ADVERTISEMENT
Andhra Pradesh High Court – Amravati
Sarada Metals And Alloys Ltd vs A.P. Electricity Regulatory … on 22 April, 2026
APHC010465652024 Bench
IN THE HIGH COURT OF ANDHRA PRADESH
[3483]
AT AMARAVATI
WRIT PETITION NO: 24693 of 2024
Sarada Metals and Alloys Ltd. ...Petitioner
Vs.
A.P. Electricity Regulatory Commission ...Respondent
**********
Advocate for Petitioner: Mr. P. Chidambaram, learned Senior
Counsel appearing vice Mr. Sai Sanjay
Suraneni
Advocate for Respondent: Mr. V. R. N. Prashanth
CORAM : THE CHIEF JUSTICE DHIRAJ SINGH THAKUR
SRI JUSTICE RAVI CHEEMALAPATI
DATE : 22nd April, 2026.
Per DHIRAJ SINGH THAKUR, CJ:
The petitioner in the present Writ Petition challenges inter alia the
validity and vires of Regulation 3.3 of the Andhra Pradesh Electricity
Regulatory Commission Renewable Power Purchase Obligation (Compliance
by purchase of Renewable Energy/Renewable Energy Certificates)
Regulations, 2017 and 2022, issued by the Andhra Pradesh Electricity
Regulatory Commission (for short, "the APERC").
2. With a view to understand in the correct perspective the background in
which the present controversy arises, it is necessary to give in brief the
material facts:
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The petitioner is engaged in the business of manufacturing and export
of manganese - based Ferro Alloys which is a primary element of steel
making. For this the petitioner claims to operate the Ferro Alloys Plant at
Vizianagaram in Andhra Pradesh. The petitioner also claims to operate an 80
MW Captive Power Plant within the premises of the Ferro Alloy Plant. The
petitioner further claims that it synchronized its Captive Power Plant on
03.02.2013 and therefore, fell within the ambit of Ministry of Power‟s directive
dated 01.10.2019, reference whereto shall be made in the later paragraphs.
3. At this stage, it is also deemed apt to refer to the statutory provisions
which are relevant for the decision in the instant case.
The Electricity Act, 2003 (for short, "the Act of 2003") was enacted with
a view to consolidate the laws relating to generation, transmission,
distribution, trading and use of electricity and also for taking measures
conducive to the development of the electricity industry, rationalisation of
electricity tariff and for constitution of Central Electricity Authority, Regulatory
Commissions and establishment of Appellate Tribunal and matters connected
therewith.
4. Before the promulgation of the Act of 2003, the electricity supply in India
was governed by three enactments namely the Indian Electricity Act, 1910,
the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions
Act, 1998.
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5. While the Indian Electricity Act, 1910 created the basic framework for
electricity supply in India, the Electricity (Supply) Act, 1948 envisaged the
creation of State Electricity Boards, on whom a duty was enjoined to arrange
the supply of electricity. However, the performance of SEBs is said to have
deteriorated on account of various factors and in that backdrop with a view to
encourage private sector participation in generation, transmission and
distribution and with the objective of distancing the regulatory responsibilities
from the Government to the Regulatory Commissions and with a view to
harmonise and rationalise the provisions of the Indian Electricity Act, 1910, the
Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act,
1998, there was a need felt for self-contained comprehensive legislation which
finally assumed the shape of the Electricity Act, 2003.
6. At this stage, it would be apt to refer to some of the provisions of the Act
of 2003:
While Section 2 of the Act pertains to definitions, Section 3 envisages
that the Central Government shall from time to time prepare "the National
Electricity Policy and Tariff Policy" in consultation with State Governments and
the authority for development of the power systems.
7. Sub-section (2) of Section 3 envisages that the Central Government
shall publish the National Electricity Policy and Tariff Policy from time to time
and further, Section 3(3) of the Act confers the Central Government with the
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power to review and revise the National Electricity Policy and the Tariff Policy,
in consultation with the State Governments and the Authority.
8. Section 3(4) envisages preparation of National Electricity Plan in
accordance with the National Electricity Policy and is required to be notified
once in five years.
