TaxTMI 
TaxTMI 
2026 (3) TMI 1442
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....abui, Adv., Mr. Chipika Zhimo, Adv., M/s Ag Veritas Law, AOR M/s. Dua Associates, AOR Mr. Basava Prabhu S Patil, Sr. Adv., Mr. Sakya Singha Chaudhuri, AOR Mr. Avijeet Lala, Adv., Ms. Shreya Dubey, Adv., Ms. Astha Sharma, Adv., Ms. Astha Sehgal, Adv., Mr. Shyam Divan, Sr. Adv., Mr. Basava Parbhu Patil, Sr. Adv., Dr. Aditya Sondhi, Sr. Adv., Mr. Geet Ahuja, AOR Mr. Akshaya Babu, Adv., Mr. Chaitanya Ahuja, Adv., Ms. Purnima Chanana, Adv., Mr. Krishna Dev Jagarlamudi, AOR Mr. Arpit Kumar Mishra, Adv., Mr. Vishnu Kanth Munda, Adv., Mr. Shadab Azhar, Adv., Mr. Faisal Sherwani, AOR Mr. Shivam Rajpal, Adv., Mr. Ayush Chatterjee, Adv., Mr. Gyan Prakash Srivastava, AOR Mr. Krishna Dev Jagarlamudi, AOR Mr. Arpit Kumar Mishra, Adv., Mr. Vishnu Kanth Munda, Adv., Mr. Shadab Azhar, Adv., Mr. Aditya K Singh, Adv., Mr. Mridul Gupta, Adv., Mr. Vineet Gupta, Adv., Mr. Divyansh Singh, Adv., Ms. Dalima Gupta, Adv., Mr. Alok Tripathi, AOR Mr. Basava Prabhu S Patil, Sr. Adv., Mr. Sakya Singha Chaudhuri, AOR Mr. Avijeet Lala, Adv., Ms. Shreya Dubey, Adv., Ms. Astha Sharma, Adv., Ms. Astha Sehgal, Adv., Mr. Hemant Sahai, Adv., Ms. Molshree Bhatnagar, Adv., Mr. Pukhrambam Ramesh Kumar, AOR Ms. Nipun Sharma....
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....fixation and be in consonance with statutory policy. For the reasons to follow, we have held that the GBI is designed to subserve a very important policy consideration effecting energy security as well as the obligation to transition from fossil fuels to renewable energy. In this context, we found it necessary to indicate how sectoral regulators like the SERCs have to work in tandem with other duty bearers to subserve the purpose of the Electricity Act, 2003. While interpreting regulatory statutes, Constitutional Courts will not choose any of the conflicting claims but will balance plurality of interests such as energy security, consumer interests, developers' stability as well as environmental concerns, such as global warming. 2. We will first examine the powers of the SERC to determine tariff. Thereafter, we will consider the endeavour of MNRE in reducing dependence on fossil fuels and the compelling need to shift gear towards renewable energy. We will then consider the competing submissions about the regulatory treatment of GBI and make our interpretative choice. II. Facts 3. The Ministry of New and Renewable Energy (MNRE) was formed through an evolution of departments,....
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....Implementation Arrangements: 4.1 The GBI would be implemented through Indian Renewable Energy Development Agency (IREDA). IREDA will also assist the Ministry in organizing business meets, awareness programmes and other related activities, as considered necessary for promotion of the scheme. 4.2 The funds provided in the budget of MNRE will be released upfront as advance to IREDA to ensure timely release and flow of funds to the projects. The existing system followed by various state utilities for data collection/metering and billing on the generation of electricity for the purpose of payment to the power producers with modification, if any as deemed necessary, would be followed as the basis of disbursal of the amount due to the power producer for the new turbine(s) to be set up under the GBI. 4.5 The IREDA would disburse the GBI to the developers through their designated bank account periodically through e-payment. 4.6 This incentive is over and above the tariff that may be approved by the State Electricity Regulatory Commissions in various States. In other words, this incentive that is sanctioned by the Union Government to enhance the availabili....
