Judgment GROVER, J. :- These petitions under Article 32 of the Constitution have been brought by or on behalf of the various factories, Co-operative Societies and Mills which carry on the business of manufacturing and selling sugar (hereinafter called compendiously the "sugar producers") challenging the validity and legality of the Levy Sugar Supply Control Order 1972 made under Section 3 of the Essential Commodities Act, 1955, hereinafter called the Act fixing the price of levy sugar in the different zones in the country and praying for various reliefs. Writ Petitions Nos. 279 to 283, 293, 300, 303 and 306 of 1972 are by the sugar producers in Andhra Pradesh zone; Writ Petitions Nos. 297 and 304 of 1972 by the Sugar producers in North Bihar zone and Writ Petitions Nos. 296 and 298 of 1972 by those in the Punjab zone. 2. The principal questions that arise for our determination are the following : (1) What is the true scope and ambit of Section 3 (3C) of the Act ? (2) (a) Whether the system of fixing price for each zone (the entire country having been divided into 15 zones), is justifiable and is based on correct principles ? (b) Whether the State-wise constitution of the zones is proper and justified ? (c) Does the zonal system lead to discrimination and as such is violative of Article 14 of the Constitution ? (3) Is price fixation based on proper principles and have the prices been determined by following the correct methods and in accordance with Section 3 (3C) of the Act ? (4) What is the correct position about depreciation and rehabilitation allowance and the extent to which these have been taken into consideration in price fixation ? (5) Have the escalations in various items by which price determination is made been properly allowed ? (6) Whether the items in respect of payment of additional bonus as provided by the payment of Bonus Amendment Ordinance 1972 and gratuity are taken into account ? 3. The history of control over sugar production, its distribution and the method followed in the fixation of the fair or levy price of sugar has been set out in the connected case (Civil Appeals Nos. 3. The history of control over sugar production, its distribution and the method followed in the fixation of the fair or levy price of sugar has been set out in the connected case (Civil Appeals Nos. 1357 to 1369 of 1972, D/- 6-11-1972) = (reported in AIR 1973 SC 537 ) ) judgment in which also has been delivered today and the same ground need not be traversed again. 4. The first question formulated by us which arises in these writ petitions can be divided into two parts. The first part involves the point whether sub-section (3C) of Section 3 of the Act deals with levy sugar only and is confined to it alone, particularly, in the matter of determination of a reasonable return as provided by Clause (d) of that sub-section. In the writ petitions the argument on behalf of the sugar producers has been that the whole object of having a scheme of partial control under which 60 to 70% sugar has to be sold in accordance with the orders made by the Government under S. 3 (f) of the Act for which levy price is payable and the balance is saleable in the free market, would be defeated. The result of accepting an interpretation that profit on the free sale of sugar can be taken into account while considering whether a reasonable return has been allowed on the capital employed by the sugar producers would, it has been stressed, be contrary to the scheme and purpose of the sub-section in question. This aspect of the matter has been fully dealt with in the above connected case. We have held that fair price has to be determined in respect of the entire produce ensuring to the industry a reasonable return on the capital employed in the business of manufacturing sugar. In other words the contentions of the sugar producers have been repelled. 5. The second part of the first question is whether price fixation according to zones and not unitwise (we shall call this "the Zonal system") is permissible under Section 3 (3C) of the Act. According to that provision different prices may be determined from time to time for different areas or for different factories or for different kinds of sugar. 5. The second part of the first question is whether price fixation according to zones and not unitwise (we shall call this "the Zonal system") is permissible under Section 3 (3C) of the Act. According to that provision different prices may be determined from time to time for different areas or for different factories or for different kinds of sugar. It has been sought to be established from clauses (a) to (d) of the same sub-section that what is contemplated is the price fixation of each unit or factory; otherwise it will not be possible to ensure that a reasonable return has been secured on the capital employed as required by clause (d). The Tariff Commission of 1969 has recommended a return of Rupees 10.50 per quintal of sugar. That recommendation having been accepted by the Government (vide its resolution dated February 20, 1970) the only way, so it has been suggested on behalf of the sugar producers, to ensure that the return is to compute the cost of