9. Section 9 of the Act deals with captive generation and envisages that a
person may construct, maintain and operate a captive generating plant and
dedicated transmission lines with a right inter alia to an open access for
purposes of carrying electricity from its captive generation plant to the
destination of its use which further is made subject to availability of adequate
transmission facility.
10. Section 61 falling in Part VII of the Act deals with Tariff Regulations and
envisages that the Appropriate Commission shall subject to the provisions of
the Act, specify the terms and conditions for determination of tariff. It further
envisages that the determination of tariff shall inter alia be guided by the
National Electricity Policy and Tariff Policy.
11. According to Section 2(4), Appropriate Commission means the Central
Regulatory Commission referred to in sub-section (1) of Section 76 or the
State Regulatory Commission referred to in Section 82 or the Joint
Commission referred to in Section 83, as the case may be.
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12. Section 82 envisages constitution of Electricity Regulatory Commission
which would be prefixed by the name of the respective States. The State
Governments were enjoined to constitute the State Electricity Regulatory
Commissions within six months from the appointed date, by notification.
However, as per the proviso to Section 82, the State Electricity Regulatory
Commission established by the State Governments under Section 17 of the
Electricity Regulatory Commissions Act, 1988, and functioning immediately
before the appointed date, would continue to be the State Commission for
purposes of the Act of 2003.
13. The State Electricity Regulatory Commissions would be deemed to be a
body corporate having perpetual succession and common seal.
14. Section 86 of the Act of 2003 envisages the functions to be discharged
by the State Electricity Regulatory Commissions inter alia to determine the
tariff for generation, supply, transmission and wheeling of electricity, within the
State, facilitate intra-State transmission and wheeling of electricity, issue
licences to persons seeking to act as transmission licensees, distribution
licensees and electricity traders. Reference to Section 86(1)(e) is necessary,
which reads as under:
"86. (1)(e) promote cogeneration and generation of
electricity from renewable sources of energy by providing
suitable measures for connectivity with the grid and sale of
electricity to any person, and also specify, for purchase of
electricity from such sources, a percentage of the total
consumption of electricity in the area of a distribution
licensee;"
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15. Section 86(4) is also important and envisages as under:
(4) In discharge of its functions, the State Commission shall
be guided by the National Electricity Policy, National
Electricity Plan and tariff policy published under section 3.
16. Section 181 of the Act of 2003 further envisages the framing of
regulations by the State Commission.
17. The Central Government on 06.01.2006 notified the Tariff Policy which
was further amended on 31.03.2008, 20.01.2011 and 08.07.2011.
Subsequently, the Ministry of Power notified its revised Tariff Policy vide
notification dated 28.01.2016, in accordance with the powers vested in it
under Section 3 of the Electricity Act, 2003.
18. According to Clause 2.2 of the Tariff Policy the Central Electricity
Regulatory Commission and State Electricity Regulatory Commissions were
enjoined to be guided by the Tariff Policy in discharging their functions
including framing of regulations.
19. Clause 4 of the Tariff Policy clearly envisaged inter alia that the
objective of the policy was to promote generation of electricity from renewable
sources.
20. Clause 6.4 further envisaged as under:
"6.4 Renewable sources of energy generation including Co-
generation from renewable energy sources:
(1) Pursuant to provisions of section 86(1)(e) of the Act, the
Appropriate Commission shall fix a minimum percentage of the
total consumption of electricity in the area of a distribution
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licensee for purchase of energy from renewable energy
sources, taking into account availability of such resources and
its impact on retail tariffs. Cost of purchase of renewable energy
shall be taken into account while determining tariff by SERCs.
Long term growth trajectory of Renewable Purchase
Obligations (RPOs) will be prescribed by the Ministry of
Power in consultation with MNRE."
21. Pursuant to the notification of the Tariff Policy by way of publication in
Gazette on 28.01.2016, the Government of India, Ministry of Power issued
guidelines for long term growth trajectory of Renewable Purchase Obligations
(RPOs) dated 22.07.2016. The following was notified as the growth trajectory
for non-solar as well as solar, uniformly for all States and Union Territories for
three years from 2016-17 to 2018 to 2019:
Long term trajectory 2016-17 2017-18 2018-19
Non-solar 8.75% 9.50% 10.25%
Solar 2.75% 4.75% 6.75%
Total 11.50% 14.25% 17.00%
22. The obligation to purchase renewable energy was cast on obligated
entities excluding consumption met from hydro sources of power which was to
be calculated on total consumption of electricity by a particular obligated
entity.
