MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED VERSUS ADANI POWER MAHARASHTRA LIMITED & ORS

MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED VERSUS ADANI POWER MAHARASHTRA LIMITED & ORS 

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.684 OF 2021
MAHARASHTRA STATE ELECTRICITY
DISTRIBUTION COMPANY LIMITED ...APPELLANT (S)
VERSUS
ADANI POWER MAHARASHTRA LIMITED
& ORS. ...RESPONDENT (S)
WITH
CIVIL APPEAL NO.6927 OF 2021
INDEX
I. INTRODUCTION…………………………………………….. Paras 1 and 2
II. FACTS IN CIVIL APPEAL NO.684 OF 2021……………. Paras 3 to 29
III. FACTS IN CIVIL APPEAL NO.6927 OF 2021…………. Paras 30 to 39
IV. SUBMISSIONS ON BEHALF OF THE DISCOMS
………
Paras 43
V. SUBMISSIONS ON BEHALF OF THE GENERATING
COMPANIES …………………………………………..
………
Paras 44 and 45
V. RELEVANT DOCUMENTS…………………………………. Paras 46 to 83
VI. JUDGMENTS CITED……………………………………….. Paras 84 to 93
VII. STATUTORY PROVISIONS WITH REGARD TO
REGULATORY MECHANISM……………………………….
Paras 94 to 104
VIII. CONSIDERATIONS…………………………………………. Para 105 onwards
1
List of abbreviations:
1. ACQ - Annual Contracted Quantity
2. APML - Adani Power Maharashtra Limited
3. APTEL - Appellate Tribunal for Electricity
4. C&AG - Comptroller and Auditor General of India
5. CCEA - Cabinet Committee on Economic Affairs
6. CERC - Central Electricity Regulatory Commission
7. CIL - Coal India Limited
8. CPP - Captive Power Plants
9. DISCOMS - Distribution Companies
10. FSA - Fuel Supply Agreement
11. GCV - Gross Calorific Value
12. GMR - GMR Warora Energy Ltd.
13. GMRETL- GMR Energy Trading Limited
14. IPPs - Independent Power Producers
15. LoA - Letter of Assurance
16. MERC - Maharashtra Electricity Regulatory Commission
17. MoC - Ministry of Coal
18. MoP - Ministry of Power
19. MSEDCL - Maharashtra State Electricity Distribution Company Limited
20. NCDP - New Coal Distributional Policy
21. PLF - Plant Load Factor
22. PPAs - Power Purchase Agreements
23. PSA - Power Sale Agreement
24. RFP - Request for Proposal
25. SECL - South Eastern Coal Limited
26. SHR - Station Heat Rate
27. TPPs - Thermal Power Stations
28. UHBVNL- Uttar Haryana Bijli Vitran Nigam Limited
29. WCL - Western Coal Limited
J U D G M E N T
2
B.R. GAVAI, J.
INTRODUCTION
1. The questions involved in both these appeals, as in several
other appeals, are common.
2. Three of the issues involved in the present appeals are also
involved in the other appeals which were listed along with these
two appeals. However, the other appeals also involve some
other ancillary and incidental issues. As such, at the request of
the learned counsel for the parties, we have heard the present
appeals. We have also heard the learned counsel appearing in
the other appeals on the three questions which are common.
FACTS IN CIVIL APPEAL NO. 684 OF 2021
3. The facts, in brief, which arise in Civil Appeal No.684 of
2021 are thus:
4. The appellant-Maharashtra State Electricity Distribution
Company Limited (hereinafter referred to as “MSEDCL”) has
entered into a long-term Power Purchase Agreements (“PPAs” for
3
short) with Adani Power Maharashtra Limited (hereinafter
referred to as “APML”). The first of the PPAs is dated 8th
September 2008 for 1320 MW (“1320 MW PPA” for short); the
second one is dated 31st March 2010 for 1200 MW (“1200 MW
PPA” for short); the third one is dated 9th August 2010 for 125
MW (“125 MW PPA” for short); and the fourth one is dated 16th
February 2013 for 440 MW (“440 MW PPA” for short). These
PPAs were entered into in pursuance of the competitive bidding
processes conducted by the appellant-MSEDCL under Section
63 of the Electricity Act, 2003 (hereinafter referred to as “the
Electricity Act”) read with the Standard Bidding Guidelines
issued by the Ministry of Power (“MoP” for short).