sugarcane, the manufacturing cost, the duty or tax payable and then add the above amount by way of return to the aggregate of the aforesaid items mentioned in clauses (a) to (c) of the sub-section. This can be done if all these items are computed unitwise and not by taking a large number of units in an area because the aforesaid items are bound to vary and the different from unit to unit. We shall have an occasion to go more fully into this matter while considering question No. (2). But we are unable to agree that the provisions of S. 3 (3C) do not in any way warrant the fixation of price for the zones into which the country may be divided. The aforesaid provision clearly envisages and contemplates the fixation of different price for different areas. It hardly matters if areas are called zones. The previous history, as will be presently seen, also fully supports such a view. The Constitution of zones for price fixation is not an innovation and goes back to 1959 when the Tariff Commission made a detailed report on the cost structure of sugar and the fair price payable to the sugar industry. 6. It will be useful to note certain preliminary matters before the various aspects of question No. 2 are considered. The Constitution of zones for price fixation is not an innovation and goes back to 1959 when the Tariff Commission made a detailed report on the cost structure of sugar and the fair price payable to the sugar industry. 6. It will be useful to note certain preliminary matters before the various aspects of question No. 2 are considered. In 1930 when the Tariff Board appointed by the Government of India investigated for the first time the claim for protection from the sugar industry there were only 29 factories producing sugar. Protection was granted to the industry in 1932. Thereafter the growth of the industry was rapid. By 1938-39, the number of sugar factories rose to 139. According to the Tariff Commission report 1959, the number of operating factories at that time was 157 with a total output of 1.98 million tones. In 1969 when the Tariff Commission made its report there were 205 factories with a capacity for production of 34.69 lakhs tons. The number of factories is stated to have now increased to 221. As the production of sugar depends on sugarcane, a number of steps have been taken for the development of sugarcane. The supply of sugarcane of good quality and fairly long season of production are two pre-requisites for maintaining the production of sugar. The duration of the season in the sugar industry means the period from the date of the start of the crushing by the factory to the date of finally closing it, and it varies from region to region as it depends on two factors (i) availability of sufficient quantity of cane and (ii) period for which reasonably good quality of cane giving economic recovery of sugar is available. Sugar recovery depends mainly on three factors : (i) the quality of sugarcane, (ii) length of the crushing season and (iii) the overall operating efficiency of the sugar factory concerned. 7. The idea of preparing the cost schedule for sugar manufacture dates back to 1937. The first schedule was prepared in 1937 by the Director of the Indian Institute of Sugar Technology, Kanpur. The Tariff Commission in 1959 was of the view that to construct the cost schedule for the entire country at a uniform percentage of recovery and identical range of duration will only result in inflating the All India cost. The first schedule was prepared in 1937 by the Director of the Indian Institute of Sugar Technology, Kanpur. The Tariff Commission in 1959 was of the view that to construct the cost schedule for the entire country at a uniform percentage of recovery and identical range of duration will only result in inflating the All India cost. The Commission arrived at the conclusion after a study of the break-up cost of individual regions that cost schedules could be constructed on the basis of actual recovery and duration as pertaining to each region. It grouped the sugar factories in various States into four regions or zones based on standard schedules for a uniform recovery of 10 per cent and for duration ranging from 90 to 200 days. 8. It appears that some State Governments represented that the Northern region comprising the States of Uttar Pradesh, Bihar and Punjab was unduly large with wide internal disparities in cost. The result was that uniform price fixed for the zone showed large differences in profit margins. The sugar Enquiry Commission headed by Dr. S. R. Sen in its final report in 1965 recommended five cost schedules for the same number of zones at 10% recovery and for different durations. Assam with one factory was to be treated as a separate zone. The Government, however, fixed prices for 16 zones under the Sugar (Control) Order 1963. The number of zones kept on changing till it was increased to 23 for the years 1965-66 and 1966-67. But in December 1967 prices were fixed for 6 zones including Assam. The Tariff Commission in 1969 recommended the Constitution of 15 zones which suggestion was finally accepted (see page 67, Tariff Commission Report 1969). 