1. Wind energy projects — Tariff determination — Non-availment of accelerated depreciation under Income Tax Act, 1961 — Dispute over applicability of fixed-rate Power Purchase Agreements. (Para 1 , 3 , 4 , 5 , 15 , 16 )
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2025 Supreme(SC) 1142
SUPREME COURT OF INDIA
Sanjay Kumar, Satish Chandra Sharma, JJ.
Gujarat Urja Vikas Nigam Limited – Appellant
Versus
Green Infra Corporate Wind Private Limited and others etc. – Respondents
Civil Appeal Nos. 14098-14101 of 2015
Decided On : 04-08-2025
Important Points
The court affirmed that power producers can determine tariffs based on their depreciation benefit status, rejecting the imposition of rates for those availing accelerated depreciation on entities not partaking in such benefits.
Subject
Electricity Law - Tariff Determination
Act Referred
Headnote
(A) Electricity Act, 2003 - Sections 61, 62, and 86 - Tariff determination for wind energy projects - Appellant challenged the orders from the Appellate Tribunal for Electricity and the Gujarat Electricity Regulatory Commission confirming tariff applicability despite arguments over accelerated depreciation - The GERC's decision allowing companies not availing benefits of accelerated depreciation to seek tariff determinations on a case-by-case basis is upheld. (Paras 3-4, 11-24)
(B) State Responsibility - The State instrumentality must promote renewable energy in line with governmental policies and cannot impose tariffs unilaterally against the policy objectives. (Paras 17-25)
Facts of the case:
The appellant contested the right of four wind energy companies to determine tariffs as their projects were commissioned within a specified 3-year control period under a prior tariff order, asserting their unavailability of accelerated depreciation benefits.
Findings of Court:
GUVNL's stance to enforce a tariff meant for projects availing accelerated depreciation on those not availing such benefits is unjustified. GERC’s verdict maintaining distinct applicability of tariffs is valid.
Issues: Primarily whether the wind energy companies were entitled to approach for tariff determination post-signing PPAs, and whether GUVNL was bound by previously set tariff rates.
Ratio Decidendi: The court reaffirmed the principle that tariffs must align with commission determinations; without commitments from companies not to opt for depreciation, GUVNL cannot claim enforceability of rates against them.
Result: Appeals dismissed.
(B) State Responsibility - The State instrumentality must promote renewable energy in line with governmental policies and cannot impose tariffs unilaterally against the policy objectives. (Paras 17-25)
Facts of the case:
The appellant contested the right of four wind energy companies to determine tariffs as their projects were commissioned within a specified 3-year control period under a prior tariff order, asserting their unavailability of accelerated depreciation benefits.
Findings of Court:
GUVNL's stance to enforce a tariff meant for projects availing accelerated depreciation on those not availing such benefits is unjustified. GERC’s verdict maintaining distinct applicability of tariffs is valid.
Issues: Primarily whether the wind energy companies were entitled to approach for tariff determination post-signing PPAs, and whether GUVNL was bound by previously set tariff rates.
Ratio Decidendi: The court reaffirmed the principle that tariffs must align with commission determinations; without commitments from companies not to opt for depreciation, GUVNL cannot claim enforceability of rates against them.
Result: Appeals dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. C.A. Sundaram, Sr. Adv. Mr. M.G. Ramachandran, Sr. Adv. Ms. Hemantika Wahi, AOR Ms. Jesal Wahi, Adv. Ms. Ranjitha Ramachandran, Adv. Ms. Srishti Khindaria, Adv.
For the Respondent(s): Mr. Anupam Chaudhary, Adv. Mr. Vishal Gupta, AOR Mr. Shri Venkatesh, Adv. Ms. Kanika Chugh, Adv. Mr. Nitin Saluja, AOR Mr. Siddharth Nigotia, Adv. Mr. Harsh Vardhan Jha, Adv. Mr. Shyam Divan, Sr. Adv. Mr. Divyakant Lahoti, AOR Mr. Akshaya Babu, Adv. Ms. Praveena Bisht, Adv. Ms. Vindhya Mehra, Adv. Mr. Kartik Lahoti, Adv. Mr. Kumar Vinayakam Gupta, Adv. Mr. Adith Menon, Adv. Ms. Samridhi Bhatt, Adv. Ms. Shreya Gokel, Adv. Mr. Siddharth Tripathi, Adv. Ms. Akanksha Soni, Adv.
For the Appellant(s) : Mr. C.A. Sundaram, Sr. Adv. Mr. M.G. Ramachandran, Sr. Adv. Ms. Hemantika Wahi, AOR Ms. Jesal Wahi, Adv. Ms. Ranjitha Ramachandran, Adv. Ms. Srishti Khindaria, Adv.
For the Respondent(s): Mr. Anupam Chaudhary, Adv. Mr. Vishal Gupta, AOR Mr. Shri Venkatesh, Adv. Ms. Kanika Chugh, Adv. Mr. Nitin Saluja, AOR Mr. Siddharth Nigotia, Adv. Mr. Harsh Vardhan Jha, Adv. Mr. Shyam Divan, Sr. Adv. Mr. Divyakant Lahoti, AOR Mr. Akshaya Babu, Adv. Ms. Praveena Bisht, Adv. Ms. Vindhya Mehra, Adv. Mr. Kartik Lahoti, Adv. Mr. Kumar Vinayakam Gupta, Adv. Mr. Adith Menon, Adv. Ms. Samridhi Bhatt, Adv. Ms. Shreya Gokel, Adv. Mr. Siddharth Tripathi, Adv. Ms. Akanksha Soni, Adv.
