Electricity; Gujarat Urja Vikas Nigam Limited Vs. Tarini Infrastructure Ltd. [Supreme Court of India, 05-06-2016]

Electricity Act, 2003 – Power Purchase Agreement (PPA) – Tariff fixed under a PPA  – State Electricity Regulatory Commission – bar of a review of the terms of a PPA – Is the tariff fixed under a PPA (Power Purchase Agreement) sacrosanct and inviolable and beyond review and correction – it was beyond the power of State Commission to vary the tariff fixed under the approved PPA in view of the specific provisions in Regulations 5.1 and 9 of the KERC (Power Procurement from Renewable Sources by Distribution Licensee) Regulations, 2004 and 2011 respectively as the same specifically excluded a PPA concluded prior to the date of notification of the Regulations in question.




JULY 05, 2016






CIVIL APPEAL NOS. 1973-1974 OF 2014



1. Is the tariff fixed under a PPA (Power Purchase Agreement) sacrosanct and inviolable and beyond review and correction by the State Electricity Regulatory Commission which is the statutory authority for fixation of tariff under the

Electricity Act, 2003

(hereinafter for short ‘the Act’). This is the short question that arises for determination in the present appeals. The Regulatory Commission did not consider it appropriate to confer on itself the said power upon a construction of the provisions of the Act and the terms of the PPA(s) in question. The Appellate Tribunal disagreed and held that the power would be available to the State Regulatory Commission. This is how the matter has come up before us in the present appeals filed at the instance of the distribution licensee which is common in both the cases, namely, Gujarat Urja Vikas Nigam Limited.

2. A very brief resume of the relevant facts would be appropriate and would assist a determination of the question arising identified hereinabove. The respondent No. 1 in Civil Appeal No. 5875 of 2012, namely, Tarini Infrastructure Ltd., is a power producer which has set up/installed two small hydro power projects in the State of Gujarat. In January, 2008 the respondent No. 1-power producer entered into a PPA with the appellantdistribution licensee for sale of electricity from the generating stations to the extent of the contracted quantity for a period of 35 years at Rs. 3.29 per KWH subject to escalation of 3% per annum till date of commercial operation. In March, 2010, just before commissioning of the generating station, the respondent power producer sought an increase in the tariff to Rs. 4.70 per unit on the ground that though under the Concession Agreement power was to be evacuated at the nearest sub-station at Rakholi under the jurisdiction of the Gujarat Electricity Transmission Company (GETCO) which was at a distance of 4 Kms from its switch yard, it was later realized that Rakholi was in Dadar Nagar Haveli. Consequently, the transmission line was required to be laid up to a point known as Mota Pondha which involved a total distance of 23 Kms. instead of the originally envisaged 4Kms. The additional infrastructure, admittedly, cost about Rs. 10 crores which was not envisaged in the Concession Agreement entered into between the respondent-power producer and Narmada Water Resources Department (respondent No. 2). In these circumstances, the power producer applied to the State Regulatory Commission for a redetermination of the tariff. The said request was refused by an order dated 03.09.2010, primarily, on the ground that once the tariff was determined and thereafter incorporated in the PPA there was no scope for redetermination of the same at the unilateral request of the power producer.

3. Insofar as Civil Appeal Nos. 1973-1974 of 2014 are concerned, the respondent-power producer, namely, Junagadh Power Projects Pvt. Ltd., has set up a biomass based power generation plant and had entered into a PPA with Gujarat Urja Vikas Nigam Limited (distribution licensee) on 26.11.2010. The tariff incorporated in the PPA was earlier approved by the State Regulatory Commission by tariff order dated 17.05.2010 on the basis of cost of biomass at Rs. 1600 per MT with escalation of 5% per annum for a period of 20 years of operation. The Biomass Energy Developers Association sought revision of the biomass fuel cost to Rs. 3000/- per MT and for consequential redetermination of the tariff. The said review petition was dismissed by the State Commission in November, 2010. Thereafter, the power producer, on its own, moved the State Regulatory Commission seeking modification of tariff on account of air cooled condenser and also seeking increase in the biomass fuel cost and consequential redetermination of the tariff on that basis. The State Regulatory Commission by its order dated 05.12.2010, while allowing an increase in tariff on account of air cooled condenser, rejected the request of the power producer to review the price of biomass fuel cost, primarily, on the ground that the review of the price of biomass fuel having been earlier rejected in the case of Biomass Energy Developers Association, the review of the said price at the request of the power producer cannot now be allowed.

4. The learned Appellate Tribunal by the impugned orders overruled the view taken by the State Regulatory Commission on a consideration of the provisions of the Act and the terms and conditions of the PPA(s). The above view of the learned Appellate Tribunal is primarily based on the reasoning that under the Act it is the State Regulatory Commission which has been statutorily vested with the power to determine the tariff and that the tariff as may be fixed and incorporated in the PPA between the distribution licensee and the power producer is liable to be reviewed in the light of changes in the circumstances of a given case. In the case of Junagadh Power Projects Pvt. Ltd. the learned Appellate Tribunal even went to the extent of holding that if in the changed scenario occasioned by a drastic alteration of the facts and circumstances surrounding the determination of tariff, a review is declined/refused the power producer will be left with no option but to shut down its plants. Therefore, a review of the tariff in exercise of the statutory power vested in the State Regulatory Commission would be fully justified. It is the correctness of the aforesaid view that has been assailed in the present appeals under Section 125 of the Act.

5. We have heard Shri C.A. Sundaram, learned senior counsel appearing for the appellant and Shri Sanjay Sen, learned senior counsel appearing for the respondent-power producers in both sets of appeals. 6. The arguments on behalf of the appellant-distribution licensee in both the cases are more or less common. In the case of Tarini Infrastructure Ltd. it is urged that under Clause 5.2 of the PPA the appellant is required to pay tariff as determined by the State Commission which is liable to escalation @ 3% per annum. The tariff order has not been challenged by the power producer. Therefore, the tariff approved by the State Regulatory Commission and incorporated in the PPA would remain in force for the period of time agreed upon and the same cannot be altered unilaterally. Reliance in this regard is placed on two recent decisions of this Court in the case of