9. We may first take up the group of petitions of the sugar producers in the Andhra Pradesh Zone. 10. The position about price of levy sugar in zone 2 in which the sugar producers in Andhra Pradesh are functioning was that for the sugar produced in 1968-69, the price fixed was Rs. 161.14 per quintal for D-29 quality. After the creation of fifteen zones in February 1970, the price for levy sugar for the Andhra Pradesh zone was fixed at Rs. 150.43 per quintal inclusive of excise duty. In May 1971 sugar was decontrolled which continued till December 1971. 161.14 per quintal for D-29 quality. After the creation of fifteen zones in February 1970, the price for levy sugar for the Andhra Pradesh zone was fixed at Rs. 150.43 per quintal inclusive of excise duty. In May 1971 sugar was decontrolled which continued till December 1971. From that time till June 1972 when partial control was reimposed, a scheme of voluntary control of sugar was in force. By agreement between the Government and the sugar producers 60% of the sugar released every month had to be placed at the disposal of the Government at Rs. 150/- per quintal exclusive of excise duty for D-30 quality. Under the impugned order the price of Rs. 121.97 per quintal was fixed for D-29 grade and Rs. 122-82 for D-30 quality for the Andhra Pradesh zone. 11. One of the main grievances of the sugar producers is that the above price was far below the price payable even under the voluntary scheme of distribution and so far as the actual cost of production of the various petitioning units is concerned the same was greatly in excess of the price of levy sugar fixed by the impugned order. Thus the sugar producers in this zone were being made to suffer huge losses instead of getting a reasonable return as provided by clause (d) of S. 3 (3C) of the Act. All this was attributed to the zonal system which is stated to suffer from the following serious defects apart from others : (i) The sugar producers in Andhra Pradesh varied greatly in economic viability; some units were very large and some very small, e.g. crushing capacity of 3750 tonnes at Vayyuru and 800 tonnes at Seathanegaram respectively out of the costed units (see Appendix 32, page 207, 1969 report, Tariff Commission). (ii) A uniform price has been fixed for all units although the manufacturing cost varies widely from unit to unit. (iii) The extreme disparity was evident from para 9.5.1 of the 1969 report which showed that the actual crushing season (based on 22 hours per day) for the individual unit had a divergence ranging from 26 days to 195 days. Statewise averages indicated a range from 26 to 153 days whilst the all India weighted average came to 108 days for the costed units. Statewise averages indicated a range from 26 to 153 days whilst the all India weighted average came to 108 days for the costed units. In Andhra Pradesh the duration in 1966-67 which is the base year of the costed units varied from 163 days to 41 days. (iv) Only 7 units out of 19 units in Andhra Pradesh zone were selected for working out the averages. This highly involved highly disparate and unfair comparison. (v) According to table 9.3 at page 75 of the 1969 report the average of the cane actually crushed by all the 7 costed units came to 1233 tonnes per unit whereas the average of the cane actually crushed by all the 19 units in the State is 1065 tonnes. According to the figures supplied by the counsel for the petitioner at the time of arguments the total cane actually crushed in 1966-67 by all the 19 units in Andhra Pradesh was 16,60,000 tons. The average duration for that year being 82 days the average daily crushing of the 19 units worked out to 1065 tonnes per unit whereas the crushing capacity of 1233 tonnes per day was taken as the base. This represented an excess of 168 tonnes per days which was wholly unjustifiable and which would make a lot of difference in the matter of computation of price. (vi) The conversion cost given at pages 209 and 210, Appendix 33 of the 1969 report worked out to Rs. 25.86 per quintal which is the conversion cost for 1233 tonnes relating to 7 costed units but the average daily crushing of all the 19 units being 1065 tonnes the actual conversion cost will work out to Rupees 29.94. Thus the difference in conversion cost would be Rs. 4.08 per quintal for sugar. (vii) The weighted averages were on a very restricted basis and handpicked units could not furnish proper guidance. The weighted averages were farcical and were in no way different from the ordinary averages. (viii) No account has been taken of the admitted fact that duration and recovery often depend on vagaries of nature or unforeseen events. For instance in the case of the sugar producers in Writ Petition No. 283/72 the duration was 162 days in 1969-70, the recovery being 9.493 % but it came down to 78 days in 1971-72 because the sugarcane crops were damaged by a highly destructive disease. For instance in the case of the sugar producers in Writ Petition No. 283/72 the duration was 162 days in 1969-70, the recovery being 9.493 % but it came down to 78 days in 1971-72 because the sugarcane crops were damaged by a highly destructive disease. In the North Bihar group of petitions of which writ petition 297/72 may be taken to be representative points similar to the above have been raised. For the North Bihar zone, the prices fixed by the impugned order were Rupees 157.55 for D-30 and Rs. 155.85 per quintal for D-29 qualities respectively. According to the sugar producer its own cost of production comes to Rs. 181.96 per quintal without any return. Owing to the faulty price fixation, this unit was suffering a heavy loss, the accumulated amount of loss having reached the figure of Rs. 9.50 lakhs. According to the statements and tables prepared and submitted to us, in the North Bihar zone the cost factors of the costed units are so disparate and unequal that five out of the 8 costed units do not even get their actual cost, leave aside any return. 