23. An obligated entity as per the APERC RPO Regulations, 2012, means
an entity obligated to purchase renewable power under clause (3) of
Regulations.
24. The Government of India, Ministry of Power, subsequently, by virtue of
the notification dated 14.06.2018, issued the long term growth trajectory of
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Renewable Purchase Obligations for Solar and Non-solar, uniformly for all the
States and Union Territories for three years, i.e., 2019-20 to 2021-22 as
under:
Long term trajectory 2019-20 2020-21 2021-22
Non-solar 10.25% 10.25% 10.50%
Solar 7.25% 8.75% 10.50%
Total 17.50% 19.00% 21.00%
25. At this point, it is relevant to refer to the Clarification, dated 01.02.2019,
issued by the Government of India, Ministry of Power, clarifying that the long
term growth trajectory of Renewable Purchase Obligation of Solar and Non-
solar for the period 2016-19 and 2019-22 as prescribed in the Ministry‟s
notification, dated 22.07.2016, at the request of various stakeholders, had
been examined in consultation with Ministry of New and Renewable Energy
and it was therefore clarified that RPO of the Captive Power Plant may be
pegged at the RPO level applicable in the year in which the Captive Power
Plant was commissioned. For facility of reference, the clarification is
reproduced hereunder:
"I am directed to refer to the Ministry of Power's Order of even
number dated 22ndJuly, 2016 and 14thJune, 2018 regarding long
term growth trajectory of Renewable Purchase Obligation
(RPO) for Solar and Non-solar for the period 2016-19 and 2019-
22 respectively.
2. The request of various stakeholders regarding capping of
RPO for Captive Power Plants (CPP) has been examined in
consultation with Ministry of New and Renewable Energy and it
is clarified that RPO of the CPP may be pegged at the RPO
level applicable in the year in which the CPP was
commissioned. As and when the company adds to the capacity
of the CPP it will have to provide for additional RPO as
obligated in the year in which new capacity is commissioned.
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There should not be an increase in RPO of CPP without any
additional fossil fuel capacity being added.
3. This issues with the approval of Hon'ble MoS(I/C) for Power
and NRE."
26. Subsequently, another clarification, dated 01.10.2019, was issued by
the Ministry of Power, which reads as under:
"I am directed to refer to the Ministry of Power's Order of even
number dated 22nd July, 2016 and 14th June, 2018 regarding
long term growth trajectory of Renewable Purchase Obligation
(RPO) for Solar and Non-solar for the period 2016-19 and 2019-
22 respectively.
2 A clarification was issued by Ministry of Power, vide
letter dated 1 February, 2019 regarding capping of RPO for
Captive Power Plants (CPP) (copy enclosed).
3 Based on the concern raised by various stakeholders
and after due consultation with MNRE, GEA and CERC it is
further clarified that
i) For CPPs commissioned before 1.04.2016, RPO should
be at the level as mandated by the appropriate Commission for
the year 2015-16. For CPPs commissioned from 1.04.2016
onwards, the RPO level as mandated by the appropriate
Commission or Ministry of Power, whichever is higher, for the
year of commissioning of the CPP shall be applicable.
ii) In case of any augmentation in the capacity, the RPO
for augmented capacity shall be the RPO applicable for the year
in which the CPP has been augmented.
iii) In case, for meeting the RPO obligation, CPP has
surplus power than its consumption requirement, such a CPP
may sell its surplus power to the DISCOMS under the prevailing
arrangements or in the power exchange.
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This issues with the approval of Hon'ble MoS(I/C) for Power
and NRE."