Table of Contents
2. Appellant claims Power Purchase Agreements are binding contracts; Respondents contend entitlement to separate tariff determination by the Regulatory Commission for not availing accelerated depreciation. (Para 16 )
3. State instrumentalities must further policy objectives; tariff determination is a statutory function under the Electricity Act, 2003, and cannot be superseded by private contractual agreements. (Para 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 )
4. Statutory tariff determination by a Regulatory Commission prevails over contractual terms in Power Purchase Agreements, especially when the contract relies on an inapplicable statutory tax benefit. (Para 21 , 24 , 25 )
5. Appeals dismissed; orders of the Regulatory Commission and Appellate Tribunal confirming the respondents' right to seek separate tariff determination are upheld. (Para 25 )
6. Can a Power Purchase Agreement bind a power producer to a tariff meant for those availing accelerated depreciation if they do not avail it?
No. The option to avail accelerated depreciation is exercised during tax filing after the PPA is signed. Since tariff determination is a statutory function, a producer cannot be bound to an inapplicable tariff unless they provided a specific written commitment to avail the benefit. (Para 21 , 22 , 23 , 24 , 25 )
7. Is the tariff fixed in a Power Purchase Agreement (PPA) inviolable and beyond review?
No. Tariff determination is an exercise of statutory power under the Electricity Act, 2003. Tariffs incorporated into PPAs are not inviolable and are subject to review and correction by the Regulatory Commission in light of changed circumstances or public interest. (Para 13 , 14 )
8. What is the legal obligation of a State instrumentality regarding the promotion of renewable energy?
A State instrumentality must abide by and further the policy objectives of the State, such as promoting renewable energy. It cannot advance purely commercial considerations in isolation or act contrary to the mandate of the Regulatory Commission. (Para 17 , 20 , 24 )
JUDGMENT :
SANJAY KUMAR, J
1. Gujarat Urja Vikas Nigam Limited (GUVNL), the appellant in these four appeals, assails the common judgment dated 28.09.2015 rendered by the Appellate Tribunal for Electricity (APTEL), New Delhi, in Appeal Nos. 198, 199, 200 and 291 of 2014. Thereby, the APTEL confirmed the orders dated 13.06.2014, 11.06.2014, 13.06.2014 and 20.09.2014 passed by the Gujarat Electricity Regulatory Commission (GERC), Gandhi Nagar, in Petition Nos. 1239 of 2012, 1221 of 2012, 1241 of 2012 and 1365 of 2013 filed by Green Infra Corporate Wind Private Limited, New Delhi; Vaayu (India) Power Corporation Private Limited, Daman; Green Infra Wind Power Limited, New Delhi; and Tadas Wind Energy Private Limited, Mumbai, respectively, viz., the four contesting respondent companies.
2. By order dated 05.05.2016, this Court requested the GERC to defer its proceedings till the matter was finally decided and disposed of by this Court. This order was passed in view of the fact that, pursuant to the APTEL’s common judgment under appeal, the GERC began hearings for determination of tariff on the petitions filed by each of the four respondent companies. Thereafter, by order dated 03.02.2023, this Court permitted the GERC to proceed with the tariff determination hearings subject to the condition that no final order should be passed without the leave of this Court. We are informed that the hearings before the GERC have concluded but the final orders have not been pronounced owing to the aforestated order.
3. The short issue for consideration is whether the four respondent companies were entitled to approach the GERC for determination of the tariff for procurement of power by GUVNL from their wind energy projects. The GERC answered this issue in their favour and the same stood confirmed by the APTEL. Hence, these statutory appeals.
4. By Order No. 1 of 2010 dated 30.01.2010, passed in exercise of the powers conferred by Sections 61 (h), 62(1)(a) and 86(1)(e) of the ELECTRICITY ACT , 2003 (for brevity, ‘the Act of 2003’), the GERC determined the tariff for procurement of power by distribution licensees, such as GUVNL, from wind energy projects. This order was applicable for a control period of 3 years with effect from 11.08.2009. In consequence, all wind energy projects commissioned during that 3-year control period were covered by this order. One of the factors considered by the GERC for tariff determination thereunder is ‘Depreciation’. In relation thereto, GUVNL and others had pointed out that some of the wind energy projects availed the benefit of ‘Accelerated Depreciation’ as a tax-planning measure and if the same is taken into account, the tariff would reduce drastically, i.e., to about Rs.3.05 per unit, but if it is not taken into account, the tariff would be higher, working out to Rs.3.77 per unit. They, therefore, suggested that the GERC should specify either an average tariff of Rs.3.50 per unit or two different tariffs for wind energy projects - (i) those which are availing the benefit of accelerated depreciation; and (ii) those which are not availing the benefit of accelerated depreciation. They also suggested that the wind energy projects which did not avail accelerated depreciation benefit should be asked to submit affidavits along with supporting documents that accelerated depreciation was not being claimed by them. Upon considering these objections/suggestions, the GERC ruled as follows: -
‘Commission’s Ruling
Depreciation is a non-cash flow expenditure and it is linked with the loan repayment. The loan repayment period is considered by the Commission as 10 years. Hence, the requirement of cash flow in the initial 10 years is more to match with the loan repayment. After considering the suggestions of the objectors, the Commission decided to allow 6% of the capital cost per annum as depreciation for the initial 10 years and 2% per annum from 11th to 25th year of the plant.
The provisions of Accelerated Depreciation are provided in