12. The tables relating to the weighted averages are meant to show that there is no particularly or charm about the weighted averages. It is not an averages which tends to remove the disparity between the various units in a zone. In the table showing the ex-works price of sugar based on minimum price of the cane, duration and recovery for North Bihar Zone compared with individual units for the season 1971-72 the zonal average cost on the basis of 66 days duration and 8.867 recovery and Rs. 91.34 cost of cane comes to Rs. 139.52 per quintal excluding the return. After applying cost schedules to cane price duration and recovery of individual factories the results show that at least 10 factories suffer heavy losses because their cost ranges between Rs. 623.81 per quintal of the factory at Ryam to Rs. 139.83 of the factory at Chanpatiya. This is exclusive of the return of 10.50%. It may be observed here that the factory at Ryam has a duration only of 7 days which is almost a fresh figure and explains the high cost incurred by it for manufacturing sugar. 623.81 per quintal of the factory at Ryam to Rs. 139.83 of the factory at Chanpatiya. This is exclusive of the return of 10.50%. It may be observed here that the factory at Ryam has a duration only of 7 days which is almost a fresh figure and explains the high cost incurred by it for manufacturing sugar. But the total number of factories in North Bihar Zone is 25 and the cost of other factories varies between 138.44 to 121.89 per quintal. It is next pointed out that under the averaging technique the Central Government fixes a common price for all sugar factories in every State or price zone by averaging extraordinary cost disparities. The average cost formulae ignore disparity in (a) cane cost per quintal; (b) duration (c) recovery, (d) daily crushing capacity and (e) capital employed by one factory and the other in each zone. 13. Writ Petition No. 298/72 is representative of the Punjab group. There are five sugar factories in the Punjab zone. The price of levy sugar was fixed under the impugned order at 147.71 per quintal. Details of the audited manufacturing cost were filed with the petition for the 1971-72 season. It was claimed that the manufacturing cost were filed with the petition for the 1971-72 season. It was claimed that the manufacturing cost for that season, came to Rs. 208.22 per quintal exclusive of interest on capital employed which worked out to another 16.40 per quintal. Thus the cost including interest came to Rs. 224.62 per quintal. The total loss on stock as on July 1, 1972 would come to Rs. 9,74,350.77. It was stated that the petitioner had recovered an average price of Rs. 243.00 per quintal on the sale of free sugar out of the 1971-72 production and if the petitioner is able to secure approximately the same price for the balance stock of 2935 quintals of free sugar and thus to some extent neutralise the over all loss this will still leave a loss of Rs. 87.17 per quintal to be made up on the sale of its present stock of levy sugar. During the month of December 1971 the duration was seriously affected by the Indo-Pakistan hostilities - an important factor which has not been taken into consideration by the Government. 14. 87.17 per quintal to be made up on the sale of its present stock of levy sugar. During the month of December 1971 the duration was seriously affected by the Indo-Pakistan hostilities - an important factor which has not been taken into consideration by the Government. 14. Servashri M. C. Setalvad, B. Sen and V. S. Desai who have appeared for the Interveners Nos. 6, 3 and 7 in Writ Petition No. 257 of 1972 respectively do not support the arguments challenging the zonal system. On the contrary a strong case has been made by them in favour of the zonal system. The Interveners whom they represent the obviously the low cost units and are in favour of the zonal system being retained. The tug of war in respect of the zonal system is between the high cost units and the low cost ones the former are against it and the latter in favour of it. 15. The system of fixing the prices, according to certain regions or zones, is not a new one. The Tariff Commission in 1959 favoured the formation of four zones. In the report of the Sugar Enquiry Commission 1965 it was pointed out that the Government had acutely fixed the prices for 22 zones which meant that from four zones the number had been increased to