27. On a reading of the above two clarifications, it becomes clear that while
the clarification, dated 01.02.2019, pegged the RPO of a Captive Power Plant
at the RPO level applicable in the year in which the Captive Power Plant was
commissioned, as per the subsequent clarification, dated 01.10.2019, all
Captive Power Plants commissioned before 01.04.2016, RPO was required to
be at the level mandated by the Appropriate Commission for the year 2015-16
and for all Captive Power Plants commissioned from 01.04.2016 onwards, the
RPO level as mandated by the Appropriate Commission or Ministry of Power,
whichever was higher, for the year of commissioning would be applicable.
28. In exercise of powers conferred in Sections 61, 66, 86(1) (e) and 181 of
the Electricity Act, 2003, the Andhra Pradesh Electricity Regulatory
Commission framed the regulations called the Renewable Power Purchase
Obligation (Compliance by Purchase of Renewable Energy/Renewable
Energy Certificates) Regulations, 2012 (for short, "APERC RPO Regulations,
2012,").
29. Regulation 3.3 of the aforementioned regulations provided as under:
"3.3 Every consumer owning a captive generating plant of
installed capacity of One (1) MW shall purchase Renewable
Energy Certificates issued under the Central Electricity
Regulatory Commission (Terms and Conditions for
recognition and issue of Renewable Energy Certificate for
Renewable Energy Generation) Regulations, 2010 as
amended from time to time, corresponding to a quantum of
not less than 5% of its consumption of energy, during each
of the years from 2012-13 to 2016-17 (each year
commencing from 1stApril of the Calendar Year and ending
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on 31stMarch of the subsequent Calendar Year) provided
that the purchase of energy from renewable energy sources
shall also be treated as fulfillment of the Renewable Power
Purchase Obligation (RPPO) prescribed herein;"
30. Subsequently, the APERC notified Regulation No.1 of 2017 (APERC
RPO Regulations, 2017). According to Clause 3.3 whereof, every consumer
owning a captive generating plant of installed capacity at 1 MW and above
and connected to the grid was required to purchase Renewable Energy
Certificates issued under the Central Electricity Regulatory Commission
(Terms and Conditions for recognition and issue of Renewable Energy
Certificate for Renewable Energy Generation) Regulations, 2010, as amended
from time to time corresponding to a minimum quantity of electricity expressed
as a percentage of its consumption of energy, during FY2017-18 to FY 2021-
22 as specified in TABLE-I under clause 3.1 of this Regulation, which
envisaged as under:
TABLE-I
Year 2017-18 2018-19 2019-20 2020-21 2021-22
Non-solar 6% 7% 8% 9% 10%
Solar 3% 4% 5% 6% 7%
Total 9% 11% 13% 15% 17%
Proviso to Regulation 3.3 further provided that, the purchase of energy
from renewable energy sources would also be treated as fulfillment of
Renewable Power Purchase Obligation.
31. Subsequently, the APERC framed Regulation No.5 of 2022 (APERC
RPO Regulations, 2022) and notified the same on 29.09.2022, which enjoined
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a consumer owning a captive generating plant to purchase renewable energy
as per the specifications below:
From the date
of publication
of these
Regulations in FY FY FY FY
Period
the official 2023-24 2024-25 2025-26 2026-27
gazette to the
end of FY
2022-23
RPPO, i.e. the 18% 19% 20% 22% 24%
minimum quantity of
renewable electricity
to be purchased as a
percentage of total
consumption
32. As per Clause 7.1 of the 2017 Regulations, framed by the APERC, if an
obligated entity does not fulfill the Renewable Power Purchase Obligation as
provided in Clause 3 thereof, during any year, the Commission was given the
power to direct the obligated entity to deposit such amount as the Commission
may determine on the basis of the shortfall in units of the Renewable Power
Purchase Obligation.
33. Not only this, in terms of Clause 7.2 of the Regulation, in addition to the
compliance of the directions under clause (7.1), a penalty can as well be
imposed by the Commission to an extent to be decided by the Commission
under Section 142 of the Electricity Act, 2003.
34. In the backdrop of the aforementioned legal provisions, a notice dated
27.12.2021, came to be served upon the petitioner intimating the petitioner
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regarding non-compliance of Clause 3.2/3.3 of the RPPO in its capacity as an
obligated entity for the period 2012-13 to 2018-19, it was therefore required to
show-cause as to why it not be directed to deposit an amount of
Rs.16,46,90,400/-.