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....1 specifies normative debt-equity ratio to be 70:30. Regulation 12 while dealing with loan and finance charges, stipulates a normative interest rate @ 300 basis points (i.e. 3%) above the SBI base rate in sub-Section (2)(b). Regulation 13 prescribes depreciation for the first 10 years by a straight-line method at the rate of 7% per annum. Regulation 14 stipulates a return on the equity component of 30% of the capital cost, and grants a return on equity of 16% with MAT/Income Tax as pass through, i.e. the DISCOM reimburses the tax paid to the GENCOs. Regulation 15 confers interest on working capital at the rate of 350 basis points (i.e. 3.5%) above the SBI rate. Regulation 16 deals with operational and maintenance expenses. Regulation 17 grants rebates for payment of bills of the generating company at the rate of 2% when paid through a letter of credit; and of 1% when paid within a period of 1 month of presentation of bills. Regulation 18 provides for sharing the proceeds of carbon credit between the generating company and the concerned beneficiaries. Regulations 19 expressly provides that taxes and duties levied by the Government are exclusive of and over and above the determined t....
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...., the benefit of GBI was not, despite the two being mutually exclusive and carrying the same purpose of incentivizing renewable power generation through wind. 12.7 The Tariff Orders carry no reference to the GBI and there was no conscious application of mind to the issue of factoring in said benefit while fixing tariff. Request proffered by the DISCOMs to factor in GBI was neither looked into nor specifically considered. 12.8 The Commission has the jurisdiction to revise the tariff in public interest. Regardless, the relief sought by DISCOMs is neither in the nature of an amendment nor a review of the Tariff Orders, rather, only a supplementary tariff order is being sought for giving effect to Regulation 20 by taking into consideration GBI. 12.9 Factoring in GBI will only have the effect of enforcing Regulation 20 and will not amount to revisiting terms and conditions of the PPA, which only binds the parties to the tariff payable as per the 2015 Tariff Regulations. 12.10 Arguments of promissory estoppel and legitimate expectation are extraneous for present consideration. 12.11 If the economic consequences are considered, factoring in GBI will only help the DISCOMs to....
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....f the 2015 Tariff Regulations. 13.4 In the proceedings concerned, the DISCOMs had requested APERC to amend its earlier Tariff Orders in terms of Regulation 20 and the APERC interpreted the words "shall be taken into consideration" as an obligation to deduct GBI from the preferential tariff. Use of the words "shall take into consideration" in Regulation 20 would only mean that the APERC "should think over, reflect on, bestow attentive thought upon" the GBI Scheme and upon such exercise it was the discretion of the APERC to determine tariff with or without factoring in said benefit. 13.5 It was the understanding of DISCOMs as well as APERC, as appears from combined reading of letters dated 30.10.2015 and 15.02.2016, that 2015 Tariff Regulations do not provide for factoring in GBI while determining tariff. Thereby, Tariff Order dated 26.03.2016 was passed in line with Tariff Order dated 01.08.2015, without factoring in GBI. 14. Thus, the APTEL was of the considered view that since Regulation 20 only requires APERC to consider and be conscious of any incentive offered by the Government, APERC was wrong to state that its failure to factor in GBI at the time of tariff determinat....
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...., from production to usage. 17.2 Electricity being a public good^13 and a basic amenity^14, it has been recognised as a part of the right to shelter and right to life^15. In this light, the Act covers the entire process of production, transfer, and sale of electricity and also deals with the utilisation of electricity. These are covered under generation, transmission, distribution, trading and use of electricity. 17.3 The Act is also concerned with the development of the electricity sector and to ensure that there is sufficient amount of electricity available to all. In furtherance of this goal of enhancing the availability of electricity, the Act envisages private sector participation and promotion of competition. 17.4 These measures are ultimately intended to protect and subserve consumer interests by making electricity supply accessible at cheaper rates for those who cannot afford it, as well as making supply accessible in all areas and regions. In this vein, the Act provides for the need for transparent subsidy policies. 17.5 Taking into account the ecological impact of the electricity sector and its activities, the Act provides for promotion of efficient and enviro....