twenty-two or more. The commission was of the view that there should be five zones only in addition to Assam. The Tariff Commission, 1969, however recommended the constitution of fifteen zones largely on State-wise basis with an excpetion only in case of Uttar Pradesh and Bihar. Uttar Pradesh was divided into three zones and Bihar into two. The Tariff Commission had been specifically requested to inquire into the working of the zonal system, the main point for inquiry being the zones into which the sugar producers should be grouped having regard to the basis of classification to be recommended by the Commission. The view of the Commission was that on the whole the number of price zones should be fifteen which would reduce, though not eliminate, the inter se anomalies in the cost structure without resorting to the extreme of the fixation of price for each unit or a single or at the most two, one for the sub-tropical and other for the tropical one. The Tariff Commission hoped that in the course of time conditions would be created making the operation of the second alternative feasible. From Chart IV relating to production of sugar to be found in the report of the Sugar Enquiry Commission, 1965, the All India production arose from 12,00,000 tons to 32,00,000 tons in 1964-65. This notwithstanding the fact that the prices were being fixed on the basis of regions. In para 19.7 at page 127 of the said report the Commission made some very useful observations. It rejected the industry s contention that under the system of determining price on the principle of average for a zone there was no incentive for heavy investment in block. It was pointed out that in recent years of control on sugar in spite of the sugar prices having been fixed on a zonal system there had been a substantial addition to the capacity even in the sub-tropical belt. It was stated : "Further, a study of the cost structure of the old and new factories reveals that in the total cost there is hardly much difference between the cost of production in the old factories where the element of depreciation is very low and that in the new factories where its incidence is fairly heavy. While in an old unit the capital cost is lower, the recurring cost is often higher, in a new unit of comparable capacity, it tends to be opposite. What the industry ought to be concerned with is the ultimate ex-factory price. To take out of context one element of cost that goes into the total cost and then to plead that because the incidence in respect of that element of cost is low in the case of old plants some allowance should be given to the industry as a whole, is not justifiable." 16. It is somewhat difficult to accept the argument of those who are opposed to the zonal system that the loss alleged to have resulted to some of the sugar producers can be attributed to the prices having been fixed zone-wise. For instance, in the Punjab zone the crushing capacity of all the factories is practically the same i.e. about 1,000 tons per day. The prices which were fixed by the Government were on the basis of 67 days duration with a recovery of 8.75 %. For instance, in the Punjab zone the crushing capacity of all the factories is practically the same i.e. about 1,000 tons per day. The prices which were fixed by the Government were on the basis of 67 days duration with a recovery of 8.75 %. In the case of Malwa Sugar Mills the actual duration was 95 days, the recovery being 8.78%. Ordinarily and in the normal course profits should have been made by the said unit and it should not have incurred losses. The reasons for incurring losses can be many including mismanagement, lack of efficiency and following a wrong investment policy which have nothing to do with the zonal system. This system by and large leads to efficiency and affords an incentive to cut down the cost. It is only when there is keen competition between the units in the same zone that a real effort will be made by each unit to reduce its cost and make the working and running of the unit more efficient. The essence of the matter is that a commercial concern can be a success only if there is proper planning and efficient management. The argument on behalf of the sugar producers which claim that they have been running into losses because of the zonal system can hardly be sustained on the evidence or the material produced by them. It is true that in a few cases all the data and the details of costs etc. were set out in the petition and were supported by statements made out from audited accounts but in most cases it was at the stage of rejoinder or at the time of arguments that elaborate statements were prepared showing figures of losses into which these units are running owing to the fixation of price by the impugned Order. The Government in these circumstances could possibly have had no opportunity to check up the correctness of all the figures and even if that could be done as weekly returns are submitted on prescribed forms to the authorities concerned it would still not be possible for the Government to determine their accuracy without a complete investigation being carried out. Nor could it be ascertained without a prolonged investigation what the real causes for some of the sugar producers incurring much heavier costs than the others. 