APTEL Remand Limited: CERC Reaffirms Incentive Entitlement for NLC, Pooling Issue Remains Settled - 2025-04-04

CERC Upholds Incentive for NLC, Clarifies Scope of APTEL Remand on Lignite Pricing

New Delhi, March 29, 2025 – The Central Electricity Regulatory Commission (CERC) has reaffirmed its stance on incentive entitlement for NLC India Limited (NLCIL), following a remand order from the Appellate Tribunal for Electricity (APTEL). In a judgment dated March 29, 2025, a CERC bench comprising Chairperson Shri Jishnu Barua and Members Shri Ramesh Babu V, Shri Harish Dudani, and Shri Ravinder Singh Dhillon, clarified that the APTEL's remand was limited to the issue of incentive calculation and did not reopen the settled matter of lignite price pooling.

Background of the Dispute

The case originates from a petition filed by NLCIL in 2013, seeking revision of pooled lignite prices to include costs from its Mine-II Expansion for the period 2010-14. The CERC initially allowed this pooling in 2015, but directed NLCIL to refund incentives earned above a certain plant availability factor (NAPAF) and share lignite sale revenues with beneficiaries, including Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), Kerala State Electricity Board Limited (KSEBL), and others.

NLCIL filed a review petition against this order, which was partially allowed by CERC in 2016. Subsequently, NLCIL appealed to APTEL, contesting the denial of full incentive and the profit-sharing directive. APTEL, in its judgment dated July 3, 2024, allowed NLCIL's appeal regarding incentive entitlement, setting aside the CERC's review order on that aspect and remanding the matter for fresh consideration.

Arguments and Counter-Arguments

Upon remand, TANGEDCO argued that APTEL's judgment constituted an "open remand," allowing CERC to revisit all issues, including the initial decision on lignite pooling. TANGEDCO contended that the pooling of Mine-II Expansion costs with existing mines, without the associated Thermal Power Station-II (Expansion) being fully operational, was inappropriate and financially detrimental to beneficiaries.

NLCIL countered that APTEL's remand was specifically limited to the incentive issue. NLCIL emphasized that APTEL had acknowledged in its judgment that the pooling of lignite costs was not challenged by any party and was considered to be in compliance with Ministry of Coal guidelines. NLCIL argued that reopening the pooling issue would contradict APTEL's findings and place NLCIL in a disadvantageous position despite succeeding in its appeal on the incentive matter.

CERC's Analysis and Decision

The CERC meticulously examined the APTEL judgment, referencing principles governing the scope of remand orders. The Commission highlighted APTEL's observation that "pooling of cost has not been challenged by the beneficiaries nor by the Appellant, therefore, the decision of the CERC to such an extent is in force as on date."

The CERC explicitly rejected TANGEDCO's contention of an "open remand," stating:

> "To us, the direction in para 157 should be seen and read only in relation to the issues decided by APTEL in the judgment and cannot be construed as reopening the issue of pooling. It can therefore, be safely concluded that the APTEL judgment dated 3.7.2024 is not an ‘open remand’ as contended by the Respondent, but only a ‘limited remand’ with directions to pass orders afresh, on the aspect of the Review Petitioners entitlement to ‘incentive’ over and above 75% normative availability in terms of the Regulations."

The Commission underscored that APTEL's primary concern was the denial of incentive to NLCIL in contravention of prevailing tariff regulations, citing the precedent set in PTC India Limited V. Central Electricity Regulatory Commission . Regarding TANGEDCO's reliance on Order 41 Rule 33 of the Code of Civil Procedure to broaden the scope of the remand, CERC deemed it "misconceived," noting that APTEL had not exercised powers under this rule and that TANGEDCO had not filed any cross-objections in the appeal.

Final Order and Implications

Ultimately, the CERC concluded that NLCIL is entitled to incentives for achieving availability above 75% NAPAF for its TPS-II Stage-I and Stage-II stations, as per the 2009 Tariff Regulations. The Commission directed TANGEDCO to refund the adjusted incentive amount of ₹168.14 crore (including interest) to NLCIL within two months.

This judgment clarifies the limited scope of APTEL's remand and reaffirms the validity of the CERC's initial decision on lignite pooling. It also ensures that NLCIL receives the incentive benefits as per regulatory norms, bringing closure to a long-standing dispute over tariff determination and incentive mechanisms in the power sector.