Summary
The Supreme Court dismissed GUVNL's appeals and upheld the GERC and APTEL orders allowing four wind energy generators to seek project-specific tariff determination despite having signed PPAs at the fixed rate of Rs. 3.56 per kWh, holding that under the Electricity Act, 2003 the procurement price is fixed statutorily by the Commission and not by private agreement, that GERC's Tariff Order No. 1 of 2010 confined that rate to projects availing accelerated depreciation under the Income Tax Act, and that GUVNL, a State instrumentality bound to further the renewable energy policy, could not bind generators that admittedly did not avail that benefit without securing a commitment from them when the statutory option to choose depreciation arises only when the return of income is filed.
Issues
- Whether wind energy generators that signed PPAs with GUVNL incorporating the levelized tariff of Rs. 3.56 per kWh fixed by GERC Order No. 1 of 2010 for projects availing accelerated depreciation were entitled, having not availed that benefit, to approach the GERC for case-specific determination of tariff.
- Whether the tariff stated in a PPA is contractually binding and inviolable, or remains subject to statutory determination by the Appropriate Commission under the Electricity Act, 2003.
- Whether the decision in GUVNL v. EMCO Ltd. precluded the generators from seeking a separate tariff after signing the PPAs.
Provisions considered
- Sections 61, 62, 64 and 86(1)(a), (b), Electricity Act, 2003The Court set out the statutory scheme: the Appropriate Commission specifies terms and conditions for tariff determination guided by the factors in Section 61 (including promotion of renewable energy), determines tariff for supply by a generating company to a distribution licensee under Section 62 on an application under Section 64, and under Section 86(1)(a) and (b) determines generation tariff and regulates the price of procurement by distribution licensees; the procurement price is therefore fixed statutorily and is not a matter of private consensus. (¶¶ 4, 8, 14, 21)
- Section 3, Electricity Act, 2003Relied on for the objective of the Act that the Central Government frames the National Electricity Policy and tariff policy for development of the power system based on optimal utilisation of resources including renewable sources of energy, which GUVNL as a State instrumentality was bound to further. (¶ 17)
- Section 32(1), Income Tax Act, 1961Section 32(1) allows an undertaking engaged in generation of power depreciation at prescribed percentages of actual cost; read with Rule 5, it gives the assessee an option between accelerated and normal depreciation, exercisable only when filing the return for the assessment year relevant to the previous year in which generation began. (¶¶ 6, 7, 22)
- Rule 5(1), 5(1A), second and third provisos, and Appendix I, Income Tax Rules, 1962The provisos allow a power undertaking, at its option exercised before the due date for furnishing its return for the relevant assessment year, to take depreciation under Appendix I (80% for renewable energy devices including wind mills) instead of Appendix IA, the option once exercised being final; the Court held this statutory liberty could not be truncated by GUVNL fixing a binding price in a PPA signed long before the option fell due. (¶¶ 6, 7, 22, 23)
Held
- Under the scheme of the Electricity Act, 2003 the price at which a distribution licensee procures power from a generating company is not a matter of consensus and private agreement; it is fixed statutorily by the Appropriate Commission. GUVNL therefore cannot fix its own price or bind a generating company to a price contrary to the dictum of the GERC, and, following Tarini Infrastructure, a tariff incorporated in a PPA is not inviolable. (¶¶ 14, 21, 25)
- GERC Tariff Order No. 1 of 2010 made it clear that the levelized tariff of Rs. 3.56 per kWh applied only to wind energy projects availing accelerated depreciation, and that projects not availing it could petition the Commission for a separate case-specific tariff; that tariff has no application to a project that did not avail accelerated depreciation. (¶¶ 4, 5, 21, 24, 25)
- Because the option between accelerated and normal depreciation must be exercised only when the return is filed for the assessment year relatable to the year generation began, and a generator cannot sell power without first signing a PPA, the tariff in a PPA signed earlier is necessarily conditional on the later exercise of that statutory option, unless the generator chose its option at the time of the PPA and gave a commitment to the distribution licensee that it would avail accelerated depreciation. (¶¶ 22, 23)
- GUVNL admittedly obtained no written commitment from the respondents that they would avail only accelerated depreciation, and it does not dispute that they did not avail it. It cannot use its dominant position and the PPAs to bind them for the life of their projects to a rate wholly inapplicable to them; the plea that the respondents are estopped by having willingly signed the PPAs is not open to it. (¶¶ 24, 25)
- GUVNL, being an instrumentality of the State, is bound by and must further the Government's policy of promoting renewable energy (the Gujarat Wind Power Policies of 2007 and 2013 and the objectives of the Act of 2003); it cannot advance commercial considerations in isolation like a private business and its conduct must meet the standard of a model citizen. Binding the respondents to an inapplicable rate was patently unfair treatment. (¶¶ 17, 18, 19, 20, 24)
- The observations in GUVNL v. EMCO Ltd. that support GUVNL must be understood in their factual context, involving two tariff orders and a specific PPA condition on delayed commissioning; as explained in Tarini Infrastructure, EMCO was distinguished because that producer sought tariff under an inapplicable Second Tariff Order instead of a separate determination under the First. (¶¶ 9, 10, 11, 12, 13, 14)
Result
Appeals dismissed; orders of the GERC permitting project-wise tariff determination and the APTEL judgment dated 28/09/2015 affirming them upheld; the Supreme Court's order dated 03/02/2023 restraining the GERC from passing final tariff orders vacated; pending applications dismissed.