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....transparency. With the powers that they are granted, coupled with autonomy that they enjoy, these Commissions are the primary duty bearers to implement the provisions of the Act. 20. Tariff determination is the exclusive province of the Regulatory Commissions. In performance of their functions, the Central and State Electricity Regulatory Commissions determine tariff for supply of electricity by generating companies to distribution licensees, for transmission, wheeling, and also for retail sale of electricity.^20 Section 61 provides the guiding principles for good governance for development, sale, and distribution of power and also emphasises the overarching principle of subserving the interests of consumers. The journey as well as the destination of tariff determination process under the statute indicates that the Commissions shall ensure that utilities will adopt commercial principles, encourage competition, promote efficiency, use resources economically, perform efficiently and optimise investments. The purpose of adopting such measures is to "safeguard and protect the interest of the consumers". Section 61 also recognises the vulnerability of the electricity sector to undue ....
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.... He would therefore reiterate that GBI voted on by the Parliament as an expenditure charged on the Consolidated Fund of India as a generator incentive cannot be altered as a consumer incentive even by legislation. If that be so, he argues, the constitutional mandate of Parliamentary Assent translating into the GBI scheme, intended to reach wind power generators, cannot be converted as a consumer incentive by the SERC. 25. We will answer this submission by restructuring Article 114(2) in three parts; i) prohibition is with respect to proposing any amendment to the Appropriation Bill; ii) in the case a grant (under Article 114(1)(a)) if it has the effect of varying the amount or altering the destination and, iii) in the case of expenditure (under Article 114(1)(b)) if it has the effect of varying the amount. 26. It is true, under Article 114(2), that if a legislation cannot vary or alter the destination of a grant, a subordinate legislation too cannot alter its destination. However, it is an admitted fact that the incentive was released or credited directly in favour of the GENCOs. There has been no diversion, much less subversion, of the sums allocat....
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....e State. Since electricity is a public good,^27 Regulatory Commissions must undertake joint and collaborative efforts with the other authorities to enable access to electricity across urban and rural areas^28 and ensure affordability through rationalisation of tariffs^29. The statutory authorities must work in cohesion and steer towards a common goal of ensuring supply of electricity across regions and terrains, supply cheaper and affordable power to those sections of society who cannot afford it. At the same time, the Regulatory Commissions maintain their independence and autonomy and ensure that the final decision with respect to fixation of tariff will be that of the Regulatory Commissions alone. 30. Laying down the guiding principles for determination of tariff as per Part VII of the Electricity Act, Section 61(h) obligates the Regulator to determine tariff keeping in mind promotion of generation of electricity from renewable sources of energy.^30 31. As noted earlier, the MNRE introduced the GBI Scheme to achieve reduced dependence on fossil fuels as an energy source and to move on to renewable sources of energy.^31 More specifically, the grant of GBI to wind power proje....
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....acts of climate change and achieve sustainable development.^38 35. To achieve these targets, India has implemented various policy measures and initiatives to promote renewable energy investment, innovation, and adoption.^39 India's commitment to transitioning to non-fossil fuels is not merely a strategic energy goal but a fundamental necessity for environmental preservation.^40 Investing in renewable energy not only addresses urgent environmental concerns but also yields a plethora of socio-economic benefits. By shifting towards renewable energy sources, we enhance our energy security, reduce reliance on volatile fossil fuel markets and mitigate the risks associated with energy scarcity. Additionally, the adoption of renewable energy technologies helps in curbing air pollution, thereby improving public health and reducing healthcare costs.^41 36. Where environmental protection is weighed in to make electricity policy, it is necessary for regulators to take a holistic approach which balances competing interests without any sacrifices. Further, policy decisions taken on the basis of the national and international goals must be incorporated at various stages to ensure that i....