5. Article 10 of the 1200 MW PPA dated 31st March 2010
entered into between the appellant-MSEDCL and respondent
No.1-APML deals with “Change in Law”.
6. Article 10.1.2 defines the term “Change in Law”.
7. Article 10.2 deals with the application and principles for
computing the impact of Change in Law. Article 10.2.1 provides
4
that while determining the consequence of a Change in Law
under Article 10, due regard has to be given to the principle,
that to compensate the Party affected by such Change in Law is
to restore through monthly Tariff Payment, to the extent
contemplated in Article 10, the affected Party to the same
economic position as if such Change in Law has not occurred.
8. Article 10.3 deals with “Relief for Change in Law”. Article
10.3.1 provides relief for Change in Law during the
Construction Period, whereas Article 10.3.2 provides for
compensation to be paid on account of Change in Law during
Operating Period. For claiming relief on account of a Change in
Law, the Party is required to approach the Appropriate
Commission along with documentary proof of such
increase/decrease in the cost of the Power Station or
revenue/expense for establishing the impact of such Change in
Law. Article 10.3.4 provides finality to the decision of the
Appropriate Commission with regard to compensation
determined under Articles 10.3.1 and 10.3.2.
5
9. On 18th October 2007, the Government of India, through
the Ministry of Coal (“MoC” for short), issued the New Coal
Distributional Policy, 2007 (hereinafter referred to as “the
NCDP, 2007”). As per the NCDP 2007, 100% of the quantity as
per the normative requirement of the consumers was to be
considered for the supply of coal, through Fuel Supply
Agreement (“FSA” for short) by Coal India Limited (“CIL” for
short) at fixed prices to be declared/notified by CIL. The NCDP,
2007 also provided that to meet the domestic requirement of
coal, CIL may have to import coal as may be required from time
to time, if feasible. CIL was to adjust its overall price
accordingly. It further provided that it was the responsibility of
CIL/Coal Companies to meet the full requirement of coal under
FSAs even by resorting to imports, if necessary.
10. It is not in dispute that in accordance with the NCDP,
2007, APML had applied for coal linkage to MoC. It is also not
in dispute that Western Coal Limited (“WCL” for short) and
South Eastern Coal Limited (“SECL” for short) issued two
6
Letters of Assurance (LoAs) in favour of APML and assured
supply of coal.
11. Undisputedly, FSA was executed between APML and WCL
for domestic coal linkage. Subsequently, the FSA was amended
and the quantum of coal assured by WCL was transferred to
SECL.
12. It is also not in dispute that subsequently, on 21st June
2013, the Cabinet Committee on Economic Affairs (“CCEA” for
short), in view of the persistent shortage of domestic coal,
approved a revised mechanism for coal supply to power
producers.
13. Thereafter, the Government of India, through the Ministry
of Coal, issued Office Memorandum dated 26th July 2013
(hereinafter referred to as “NCDP 2013”), thereby approving a
revised arrangement for the supply of coal to the identified
Thermal Power Stations (“TPPs” for short). The said Office
Memorandum provided that FSAs will be signed for the
domestic coal quantity of 65%, 65%, 67%, and 75% of Annual
7
Contracted Quantity (“ACQ” for short) for the remaining four
years of the 12th Plan for the power plants having normal coal
linkages. It further provided that to meet the balance FSA
obligations towards the requirement of the said 78,000 MW
TPPs, CIL may import coal and supply the same to the willing
power plants on a cost-plus basis. It further provided that the
power plants may also directly import coal themselves, if they
so opt, in which case, the FSA obligations on the part of CIL to
the extent of import component would be deemed to have been
discharged.
