Kiran Raj

The Supreme Court of India Division Bench of Justice Sanjay Kumar and Justice Satish Chandra Sharma held that the tariff of ₹3.56 per kWh determined under Order No. 1 of 2010 by the Gujarat Electricity Regulatory Commission (GERC) is applicable only to wind energy projects that availed the benefit of accelerated depreciation under the Income Tax Act, 1961. The Court dismissed the appeals challenging the Appellate Tribunal for Electricity’s decision, thereby upholding the orders of the GERC and the Tribunal which allowed project-wise determination of tariff for companies that did not claim accelerated depreciation.

The Bench directed that the order dated 03.02.2023, which had restrained the finalisation of tariff determination, stands vacated. All pending applications in connection with the appeals were dismissed. The Court found that the appellant, being an instrumentality of the State, could not bind the respondent companies to a tariff applicable only to those availing accelerated depreciation when they had not availed such benefit and no written commitments had been secured from them. The judgment concluded that the tariff fixed in the Power Purchase Agreements (PPAs) was inapplicable to the respondents, and the orders passed by the GERC and APTEL required no interference.

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The dispute arose from the determination of tariff for procurement of power by Gujarat Urja Vikas Nigam Limited (GUVNL) from the wind energy projects of four companies: Green Infra Corporate Wind Private Limited, Vaayu (India) Power Corporation Private Limited, Green Infra Wind Power Limited, and Tadas Wind Energy Private Limited. The Gujarat Electricity Regulatory Commission (GERC) had issued Order No. 1 of 2010 on 30.01.2010 under Sections 61(h), 62(1)(a), and 86(1)(e) of the Electricity Act, 2003, determining tariff for procurement of power from wind energy projects for a control period of three years effective from 11.08.2009. For projects availing accelerated depreciation under the Income Tax Act, 1961, the levelized tariff was fixed at ₹3.56 per kWh for the project life of 25 years. The order also stated that projects not availing accelerated depreciation could approach GERC on a case-to-case basis for tariff determination.

The accelerated depreciation provisions under Section 32 of the Income Tax Act, 1961 and Rule 5 of the Income Tax Rules, 1962 allowed an 80% rate for renewable energy devices, including windmills, effective from AY 2006-07. The option to avail accelerated depreciation had to be exercised before the due date for filing the return for the assessment year in which the project began generating power.

The Electricity Act, 2003 vested the Appropriate Commission with the power to determine tariffs. Sections 61, 62, 64, and 86 laid out the framework for tariff determination, including factors such as consumer interest and promotion of renewable energy. Tariff orders, once issued, remained in force unless amended or revoked.

The respondents signed PPAs with GUVNL between June 2010 and March 2012, within the control period of the 2010 Order, with a tariff clause stating a fixed rate of ₹3.56 per kWh for 25 years as determined in Order No. 1 of 2010. The respondents later approached GERC in 2012/2013, seeking determination of tariff on the ground that they had not availed accelerated depreciation. GUVNL opposed, asserting that the projects, having signed PPAs at a fixed rate, could not seek a higher tariff later. GUVNL argued that if these projects had opted for case-specific tariffs, it would not have entered into PPAs with them.

GERC held in favour of the respondents, allowing project-wise tariff determination, and APTEL confirmed this decision in 2014. GUVNL appealed to the Supreme Court.

The Court observed that GUVNL, as an instrumentality of the State, was bound by the policy directives promoting renewable energy and could not act solely on commercial considerations. "GUVNL cannot, therefore, fix its own price or bind a generating company to such price, contrary to the dictum of the GERC." The Court noted that Order No. 1 of 2010 clearly stipulated the ₹3.56 per kWh tariff applied only to projects availing accelerated depreciation.

It recorded that under the Income Tax Act, 1961, the choice to avail accelerated depreciation could only be made when filing the return for the relevant assessment year, after the project began generating power. "This liberty and discretion given to an assessee could not be truncated or cut-short by GUVNL by fixing a binding price unilaterally in the PPA executed long before the assessee had to statutorily choose its option."

The Court identified the conundrum for power producers: they had to sign PPAs to sell power before they were required to decide on depreciation benefits, making PPA tariffs necessarily conditional on that choice. "The situation would, however, be different if the power producer chooses its option at the time of entering into the PPA... and gives a commitment... that it would only avail accelerated depreciation." GUVNL had not obtained such commitments from the respondents.

The Bench stated: "Without securing such commitments from them, merely because these companies signed the PPAs with a fixed tariff... GUVNL cannot take advantage of its dominant position... to bind them to the price mentioned therein." It found the appellant’s conduct contrary to the government’s renewable energy policy, remarking that "such conduct, akin to a Shylock, does not reflect positively upon GUVNL."

The Court reviewed previous decisions in Gujarat Urja Vikas Nigam Limited v. EMCO Limited and Gujarat Urja Vikas Nigam Limited v. Tarini Infrastructure Limited, distinguishing the former due to different factual circumstances involving two tariff orders and a PPA condition, and affirming the latter’s principle that statutory tariff determination could override contractual terms in public interest.

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The Court dismissed the appeals, holding them "bereft of merit" and vacated the interim order dated 03.02.2023 which had restrained final orders on tariff determination. "The appeals are bereft of merit and are, accordingly, dismissed. Order dated 03.02.2023 shall stand vacated." It also directed: "Pending applications, if any, shall also stand dismissed."

The judgment upheld the GERC and APTEL orders that the ₹3.56 per kWh tariff applied only to projects availing accelerated depreciation and that projects not availing it were entitled to approach GERC for separate tariff determination.

Advocates Representing the Parties:

For the Petitioners: 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 Respondents: 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.

Case Title: Gujarat Urja Vikas Nigam Limited v. Green Infra Corporate Wind Private Limited & Others

Neutral Citation: 2025 INSC 922

Case Number: Civil Appeal Nos. 14098-14101 of 2015

Bench: Justice Sanjay Kumar, Justice Satish Chandra Sharma