Supreme Court Upholds Right of Wind Energy Producers for Fair Tariff Determination: Lahoti Advocates' Major Victory for Tadas Wind Energy Pvt. Ltd.

 

Date of Judgment: 4th August 2025
Court: Supreme Court of India
Bench: Justice Sanjay Kumar and Justice Satish Chandra Sharma
Case: Gujarat Urja Vikas Nigam Limited vs. Green Infra Corporate Wind Pvt. Ltd. & Ors. (Including Tadas Wind Energy Pvt. Ltd.)
Lead Counsel: Mr. Shyam Divan, Senior Advocate, assisted by Lahoti Advocates

 

Background and Context

In a landmark judgment, the Supreme Court has upheld the rights of renewable energy producers, specifically wind energy companies, to seek project-specific tariff determination, pursuant to the liberty granted in the Tariff Order, when they have not availed accelerated depreciation benefits under the Income Tax Act, 1961. This decision resolves a long-standing dispute between Gujarat Urja Vikas Nigam Limited (GUVNL) and various Wind Energy Producers, including M/s. Tadas Wind Energy Pvt. Ltd., represented by a team led by Mr. Shyam Divan, Senior Advocate, and Lahoti Advocates.

 

The case arose from the common judgment of the Appellate Tribunal for Electricity (APTEL), which had upheld the orders of the Gujarat Electricity Regulatory Commission (GERC) permitting adjudication of project-specific tariff determination for wind energy producers not availing the accelerated depreciation route.

 

Core Issue

The pivotal question before the Supreme Court was: Are wind energy companies that have not availed accelerated depreciation entitled to approach the GERC for determination of tariff, notwithstanding the tariff stipulated in their Power Purchase Agreements (PPAs) with GUVNL?

 

Statutory and Policy Framework:

• GERC’s Order No. 1 of 2010: This Tariff Order fixed a levelized tariff of ₹3.56 per kWh for wind energy projects availing accelerated depreciation, with a specific window (control period) for eligibility. For projects not availing such benefit, the Tariff Order permitted case-by-case tariff determination.
• Income Tax Act, 1961: Section 32, read with Rule 5 of the Income-Tax Rules, 1962, governs depreciation claims. Power producers must exercise the option to claim (or not claim) accelerated depreciation at the time of filing their return for the assessment year in which the project commences generation.
• Electricity Act, 2003: The tariff for electricity procurement by distribution licensees must be determined by the State Commission, considering both consumer interests and promotion of renewable energy (Sections 61, 62, 86).
• Gujarat Wind Power Policy: The State actively encouraged investment in renewable energy and tied PPAs to regulatory orders.

 

Arguments and the Supreme Court’s Analysis

GUVNL’s Stand:

• GUVNL argued that wind power companies, having signed PPAs at the fixed tariff, could not subsequently seek a higher tariff by declining accelerated depreciation.
• GUVNL claimed that it would not have entered into such PPAs had the companies indicated they would not claim accelerated depreciation.

 

Respondents’ Position (led by Lahoti Advocates):

• The wind energy producers maintained that the statutory scheme and GERC’s Tariff Order allowed them to exercise their option on depreciation only at the stage of income tax return filing, which occurs after the electricity is generated pursuant to the PPA and commissioning of Wind Power Project.
• Since they had not availed accelerated depreciation, they were entitled to approach GERC for a fair, project-specific tariff determination, pursuant to the liberty granted under the Tariff Order.

 

Supreme Court’s Reasoning:

• Contract vs. Statutory Framework: The Court held that GUVNL, being a State instrumentality, cannot operate solely on commercial considerations or bind generating companies to a tariff contrary to regulatory and statutory mandates.
• Timing and Choice: The choice to avail accelerated depreciation is statutorily exercisable after a project becomes operational and files its tax return, not at the PPA stage.
• No Written Commitment: GUVNL failed to obtain any written commitment from the respondent companies that they would necessarily claim accelerated depreciation.
• Policy Imperatives: The judgment emphasized the role of State policy and the regulatory regime in promoting renewable energy, holding GUVNL to higher standards as a public utility.

 

Key Observation:

“GUVNL cannot take advantage of its dominant position...by fixing a tariff for purchase of power from such wind energy projects, which, on the face of it, is contrary to the mandate of Order No.1 of 2010 issued by the GERC. The said order put it beyond the pale of doubt that the tariff of ₹3.56 per kWh was applicable only to those wind energy projects that availed the benefit of accelerated depreciation. GUVNL does not dispute the fact that the four respondent companies did not avail such benefit. Ergo, the question of applying to them the tariff that was only meant for wind energy projects that did avail accelerated depreciation would not arise.”

 

Outcome and Impact

• Appeals Dismissed: The Supreme Court dismissed GUVNL’s appeals, upholding the rights of the respondent companies to seek case-specific tariff determination from the GERC.
• Policy Clarity: The judgment provides much-needed clarity and sets a precedent for future renewable energy projects, reinforcing the sanctity of regulatory orders and statutory rights vis-à-vis commercial contracts.
• Investor Confidence: This decision strengthens investor confidence in the renewable energy sector, ensuring that State utilities cannot override regulatory provisions or act contrary to declared government policy.
• Recognition of Counsel: The case was masterfully argued by Mr. Shyam Divan, Senior Advocate, ably assisted by the Team of Lahoti Advocates comprising of Mr. Divyakant Lahoti, Ms. Praveena Bisht and Mr. Siddharth Tripathi, reflecting the firm’s deep expertise in regulatory and commercial litigation.

 

Conclusion

The Supreme Court’s decision is a milestone in Indian renewable energy jurisprudence, reaffirming that regulatory and policy imperatives must override narrow commercial interests, especially where the State is a party. It ensures fair treatment for renewable energy producers and further incentivizes investment in green power.

 

This article is intended for information and awareness. For case-specific advice, please consult qualified legal professionals.