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....d jurisdiction would be exercised in collaboration with other stakeholders. When regulation is exercised as an enterprise, it is seen as "delegation by Government of the inherent powers to act in the public interest"^43 40. When the domain regulator acts in the larger interest and in coordination with other duty bearers under the Act and those responsible for development of the concerned sector, they coordinate with different stakeholders and work towards a common enterprise and for larger public purpose; this approach has the virtue of integrating and effectuating regulatory power in areas having social justice and/or environmental considerations. 41. While discussing the subject relating to regulatory competence and regulatory object and design, Paul Craig has formulated the issue in the following terms as under; "Regulation as control is predicated on regulation being an intrusion into private autonomy, which is justified for reasons of market failure. The principal regulatory objective is efficiency to be achieved through promotion of competition and the correction of externalities. Distributive concerns are regarded as the province of government, not the regulat....
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....at this is necessary not only to ensure that these specialised functions are performed by expert regulators but to also facilitate a systematic and consistent development of sectoral laws. 33. In this light, when a constitutional court is interpreting statutes, rules, or regulations that fall within the regulator's domain, it must bear in mind the need to enable the regulator to exercise comprehensive jurisdiction. Courts must not impair the functioning of the regulator by taking away certain aspects of the sector outside the regulator's scope, thereby fragmenting regulation and creating plurality of jurisdictions. It is in the interest of good governance through regulation to ensure that there is no proliferation of remedies and there are no parallel, multiple remedial forums. Further, this also ensures that the sectoral law is developed in a coordinated and systematic fashion by the regulator that is equipped to deal with not only legal issue but also has specialised knowledge in other areas." (emphasis supplied) X. Conclusion 43. Hence, it is restated that the Parliamentary allocation and grant of generator incentive does not ipso facto exclude the regula....
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.... power must be exercised as a collaborative enterprise. It must not be exercised in a manner that ignores the purpose and object of a policy or grant by other stakeholders. 47. With the declaration of the powers and jurisdiction of the Electricity Regulatory Commission in determination of tariff as indicated in the judgment, we dismiss the Civil Appeal No. 4495 of 2025 filed against the judgment and order dated 19.12.2024 passed by the APTEL in Appeal No. 284 of 2018 by holding that the GBI is intended to be disbursed to the GENCOs over and above the tariff. 48. Applications filed for intervention/ impleadment are allowed. Other pending applications, if any, are disposed of in terms of the judgement. --------------------- Notes: 1. Regulation 20 Subsidy or incentive by the Government: The Commission shall take into consideration any incentive or subsidy offered by the Central or State Government, including accelerated depreciation (AD) benefit, if availed by the generating company, for Wind Power Projects while determining the tariff under these Regulations... 2. See Regulations 23-26. 3. See Regulations 2(p) and 5(a). 4. ....
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.... entered into between a generating company and a licensee or between licensees, for a period not exceeding one year to ensure reasonable prices of electricity; (b) transmission of electricity; (c) wheeling of electricity; (d) retail sale of electricity: Provided that in case of distribution of electricity in the same area by two or more distribution licensees, the Appropriate Commission may, for promoting competition among distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity. Sections 79 sets out the functions of the Central Commission. The relevant portion is as follows: Section 79 Functions of Central Commission: (1) The Central Commission shall discharge the following functions, namely:- (a) to regulate the tariff of generating companies owned or controlled by the Central Government; (b) to regulate the tariff of generating companies other than those owned or controlled by the Central Government specified in clause (a), if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State; ....
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....including interest, sinking fund charges and redemption charges, and other expenditure relating to the raising of loans and the service and redemption of debt; (d) (i) the salaries, allowances and pensions payable to or in respect of Judges of the Supreme Court; (ii) the pensions payable to or in respect of Judges of the Federal Court; (iii) the pensions payable to or in respect of Judges of any High Court which exercises jurisdiction in relation to any area included in the territory of India or which at any time before the commencement of this Constitution exercised jurisdiction in relation to any area included in a Governor's Province of the Dominion of India; (e) the salary, allowances and pension payable to or in respect of the Comptroller and Auditor General of India; (f) any sums required to satisfy any judgment, decree or award of any court or arbitral tribunal; (g) any other expenditure declared by this Constitution or by Parliament by law to be so charged. 25. Article 113 Procedure in Parliament with respect to estimates: ... (2) So much of the said estimates as relates to other expenditure shall be submitted i....