State Instrumentality Cannot Bind Generators to Inapplicable Tariff; GUVNL Appeals Dismissed

A Bench of Justices Sanjay Kumar and Satish Chandra Sharma heard appeals by Gujarat Urja Vikas Nigam Limited (GUVNL) challenging a common judgment of the Appellate Tribunal for Electricity (APTEL) which had upheld Gujarat Electricity Regulatory Commission’s (GERC) orders allowing four wind power producers to seek project‑wise tariff determination. The appeals arose from petitions filed in 2012–2013 by the respondent companies claiming entitlement to a higher tariff because they did not avail accelerated depreciation under the Income‑tax Act.

The Court dismissed the appeals and upheld the GERC and APTEL decisions that a distribution licensee could not unilaterally bind a generator to a tariff that applied only to projects availing accelerated depreciation where the generator had not irrevocably committed to that tax option. The Court emphasized the statutory role of the Appropriate Commission in tariff fixation under the Electricity Act, 2003, and observed that GUVNL, as a State instrumentality, could not place its commercial interest above policy directives promoting renewable energy. The Court, in its reasoning, observed: The Court also relied on the GERC’s own articulation in Order No.1 of 2010 that "Depreciation is a non-cash flow expenditure and it is linked with the loan repayment," and that the Commission had "decide[d] to determine the tariff taking into account the benefit of accelerated depreciation available under Income Tax Act, 1961." It held that where a tariff order expressly contemplated separate determination for projects not availing accelerated depreciation, generators could approach the Commission on a case‑to‑case basis.

Background

The dispute concerned four PPAs entered between GUVNL and wind power developers during the GERC control period covered by Order No.1 of 2010 (effective 11.08.2009 for three years). GERC set a levelized tariff of ₹3.56/kWh for projects availing accelerated depreciation and made clear that projects not availing that benefit could file petitions for separate tariff fixation. The respondent companies executed PPAs containing the ₹3.56/kWh clause but subsequently petitioned GERC claiming they had not taken accelerated depreciation and thus required project‑wise tariff determination. GUVNL argued that having signed PPAs at the stated tariff the respondents were estopped from seeking a different tariff, and that it would not have contracted but for that rate.

GERC and later APTEL rejected GUVNL’s contention, holding that statutory provisions (Sections 61, 62 and 86 of the Electricity Act, 2003) vested tariff‑fixing power in the Appropriate Commission and that a state instrumentality could not frustrate policy objectives by unilaterally fixing an inapplicable price. The Supreme Court reviewed precedent including Gujarat Urja Vikas Nigam Ltd. v. EMCO Ltd. and Tarini Infrastructure Ltd., distinguished factual matrices where necessary, and held that absent a specific written commitment by generators to avail accelerated depreciation, GUVNL could not claim an indefeasible right to the lower tariff. The Court dismissed the appeals, vacated its earlier order dated 03.02.2023 that had constrained GERC’s final orders, and refused all pending applications.

Case Details: Case No.: 2025 INSC 922 (Civil Appeal Nos. 14098–14101 of 2015) Case Title: Gujarat Urja Vikas Nigam Limited v. Green Infra Corporate Wind Private Limited and Others Appearances: For the Petitioner(s): Not indicated in the judgment For the Respondent(s): Not indicated in the judgment