14. On 31st July 2013, the MoP issued a letter to the Central
Electricity Regulatory Commission (“CERC” for short) and State
Electricity Regulatory Commissions to consider as pass-through
in tariff the cost of alternate coal (procured to meet the shortfall
in supply of domestic linkage coal) on a case to case basis.
15. Contending that on account of the Change in Law, APML
was entitled to compensation, APML filed a Petition bearing
Case No.189 of 2013 on 17th December 2013 before the
8
Maharashtra Electricity Regulatory Commission (“MERC” for
short).
16. MERC, vide order dated 15th July 2014, disposed the said
Petition (i.e. Case No. 189 of 2013) by approving a framework
for determination of compensatory fuel charge, in view of the
CCEA decision of 21st June 2013 and the MoP’s advice dated
31st July 2013.
17. In compliance with the MERC’s order dated 15th July
2014, APML filed another Petition before the MERC bearing
Case No. 140 of 2014 on 23rd July 2014, inter alia, for approving
a mechanism for the determination of compensatory tariff.
18. The MERC, vide its order dated 20th August 2014,
formulated a mechanism for the pass-through in tariff of the
compensatory fuel charge that had been allowed in Case No.189
of 2013.
19. Subsequently, APML filed a Review Petition before the
MERC bearing Case No.159 of 2014. The same was disallowed
9
by the MERC as being devoid of merits except on the issue of
the effectiveness of the compensatory fuel charge.
20. On 28th January 2016, the MoP issued the revised Tariff
Policy. As per clause 6.1 of the revised Tariff Policy, the
Appropriate Commission was required to consider the cost of
imported/market-based e-auction coal procured for making up
the shortfall in the domestic coal for pass-through in tariff of
competitively bid projects.
21. Thereafter, on 9th March 2016, APML filed appeals before
the Appellate Tribunal for Electricity (hereinafter referred to as
“APTEL”), being Appeal Nos. 129 of 2016 and 130 of 2016,
challenging the orders passed by the MERC in Case Nos.189 of
2013 and 140 of 2014. MSEDCL too filed cross-appeals against
the MERC orders being Appeal Nos. 187 and 188 of 2016.
22. On 4th May 2017, the learned APTEL remanded the issues
raised in the cross-appeals filed by APML and MSEDCL for
fresh consideration by the MERC in the light of the judgment of
this Court in the case of Energy Watchdog v. Central
10
Electricity Regulatory Commission and others1 which was
decided on 11th April 2017.
23. By order dated 7th March 2018, the MERC decided Case
No.189 of 2013 and 140 of 2014, wherein, while allowing the
claims of APML for relief on account of a Change in Law for
1180 MW capacity, it restricted it to the extent of the minimum
supply obligations specified for the CIL subsidiaries for the last
four years of the 12th Five Year Plan period i.e. Financial Year
2013-14 to Financial Year 2016-17 as per the NCDP, 2013. It
further held that the alternate coal quantity for meeting the
domestic coal shortfall shall be computed based on the Station
Heat Rate (“SHR” for short) mentioned by APML in the bid
documents and the middle value of the Gross Calorific Value
(“GCV” for short) range of assured coal grade for domestic coal
as per the FSA/LoA/MoU.
1 (2017) 14 SCC 80
11
24. Being aggrieved thereby, APML preferred appeals before
the learned APTEL. The learned APTEL framed the following
three issues:
“Issue No. 1: Whether the MERC was
correct in holding that the
net SHR submitted by the
Appellant in its bid or SHR
and Auxiliary Consumption
norms specified for new
generating stations under
the MYT Regulations, 2011,
whichever is superior shall
form the basis for
computing Change in Law
compensation under the
PPAs?
Issue No. 2: Whether the MERC was
correct in holding that the
reference GCV of domestic
coal supplied by CIL shall
be the middle value of GCV
range of assured coal grade
in LoA/FSA/MoU and not
the GCV as received?
Issue No. 3: Whether the MERC was
correct in holding that for
the purpose of Change in
Law compensation for 1180
MW capacity, shortfall in
12
domestic linkage coal shall
be assessed by considering
the coal supply as the
maximum of (1) actual
quantum of coal offered for
offtake by CIL under the
LoA/FSA and (2) the
minimum assured quantum
in NCDP 2013 for the
respective year?”