35. An appropriate response, dated 07.04.2022, according to the petitioner,
was submitted to the show-cause notice, which was considered by the
APERC but the same came to be rejected on 30.05.2023 and an amount of
Rs.16,24,90,400/- was determined as payable by the petitioner on account of
its failure to meet the RPPO for the energy consumed.
36. An Original Petition bearing No.82 of 2023 came to be filed before the
APERC in which the petitioner inter alia sought a declaration that the
petitioner‟s RPPO liability be capped as per the Ministry of Power‟s
clarification, dated 01.10.2019, for Captive Power Plants.
37. By virtue of the order dated 03.09.2024, the APERC dismissed the
Original Petition by holding that it was vested with exclusive powers of
regulating tariffs and all other aspects related thereto, and further that the
National Electricity Policy, National Electricity Plan and the Tariff Policy
published under Section 3 of the Act would only be a guiding factor.
38. It rejected the contention of the counsel for the petitioner that the
clarificatory orders passed by the Ministry of Power were in any way binding
on the Commission and that if at all it had only a guiding force. It held:
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".... No doubt, the clarificatory orders of the MoP sought to limit
the CPPs' liability for RPPO; the same would certainly be a
material consideration for this Commission while making its
Regulations for the future. However, as the obligation is for the
past periods, which is already governed by Regulations issued
by this Commission, in due exercise of the statutory powers, in
the opinion of this Commission, such Clarificatory Orders,
despite having statutory flavor, cannot displace the Regulations
already in force. In other words, to act on a Clarificatory Order
of the MoP would be to negate the Regulations framed and
notified by this Commission. Such a course is not desirable so
long as the Regulations continue to be enforced for the
Obligated Entities concerned."
39. While placing reliance on Tata Power Company Limited (supra), it
was held that the Tariff Policy was not per se binding on the Commission but
would be one of the material considerations only.
40. Although the Electricity Act did provide for an appeal under Section 111
before the Appellate Tribunal for Electricity (APTEL), yet since the petitioner
challenges the vires of the Regulations of 2017 & 2022, the present petition
has been filed challenging the 3.3 RPPO Regulations of 2017 and 2022 as
ultra vires to the Electricity Act, 2003. Apart from this, a direction is sought to
APERC to amend Regulation 3.3 of the 2017 and 2022 Regulations to give
effect to the Ministry of Power‟s directive, dated 01.10.2019, regarding long
term growth trajectory of RPO Captive Power Plants, which envisaged a cap
on RPO of Captive Power Plant commissioned before 01.04.2016 at the RPO
prescribed by the APERC for F.Y. 2015-16, which was at 5% of the power
consumed.
41. Mr. P. Chidambaram, learned Senior Counsel, would submit that the
impugned regulations and, in particular, Regulation 3.3 of APERC RPPO
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Regulations of 2017 and 2022, are ultra vires the Electricity Act, 2003
inasmuch as the regulations failed to give effect to the Ministry of Powers
Directive, dated 01.10.2019, which mandates capping the RPO for Captive
Power Plants commissioned before 01.04.2016 at 5%, which was applicable
in the case of the petitioner herein. It was urged that the directive issued by
the Ministry of Power was rooted in Clause 6.4.1 of the Tariff Policy, 2016,
was therefore statutory in nature, and possessed the force of law and APERC
being a delegate under the Electricity Act was statutorily bound to be guided
by the Tariff Policy and the directives issued thereunder.
42. It was stated that Section 86(4) of the Electricity Act mandated that
APERC shall be guided by the National Electricity Policy and the Tariff Policy
and by disregarding the Ministry of Powers Directive, APERC had acted in
contravention of these statutory provisions which rendered the impugned
regulations ultra vires.
43. Reliance was finally placed upon the judgment of the Apex Court
rendered in Reliance Infrastructure Ltd. v. State of Maharashtra and Tata
Power Company Limited v. MERC &Ors.
