced as our requirement would not be met unless all consumers have legal connections," he said.
This circular was challenged by Shetkari Sangathana through its vice-president Baban Kale in the MERC. The Sangathana pleaded that the circular should be quashed as it was contrary to the Electricity Act.
It pointed out that the state government had issued directives to the MSEDCL that a failed transformer should be repaired or replaced within 48 hours in rural areas. MSEDCL's action was thus violation of government's order.
The Sangathana further contended that MSEDCL could not take action against the farmers as it was getting subsidy from state government for supplying electricity to them. It pointed out that the farmers who were paying their bills were suffering, which was contrary to principles of natural justice.
MSEDCL defended its actions by pointing out that agricultural consumers' arrears had mounted to 6,300 crores and the company was in dire straits due to non-payment of bills by farmers. It further stated in spite of various steps taken by the company as well as state government the arrears of agricultural consumers was increasing by the day and hence the company was left with no choice but to take stringent measures.