25. On Issue No.1, the learned APTEL held that APML was
entitled to compensation on the ground of Change in Law based
on the SHR specified in the MERC MYT Regulations 2011 or the
actual SHR achieved by APML, whichever is lower.
26. On Issue No.2, the learned APTEL held that the
compensation for the Change in Law approved by the MERC
shall be computed based on the actual GCV of coal received.
27. On Issue No.3, the learned APTEL held that under the
NCDP, 2007, there was an assurance of 100% coal supply and
as such, while granting compensation on the ground of Change
in Law, it was not justified to restrict it to the maximum of 35%
to 25% for the respective four years of the 12th Plan.
13
28. The learned APTEL held that the restitution principle has
to be applied. It further held that to protect the interests of
consumers, the Generators had itself indicated that the
parameters which are more beneficial to the consumers i.e. the
lower amongst the actual or as per the Regulations would
protect the interests of the consumers.
29. Being aggrieved thereby, the MSEDCL has approached this
Court by way of Civil Appeal No.684 of 2021.
FACTS IN CIVIL APPEAL NO.6927 OF 2021
30. In Civil Appeal No.6927 of 2021, the MSEDCL challenges
the concurrent orders passed by the CERC dated 15th November
2018 and the order passed by the learned APTEL dated 16th
July 2021.
31. MSEDCL issued a Request for Proposal (RFP) on 15th May
2009 and initiated the competitive bidding process for
procurement of power on long-term basis. GMR Warora Energy
Ltd. (“GMR” for short) submitted its bid on 7th August 2009 and
emerged as one of the successful bidders with a levelized tariff
14
of Rs. 2.879/kWh. Accordingly, the PPA was executed for the
procurement of 200 MW of power on 17th March 2010 by
MSEDCL on long-term basis. Similarly in March 2012,
Respondent No. 2-Union Territory of Dadra & Nagar Haveli
(“DNH” for short) issued an RFP for the procurement of power
through competitive bidding and GMR emerged as one of the
successful bidders.
32. Consequently, respondent No. 1 in Civil Appeal No.6927 of
2021 i.e. GMR entered into the following long-term PPAs for the
supply of power from the Project:
(a) Supply and sale of 200 MW of power on a long-term basis
to MSEDCL in terms of PPA dated 17th March 2010. The cut-off
date for this PPA is 31st July 2009. Supply of power in terms of
the PPA commenced from 17th March 2014.
(b) Supply and sale of 200 MW of power on long term basis to
Electricity Department, DNH in terms of PPA dated 21st March
2013. The cut-off date of this PPA is 1st June 2012. Supply of
power in terms of the PPA commenced from 1st April 2013.
15
(c) Supply and sale of 150 MW of power on long term basis to
TANGEDCO through back-to-back arrangements as follows:
(i) Power Sale Agreement (PSA) dated 1st March 2013
between GMR Energy Trading Limited (GMRETL) and GMR,
based on which a bid was submitted to TANGEDCO;
(ii) PPA dated 27th November 2013 between GMRETL and
TANGEDCO for the supply of power from GMR to TANGEDCO.
The cut-off date of this PPA is 27th February 2013.
(iii) PPA dated 3rd May 2014 between GMR and GMRETL
recording the terms and conditions in accordance with PPA
between GMRETL and TANGEDCO. The supply of power under
the PPA commenced on 22nd October 2015.
33. Petition No. 8/MP/2014 was filed by GMR claiming
compensation on account of the impact of the Change in Law
events during the Operation period and Construction period
under MSEDCL and DNH PPAs. The Commission, by order
dated 1st February 2017, had allowed some of the claims of GMR
on the ground of Change in law. Vide the said order, it has also
16
disallowed some of the claims. Aggrieved by the said order,
GMR filed Appeal No. 111 of 2017 before the learned APTEL in
respect of the compensation claims disallowed by the
Commission. Similarly, Appeal No. 290/2017 was filed by DNH
Power Distribution Company Ltd against the said order dated
1
st February 2017 disputing the compensation claims allowed to
GMR under some Change in Law events.