44. The stand of the official respondent was that APERC was an
autonomous body and further that under Section 86(1)(e) of the Act of 2003,
APERC was empowered to specify Renewable Power Purchase Obligations
for obligated entities within the State. It is also stated that it was an exercise of
the powers so vested in the Commission that the regulations came to be
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framed earlier in the year 2012, subsequently in 2017, and thereafter in the
year 2022. It was also held that while Section 86(4) of the Electricity Act
mandated the APERC to be "guided" by the National Electricity Policy and the
Tariff Policy, it did not imply that every such directive issued by the Ministry of
Power was automatically binding on the APERC. The term "guided", it was
urged, suggested an advisory role rather than a mandatory obligation to follow
each such directive.
45. Apart from this, Mr. V. R. N. Prashanth, learned Counsel appearing for
APERC, would submit that the clarification, dated 01.02.2019, and the
clarification, dated 01.10.2019, cannot be considered to be a part of the
National Tariff Policy, inasmuch as while the National Tariff Policy authorizes
the Ministry of Power to provide the long term growth trajectory, it did not
empower the Ministry of Power to cap the Renewal Power Purchase
Obligations and further that the Electricity Regulatory Commissions have been
given unbridled powers to fix the percentage of Renewal Power Purchase
Obligations by taking into consideration various factors including the
availability of renewable power sources with a view to strike harmonious
balance, which safeguarded the interest of the end consumer also.
46. We are not convinced with the argument of learned counsel for the
respondent that the Ministry of Power had no authority to cap the Renewable
Power Purchase Obligation at all and that it could have only provide for a long
term growth trajectory as in terms of National Tariff Policy and, in particular, in
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terms of clause 6.4 of the said Tariff policy. It goes without saying that if the
Ministry of Power could prescribe a long term growth trajectory of Renewable
Power Purchase Obligations, it would also carry with it the power to regulate
the said growth trajectory or even cap it at a particular level and for a specific
period and in the case of specific group of Captive Power Plants.
47. At this stage, it may be apt to refer to some of the judgments, which
have a direct bearing on the issues that arise in the present petition. In
Reliance Infrastructure Ltd. v. State of Maharashtra1, the Apex Court was
examining the validity of the tariff regulation, framed by the Maharashtra ERC,
which was challenged as being opposed to the National Tariff Policy. In that
context, the Apex Court, while examining the purport with the interpretation in
the case of Reliance Infrastructure Ltd. of the phrase „shall be guided‟ as
contained in Section 61 of the 2003 Act, held:
"29. Section 181 empowers the State Commissions to make
regulations consistent with the Act and the Rules to carry out
the provisions of the Act. Among the matters for which the
regulations may provide are "the terms and conditions for the
determination of tariff under Section 61". In specifying the
terms and conditions for the determination of tariff, the
appropriate Commission (as Section 61 provides) "shall be
guided" by the factors which are set out in clauses (a) to (i).
The expression "shall be guided" comprises of two
elements: the "shall" and, the "guidance". Clauses (a) to
(i) provide guidance to the Commission in specifying the
terms and conditions for the determination of tariff. The
expression "shall" indicates that the factors which are
specified in clauses (a) to (i) have to be borne in mind by the
appropriate Commission. As guiding factors, they provide
considerations which are material to the determination of
tariffs by the appropriate Commission.
1
(2019) 3 SCC 352
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30. The National Tariff Policy has multi-faceted objectives.
Significant among them is the need to ensure to consumers
the availability of electricity at reasonable and competitive
rates. The policy also seeks to ensure the financial
viability of the sector and underlines the need to attract
investments. A financially sustainable electricity sector is an
important facet of the overall regulatory framework. The
objectives of the policy emphasise the need to promote
transparency, consistency and predictability in
regulatory approaches across jurisdictions. The policy
emphasises the need to minimise perceptions of regulatory
risk. Finally, the policy recognises the need to promote
competition, efficiency in operations and improvements in the
quality of supply. In designing and formulating the
regulatory framework for tariffs, the delegate of the
legislature has to bring about a balance between the
competing goals which the Tariff Policy incorporates.
31. As part of the process, the delegate has to bear in mind
the interests of diverse stakeholders including consumers and
producers. ...The operating norms must be designed to
promote efficiency and to ensure that the gains which accrue
on account of efficient operations are shared with the
consumers of electricity. The operating norms will, therefore,
have due regard to the performance in the past as well as
capacities for future achievement. These must be
dovetailed with all relevant considerations, bearing on
the requirements of the policy.
