The Supreme Court has held that while tariff determination lies exclusively within the domain of the State Electricity Regulatory Commission (SERC), the Commission is equally bound to consider government policy incentives, including the Generation Based Incentive (GBI) granted by the Ministry of New and Renewable Energy (MNRE) for promoting renewable energy generation. However, such consideration must not result in a mechanical deduction of the incentive from the tariff in a manner that defeats the very objective of the scheme, which is to incentivise wind power generators and not to pass the benefit on to distribution companies (DISCOMs) or consumers. A bench comprising Justices Pamidighantam Sri Narasimha and Atul S. Chandurkar dismissed the appeal filed by Southern Power Distribution Company of Andhra Pradesh Limited and another against the judgment of the Appellate Tribunal for Electricity (APTEL) dated 19 December 2024.
The dispute arose from the GBI scheme introduced by the MNRE vide notification dated 17 December 2009, which provided wind power generators an incentive of ₹0.50 per unit of electricity fed into the grid for a period of four to ten years, subject to a cap of ₹62 lakh per MW. The scheme was explicitly designed to run parallel with accelerated depreciation on a mutually exclusive basis and was intended to be “over and above the tariff approved by the State Electricity Regulatory Commissions.” The Andhra Pradesh Electricity Regulatory Commission (APERC), in exercise of its powers under Sections 61 and 86 read with Section 181 of the Electricity Act, 2003, notified the Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for Tariff Determination for Wind Power Projects) Regulations, 2015. Regulation 20 of these Regulations expressly provided that the Commission “shall take into consideration any incentive or subsidy offered by the Central or State Government… if availed by the generating company… while determining the tariff.”
In its Tariff Orders dated 1 August 2015 and 26 March 2016, APERC initially did not factor in the GBI while determining the levelised generic preferential tariff for wind power projects. However, when the DISCOMs later sought amendment of these orders, APERC reversed its position and directed deduction of the GBI amounts from the tariff payable by the DISCOMs to the generators. Aggrieved, the wind power generating companies approached APTEL, which set aside APERC’s order, holding that the Commission had no power to mandatorily factor in the GBI benefit while determining tariff. The DISCOMs then approached the Supreme Court.
Dismissing the appeal, the Supreme Court clarified that the SERC does possess the power and jurisdiction to consider and, where warranted, factor in the GBI while determining tariff. The Court rejected the contention that the grant of GBI under Article 282 of the Constitution places it beyond the regulatory reach of the SERC. It held that tariff determination is the exclusive province of the Regulatory Commissions and that there is no unallocated regulatory residue outside their jurisdiction. However, the Court emphasised that this regulatory power must be exercised as a collaborative enterprise and in consonance with the statutory policy and the purpose of the incentive scheme. The GBI was designed to subserve the important policy objective of promoting renewable energy generation and reducing dependence on fossil fuels. Therefore, while the Commission is obligated to consider the GBI under Regulation 20, it cannot mechanically deduct the incentive amount from the tariff in a manner that nullifies the very objective of the scheme and effectively converts a generator-focused incentive into a consumer subsidy.
The Court observed that APERC’s approach of simply deducting the GBI from the tariff without a purposive and contextual analysis was erroneous and contrary to the intent behind Regulation 20 and the MNRE scheme. It held that factoring in the incentive into tariff cannot be divorced from its underlying objective of encouraging investment in renewable energy. The appeal was accordingly dismissed, and the judgment of APTEL was upheld.
Cause Title: Southern Power Distribution Company of Andhra Pradesh Limited & Anr. Versus Green Infra Wind Solutions Limited & Ors.
Citation: 2026 INSC 294 (Civil Appeal No. 4495 of 2025)
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