34. During the pendency of the above said appeals, GMR has
filed Petition (i.e. Petition No.88/MP/2018) seeking the following
reliefs:
“(a) Confirms that the following operational
parameters which are imperative of
calculation of compensation due to the
Petitioner on account of change in law
events, are to be considered on actuals:
(i) Auxiliary Power Consumption
(ii) Station Heat Rate
(iii) Gross calorific Value
(b) Confirm that levy of Service Tax &
Swachh Bharat Cess on coal transportation
is on all components as per rail invoice;
17
(c) Release of amounts due to the Petitioner
from Respondent No. 1, MSEDCL in light of
the Commission’s order dated 1.2.2017 in
Petition No. 8/MP/2014.”
35. Two of the issues involved in the present appeals with
regard to SHR and GCV also fell for consideration before the
CERC.
36. The CERC found that the CERC norms applicable for the
period 2009-14 and 2014-19 do not provide the norms for 300
MW units. It further found that the CERC norms provide for a
degradation factor of 6.5% and 4.5% respectively towards Heat
Rate over and above the Design Heat Rate. It found that since
the Design Heat Rate is 2211 kcal/kWh, the gross Heat Rate
works out to 2355 kcal/kWh and 2310 kcal/kWh for the period
2009-14 and 2014-19 respectively. It directed that the SHR of
2355 kcal/kWh during the period 2009-14 and 2310 kcal/kWh
during the period 2014-19 or the actual SHR, whichever was
lower, shall be considered for calculating the coal consumption
for compensation under the Change in Law.
18
37. Insofar as the GCV is concerned, the CERC found that in
the 2014 Tariff Regulations of the Commission, the
measurement of GCV has been specified on “as received” basis.
It, therefore, found that it would be appropriate if the GCV on
“as received” basis is considered for computation of
compensation for Change in Law.
38. Being aggrieved by the order passed by the CERC dated
15th November 2018, the MSEDCL preferred an appeal being
Appeal No.342 of 2019 before the learned APTEL. The learned
APTEL did not find merit in the submission of the MSEDCL and
as such, dismissed the appeal by judgment and order dated 16th
July 2021.
39. Being aggrieved thereby, MSEDCL has approached this
Court by way of Civil Appeal No.6927 of 2021.
40. The arguments on behalf of the appellant-MSEDCL in Civil
Appeal No.684 of 2021 were advanced by Shri Gopal Jain,
learned Senior Counsel, whereas arguments in Civil Appeal
19
No.6927 of 2021 were advanced by Shri G. Sai Kumar, learned
counsel.
41. We have also heard Shri Balbir Singh, learned Additional
Solicitor General and Shri M.G. Ramachandran, learned Senior
Counsel appearing for some of the State Electricity Distribution
Companies, whose matters are not being decided by this
judgment, but wherein the aforesaid three questions/issues are
common.
42. On behalf of the respondent-APML as well as the
respondent-GMR, Dr. Abhishek Manu Singhvi, learned Senior
Counsel advanced the arguments. His arguments were
supplemented by Shri Vishrov Mukherjee, learned Counsel.
SUBMISSIONS ON BEHALF OF THE DISCOMS
43. The main arguments that were advanced on behalf of the
Distribution Companies (hereinafter referred to “DISCOMS”) are
as under:
(i) The SHR and GCV value are declared in the bid
document and it is not permissible for the
20
Generating Companies to claim advantage on
the basis of SHR value which is different than
the one quoted i.e. the SHR value as provided in
the Tariff Regulations or the actual. It is their
submission that the declaration of operational
parameters i.e. SHR and GCV were the mandate
of the bid in case of Case-1 competitive bidding
process. It is submitted that if deviation from
such declared bid parameters for compensating
the bidder/ Generating Companies/ Generators
under the PPA on the ground of Change in Law
is permitted, it will take away the very sanctity
of the bid.