32. The Tariff Policy provides guidance to the appropriate
Commission when it frames regulations. The power to
frame regulations is legislative in nature. It is conferred upon
the appropriate Commission. The Commission weighs
numerous factors. Its discretion in carrying out a complex
exercise cannot be constrained. The delegate of the
legislature is therefore under a mandate to bring about a fair
and equitable balance between competing considerations.
Standing at the forefront of those considerations is above all
the need to ensure efficiency and to protect the interests of
consumers. ..."
48. In Tata Power Co. Ltd. Transmission v. MERC & Ors.2, the Apex
Court was considering, inter alia, the issue as to whether the National Tariff
Policy(NTP) framed under Section 3 of the Act is binding on the State
Regulatory Commissions. In that context, the Apex Court held that the
2
(2023) 11 SCC 1
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interpretation in the case of Reliance Infrastructure Ltd. of the phrase „shall
be guided‟ as contained in Section 61 would be equally applicable to the said
phrase as contained in Section 86(4) of the Act of 2003. It was held:
"98. Section 181 of the Act stipulates that the State
Commission(s) may by notification, make regulations
consistent with the Act and the rules framed by the State
Government under Section 180 of the Act to carry out the
provisions of the Act. ...
99. At this juncture, it is necessary to refer to Section 86 of the
Act. Section 86 lists the functions of the State Commission.
Section 86(a) states that the State Commission shall discharge
the function of determining the tariff for transmission. Section
86(c) stipulates that the State Commissions shall facilitate
intra-State transmission of electricity. Section 86(4) provides
that in the discharge of its functions, which includes the
determination of tariff for the transmission of electricity under
clause (a), the State Commission shall be guided by the NEP,
National Electricity Plan and NTP notified under Section 3 of
the Act.
114. This Court in Reliance Infrastructure [Reliance
Infrastructure Ltd. v. State of Maharashtra, (2019) 3 SCC 352]
held that the principles prescribed in Section 61 are all material
considerations that must guide the appropriate Commission
while it prescribes the terms and conditions for determining the
tariff. It was held that it was the responsibility of the
Commission to ensure a delicate balance of the principles
prescribed under Section 61. Thus, while NTP which is
prescribed as one of the principles under Section 61 shall
be a material consideration, it cannot be interpreted to
mean that it is the "only" material consideration. This
interpretation of "shall be guided" is equally applicable to
the use of the phrase in Section 86(3).
121. While the determination and regulation of tariff falls within
the exclusive domain of the Regulatory Commission, it is
crucial to note that Sections 61 and 86 stipulate that the
Commission shall be guided by NTP while specifying terms
and conditions for determining tariff. The State Commission
while exercising its power to make regulations under Section
181(2)(zd) on the terms and conditions for determination of
tariff under Section 61 must conform to the provisions of the
Act. Thus, while framing regulations under Section
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181(2)(zd), the Commission must be guided by the
principles mentioned in Section 61, which includes the
NEP and NTP.
122. This Court in Reliance Infrastructure Ltd. v. State of
Maharashtra, (2019) 3 SCC 352 has already held that NTP is
one of the material considerations. NTP is one of the many
guidelines that the Commission must necessarily consider
while regulating tariff. The State and the Central Government
only have an advisory role in the regulation of tariff. The
Electricity Regulatory Commissions Act, 1998, which was
consolidated with other statutes on electricity while enacting
the Electricity Act, 2003, was enacted to distance the
governments from the determination of tariffs. Further, the Act
does not seek to centralise the power to regulate tariff with the
Centre. One of the objectives of the Act was to provide the
"States enough flexibility to develop their power sector in
the manner they consider appropriate". Thus, since the
appropriate Commissions possess full autonomy in the
determination and regulation of tariff, and the States have
been provided flexibility to develop their power systems
for intra-State transmission of electricity, the NTP 2016
shall be oneof the material considerations...."