17. Nor could it be ascertained without a prolonged investigation what the real causes for some of the sugar producers incurring much heavier costs than the others. 17. The extreme position taken up on behalf of some of the petitioners that the prices should have been fixed unit-wise and on the basis of actual costs incurred by each unit could hardly be tenable. Apart from the impracticability of fixing the prices for each unit in the whole country the entire object and purpose of controlling prices would be defeated by the adoption of such a system. It must be remembered that during the earlier period of price control the price was fixed on an all India basis. That still is the objective and if such an objective can be achieved it cannot be doubted that it will be highly conducive to proper benefit being conferred on the consumers. According to the Commission the objective to be achieved should be to have only two regions in the whole country, namely, sub-tropical and tropical. Not a single expert body appointed by the Government of India from time to time countenanced the suggestion that price control should be unit-wise. It appears that even before the Tariff Commission such a point of view was understandably not pressed on behalf of the sugar industry. The low cost units demanded the formation of the larger zones. No material has been placed before us to show that there was any serious demand for prices being fixed unit-wise. Even in the arguments it was almost common ground with the exception of one or two dissentient voices that zoning is unavoidable in our country in the matter of fixing of the price of sugar. 18. We may now advert to some of the salient flaws and infirmities which have been sought to be shown with the assistance of various facts and figures from which the zonal system is said to suffer. Firstly the method of selection of the units for the purpose of costing and taking of the averages has been subjected to severe criticism. 19. As stated in para 9.1 of Chapter IX of the 1969 report the findings of the Commission were based on 66 costed units out of 200 working units in the industry. Firstly the method of selection of the units for the purpose of costing and taking of the averages has been subjected to severe criticism. 19. As stated in para 9.1 of Chapter IX of the 1969 report the findings of the Commission were based on 66 costed units out of 200 working units in the industry. It was also mentioned in para 9.1.1 that on a scrutiny of the cost forms it was found that the information furnished by most of the non-costed units was not satisfactory. The defects noticed were in regard to allocation of costs under the various heads and inclusion of certain items which should ordinarily have constituted a part of the return. It was further stated that the cost Accounts Officers of the Commission made a detailed scrutiny of the accounts in the selected units and worked out costs in a fair and equitable manner to enable the Commissioner to determine appropriate costs for each unit for detailed cost investigation. The 66 units which were costed out of 68 selected for the purposes accounted for nearly 34 % of the total capacity and 37 % of the total production of sugar in 1966-67. The average duration of the costed units was 101 days with a recovery amounting to 9.73 % as compared to All India figure of 95 days and 9.91 % recovery respectively. The Commission was the best judge of selecting the units for cost study and for working out the average cost. The reasons given by it for selecting the costed units do not suffer from any disregard of the recognised principles of costing. It is true that the selection of some units out of all the units in a particular zone can lead to the anomalies and the hardships which have been pointed out on behalf of the sugar producers. To take an illustration the averages with regard to crushing capacity in the Andhra Pradesh zone might have been different if all the units had been taken into consideration. But the Commission could not have taken the averages of all the units unless it had selected them for costing which in the very nature of things was not practical and which for the reasons given by the Commission itself could not be done because of the unsatisfactory nature of the information furnished by most of the non-costed units. But the Commission could not have taken the averages of all the units unless it had selected them for costing which in the very nature of things was not practical and which for the reasons given by the Commission itself could not be done because of the unsatisfactory nature of the information furnished by most of the non-costed units. Indeed the petitioner in Writ Petition No. 279 did not even reply or send any memoranda to the Commission although the questionnaires were sent to it. Similarly in Andhra Pradesh Zone three other units. Amadalavalasa Co-operative Agricultural & Industrial Society Ltd., Sivakami Sugar Ltd. and Challapalli Sugars Ltd. did not send any reply or memoranda as is apparent from Appendix II in the report.