(ii) It is submitted that to ensure serious
participation in the bid process and for timely
completion of commencement of supply of
power, the Competitive Bidding Guidelines 2005
itself mandates the
21
bidder/generator/Generating Companies to
have a ‘firm’ fuel arrangement. It is their
submission that it is mandatory for the
bidder/generator to declare the ‘quantity’ of fuel
required to generate power for the entire term of
the PPA. The DISCOMS argued that the
quantity of fuel can only be ascertained by
applying the SHR and GCV components as
declared in the bid.
(iii) It is submitted that the RFP itself mandated the
participating bidders/generators to submit
documentary evidence with regard to the
‘quantity’ of fuel required to generate power for
the entire term of 25 years of the PPA.
(iv) It is submitted that for ascertaining the
‘quantity’, it was also necessary for the
bidder/generator to provide ‘supporting
22
computation’ by declaring the SHR and GCV
value applicable for the entire term of the PPA.
(v) It is the contention on behalf of the DISCOMS
that the bidder/generator, while submitting
his/its bids, is required to submit the bids by
taking into consideration all factors, including
risks regarding fluctuations, availability of
fuel/coal, etc. It is submitted that if there is
any change with regard to the availability of fuel
or the rate at which a bidder/generator is
required to procure the coal, then the
bidder/generator has to suffer the
consequences thereof as he/it has submitted
his/its bid with eyes open.
(vi) The thrust of the argument of the DISCOMS is
that in a competitive bid based PPA under
Section 63 of the Electricity Act, the quoted
tariff is sacrosanct and it is not open for the
23
respondent/generator to seek higher tariff or
extra compensation under the PPA, except as
per Article 13 of the PPA dealing with impact of
Change in Law. It is submitted that the reliance
placed by the learned APTEL on the judgment of
this Court in the Case of Energy Watchdog
(supra) is totally misconceived.
(vii) It is, therefore, submitted that the relief for the
impact of NCDP 2013 is admissible only to the
extent of the changes brought about by the
NCDP 2013 and not in excess thereof. It is
submitted that the Change in Law made by the
Central Government on 31st July 2013 was visà-vis the NCDP 2007 which was in force as on
the cut-off date provided in Article 13.1 of the
PPA i.e. 7 days before the bid submission date.
It is submitted that the very purpose of
compensating the party affected by Change in
24
Law is to restore, through monthly tariff
payments, the affected party to the same
economic position as if the Change in Law had
not occurred.
(viii) It is submitted that as per para 2.2 of the NCDP
2007 read with para 5.2, CIL was entitled to
meet the shortfall in the availability of domestic
coal by importing coal. In such event, the
Generators were required to pay the higher cost
of imported coal to CIL. It is submitted that
while submitting the bids, the
bidders/generators, therefore, had submitted
their bids for supply of electricity to the
DISCOMS knowing the position that they will
not be compensated for higher cost of imported
coal separately, over and above the quoted
tariff /quoted energy charges, in the event of
supply of imported coal by CIL.
25
(ix) It is contended that, if in the event the
Generator could have procured the fuel/coal at
a lesser price, then the benefit which would
have occurred to him/it on account of such
saving in procurement would have gone to
him/it. On the same analogy, if the Generator is
required to obtain the fuel/coal at a higher price
then he/it cannot be heard to say that he/it
should be compensated for the same.
(x) It is submitted that, as a matter of fact, till 31st
July 2013 i.e. when the NCDP 2013 was
brought into effect, there could have been no
claims from the Generators for increase in tariff
to be allowed for higher coal cost on account of
imported coal supply. It is submitted that if the
NCDP 2013 had not brought about a Change in
Law, the position as prevalent before would
have continued. It is submitted that this Court
26
has consistently held that an unprecedented
increase in input cost cannot be a ground for a
supplier not to perform the obligations under a
binding contract or seek higher price or
compensation for such performance.