49. While the issue in Tata Power Co. Ltd. Transmission (supra) was not
centered around the Renewable Power Purchase Obligations, yet the Apex
Court did examine the phrase „shall be guided‟ as existing in Section 86(4) of
the Act of 2003. The legal position which thus stands crystallized by the
Hon‟ble Supreme Court leaves this Court in no doubt that framing of
regulations with regard to the Power Purchase Obligations falls exclusively
within the domain of the Commission, which however must consider the
guidance as provided by the National Tariff Policy in terms of Section 86(4) of
the Act.
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50. It can also be seen that the guidance which is provided by the Central
Government envisaged under Section 86(4) is a material consideration but not
the only material consideration as was held in Tata Power Co. Ltd.
Transmission (supra) and further that the role of the State and the Central
Government was only advisory in nature and that the Electricity Regulatory
Commissions had full autonomy and power in framing regulations which
included the Regulations prescribing Renewable Power Purchase Obligations.
51. Mr. P. Chidambaram, learned Senior Counsel would, however, urge
that while the clarifications dated 01.02.2019 and 01.10.2019 may not have
any binding force, yet the Commission ought to have considered the same as
to whether the regulations of RPPO of 2017 or for that matter, regulations of
RPPO of 2022 required an amendment.
52. It was also urged that according to the stand taken by the APERC, it
was nowhere reflected that the clarifications dated 01.02.2019 and
01.10.2019, were at all considered for purposes of deciding whether an
appropriate amendment to the Regulations of 2017 or 2022 were warranted or
not.
53. At the very outset, we can see that the Regulations impugned of 2017
were framed in the year 2017 when the clarification dated 01.02.2019 and the
subsequent clarification dated 01.10.2019, were not in existence. The
petitioner also did not challenge the said regulations on the grounds which are
now sought to be urged before us and the petition came to be filed as late as
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in October, 2024. By that time, even when the petitioner could have
approached this Court for purposes of seeking appropriate relief from this
Court in regard to the Regulations of 2017, yet it chose to remain silent.
54. We are of the opinion that as far as the challenge to the Regulations of
2017 is concerned, the same is belated. The regulations of 2017 are no longer
in force and have worked itself out and, therefore, challenge to the same
cannot be permitted at this stage. However, insofar as the Regulations of
2022 are concerned, APERC was in fact obliged to at least consider the
clarification, dated 01.02.2019 as also the clarification, dated 01.10.2019,
before framing the 2022 Regulations. We are quite in agreement with the
argument of Mr. P. Chidambaram, learned Senior Counsel that even when the
notification dated 01.02.2019, and the subsequent clarifications had no
binding effect on the APERC, yet it could be considered to be a material
factor, which ought to have been considered, among others, before framing
the Regulations of 2022.
55. Be that as it may, we direct the State Electricity Regulatory Commission
to consider the clarification dated 01.10.2019, and to decide whether any
amendment was necessary in the light of the said clarification. If the guidance
given by the aforementioned clarification is accepted, the necessary
amendment would be incorporated by the Commission in the Regulations of
2022 and appropriate relief extended to the petitioner. Till such time as the
matter is considered by the APERC in regard to the Regulations of 2022, no
coercive action be taken for recovery of any amount, which would be beyond
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the obligation of the petitioner as was fixed by clarification dated 01.10.2019,
for the period the said clarification remained in force.
56. However, it is made clear that in the event the APERC decides not to
amend the regulations for any good reason, the petitioner would be under an
obligation to show strict compliance to Regulations of 2022. We further hold
that the petitioner would be under an obligation to satisfy the demand raised
by the Commission in regard to the period covered under the 2017
Regulations.
57. This Writ Petition is disposed of accordingly. No costs.
Consequently, connected miscellaneous applications, if any, shall stand
closed.
DHIRAJ SINGH THAKUR, CJ.
RAVI CHEEMALAPATI, J.
SSN/AKN/KBS
97
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HON’BLE MR.JUSTICE DHIRAJ SINGH THAKUR, CHIEF JUSTICE
&
HON’BLE MR. JUSTICERAVI CHEEMALAPATI
SPONSORED
Writ Petition No: 24693 of 2024
DATE : 22.04.2026
SSN/AKN/KBS
