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Upholds on Bagasse Plants, Rejects Discrimination
The has upheld the levy of on bagasse-based cogeneration plants, dismissing petitions that challenged the demands as discriminatory and the .
Justice M. Nagaprasanna rejected arguments that exempting solar power projects while imposing the surcharge on bagasse units violated Article 14, and sustained the validity of , and the .
The Dispute Over
The petitioners—, , and —operate bagasse-based cogeneration power projects across Karnataka. They procured electricity from the through while remaining connected to the distribution network of the and other ESCOMs.
The ESCOMs issued demand notices levying for periods between and , amounting to crores of rupees. After the upheld these demands, the companies moved the High Court.
Petitioners' Arguments
argued that the surcharge could not be imposed on transactions governed by regulations. He contended that the ESCOMs were not valid distribution licensees under Section 14 of the Electricity Act and that the surcharge amounted to since solar projects were exempted. He also pleaded under Section 56 of the Act, which caps recovery at two years.
Respondents' Defense
Counsel for the ESCOMs submitted that the surcharge compensates distribution companies for revenue lost when high-paying consumers exit the system, protecting subsidized supply to poorer sections. They argued that the companies were under the third proviso to Section 14 and that the petitioners, having entered into , could not dispute their status.
The Court's Reasoning
The High Court relied on three precedents— , , and —to hold that State Commissions have jurisdiction to regulate and impose on consumers within their territory, regardless of the source of power.
The Court observed that the petitioners drew electricity through ESCOMs' distribution lines and operated within Karnataka, making them liable for the surcharge. It further held that neither Regulation 3(1) of the Licensing Regulations nor the was inconsistent with the parent Act.
Key Observations from the Judgment
“The contention that solar power projects are exempted while bagasse-based cogeneration plants are levied with huge Surcharge being discriminatory, is a submission that is noted only to be rejected.”
“The petitioners should pay the Surcharge and the contention that Solar power is exempted is neither here nor there.”
“, broadly speaking, is the charge payable by a consumer who opt to avail power supply through from someone other than such distribution licensee in whose area it is situated.” (quoting Sesa Sterlite )
The Final Decision
Finding no merit in the petitions, Justice Nagaprasanna dismissed all four writ petitions, sustaining the demand notices and upholding the validity of the challenged regulations. The decision reinforces the authority of State Electricity Regulatory Commissions to levy on industrial consumers who procure power through , and clarifies that exemption for one category (solar) does not create a right for others to claim similar treatment.