(xi) It is the submission of the DISCOMS that the
benefit on account of the Change in Law
brought into effect by the NCDP 2013 has to be
restricted only to the extent of shortfall as
provided by the said policy. It is submitted that
if it was the intention of the NCDP 2013 to
provide for relief through the Change in
Law/policy decision for the shortfall even below
the specified percentages i.e. for entire shortfall
on actual basis, then there was no rationale in
specifying the percentages in the NCDP 2013.
(xii) It is further contended by the DISCOMS that
the contention of the Generating Companies
27
that Shakti Policy 2017 was a continuation of
NCDP 2013 is incorrect. It is submitted that
the first part under (A) of the Shakti Policy 2017
deals with the old regime of LoA/FSA which is
the NCDP aspect. The second part under (B)
deals with the new transparent coal allocation
policy called SHAKTI. It is submitted that, as a
matter of fact, SHAKTI and allocation of coal
thereunder was admissible only to Entities
which did not have any LoA/FSA under the
NCDP 2007 or the NCDP 2013. Reliance in this
respect has been placed on the judgment of this
Court in the case of Jaipur Vidyut Vitaran
Nigam Ltd. and others v. Adani Power
Rajasthan Limited and another2
(hereinafter
referred to as “Adani Rajasthan case”)
2 2020 SCC Online SC 697
28
(xiii) It is submitted that the law laid down by this
Court in the case of Energy Watchdog (supra)
has been applied by the learned APTEL in a
patently erroneous and perverse manner.
(xiv) It is submitted that the total quantum of coal
required is to be computed not in an abstract
manner but is to be necessarily based on the
SHR of the power station. It is submitted that
the SHR has nothing to do with coal quality or
GCV of coal. It is submitted that the SHR is the
boiler and turbine characteristic of a thermal
power station and, therefore, indicative of the
quality and efficiency of the machine. It is
submitted that the quantum of coal requirement
is less with lower SHR and increases with
higher SHR, inasmuch as it relates to the ability
and efficiency of the machines to extract heat
29
energy from coal to produce per unit of
electricity.
(xv) It is submitted that in Case 2 bidding, the net
SHR is a bidding parameter as coal linkage is
arranged by the entity inviting bids, and actual
cost of coal is allowed as a pass-through in the
tariff as per the formula specified. It is their
submission that there are no quoted energy
charges in Case 2 bidding but only quoted fixed
charges. It is submitted that, whereas, in Case
1 bidding, SHR may not, as such, be the criteria
for selection but is a necessary requirement/
condition to be given for identifying the
quantum of coal required to generate electricity
over the length of the PPA. While submitting
his/its bid and quoting energy charges, the
bidder/generator was required to take into
consideration the quantum of coal requirement
30
which, in turn, is based on the SHR and
auxiliary consumption parameters to be given
by the bidder/generator. It is submitted that
the coal Supply Agreement for quantum of coal
is signed by CIL only for the quantum as
determined above, based on the SHR and
operating parameters provided by the
bidder/generator. It is submitted that the view
taken by the learned APTEL is contrary to the
view taken by it between the same parties in its
judgment dated 13th April 2018 in Appeal No.
210 of 2017.
(xvi) It is submitted that if the SHR which is higher
than the one quoted by the bidder/generator is
to be taken into consideration, then it will
amount to granting premium to the Generator
for its inefficiency. It is submitted that if the
coal consumption increases on account of
31
highest SHR, the excess expenditure on
quantum of coal is to be borne by the
Generator.
(xvii) It is submitted that if the bid assumed SHR is
2200 kcal/kg and actual SHR is 2300 kcal/kg,
when the quoted tariff is based on the SHR of
2200 kcal/kg, for Change in Law impact, SHR
of 2300 kcal/kg cannot be permitted to be used
for computation of compensation for Change in
Law.
(xviii) It is submitted that the impugned judgment
permitting the actual SHR or the SHR given in
Tariff Regulations, whichever is lower, if upheld,
would amount to converting the scope of
Section 63 tariff determination into a Section 62
cost plus tariff determination. It is submitted
that this is impermissible in a competitive bid
based PPA.
32
(xix) It is further submitted that the MERC Tariff
Regulations expressly provides that the Tariff
Regulations will have no application to Section
63 tariff determination and the same is
governed by the guidelines of the Central
Government under Section 63 of the Electricity
Act.
(xx) It is submitted that perusal of Regulation 2(2)(a)
of the Central Electricity Regulatory
Commission (Terms and Conditions of Tariff)
Regulations, 2019 would reveal that they are
not applicable where the tariff has been
discovered through tariff based competitive
bidding in accordance with the guidelines
issued by the Central Government and adopted
by the Commission under Section 63 of the
Electricity Act.
33
(xxi) It is submitted that when admittedly there is bid
assumed SHR as per bidding conditions, the
learned APTEL cannot ignore the same on the
purported ground of equity and provide for an
alternate parameter for computational purpose
of actual SHR with the ceiling as under the
Tariff Regulations. It is submitted that this will
result in changing the bidding terms and
conditions after the bid was accepted and
became final.
(xxii) It is further submitted that the finding that the
GCV computation is to be made on ‘as received’
basis, is also patently erroneous. It is
submitted that the real purpose behind relying
on the said methodology of computation is to
recover the grade slippage in the coal grade
actually supplied as against the coal grade
billed by the Coal Company and all the losses in
34
the heat value of the coal during the time period
when the coal is taken delivery from the coal
mines and transported to the Power Plant and
unloading at the Power Plant site.
(xxiii) It is submitted that the evaluation of GCV on air
dried basis by Coal Company was well
known/existing even prior to bidding and the
Generators were very much aware of it.
Accordingly, the same has already been factored
into while the Generators submitted their bids.
As such, if the computation of GCV is permitted
on ‘as received’ basis, the Generators will be
doubly compensated. In any case, it is
submitted that if the Generators had any issues
with regard to the grade of coal i.e. GCV range
and quantum, then that is an issue between the
Generators and the respective Coal Companies,
which is required to be resolved under the FSA
35
between them. The DISCOMS cannot be roped
into for the resolution of such disputes between
the Generators/Generating Companies and the
Coal Companies.
(xxiv) Lastly, it is submitted that since the letter of the
MoP, which has been considered as a Change in
Law event, is dated 31st July 2013, the learned
APTEL could not have given effect to the same
from 1st April 2013. It is submitted that this
would permit giving the benefit of compensation
with retrospective effect.
(xxv) Insofar as the reliance placed by the Generating
Companies on the judgment of this Court in
Adani Rajasthan case is concerned, it is
submitted that the said judgment would not be
applicable to the facts of the present case. It is
submitted that in the said case, there was no
36
FSA and the State Government had undertaken
to supply the entire coal quantum.
(xxvi) It is further submitted that the judgment of this
Court in the case of Nabha Power Limited
(NPL) v. Punjab State Power Corporation
Limited (PSPCL) and another3 would also not
be applicable to the facts of the present case
inasmuch as the said case was under Case-2.
(xxvii) It is submitted that the inability of a Generator
to seek sufficient relief from the Coal Companies
cannot be a reason to claim relief from the
Distribution Licensees/DISCOMS or the
consumers. The DISCOMS cannot be penalized
on account of failure by the Coal Companies of
supplying sufficient coal.
(xxviii) An additional ground in Civil Appeal No.6927 of
2021 raised is that CERC has erred in holding
3 (2018) 11 SCC 508
37
that the principle of late payment surcharge
envisaged in Articles 8.3.5 and 8.8.3 of the PPA
is applicable towards payment of the balance
amounts by MSEDCL in respect of the relief
under Change in Law.
SUBMISSIONS ON BEHALF OF THE GENERATING
COMPANIES
44. As against this, it is submitted on behalf of the Generating
Companies as under:
(i) It is submitted that under the NCDP 2007,
100% normative coal requirement of Generating
Companies was assured to be supplied by the
CIL. However, by NCDP 2013, the responsibility
of CIL to supply coal was reduced to 65%, 65%,
67% and 75% of ACQ for the remaining years of
the 12th Five Year Plan i.e. Financial Year 2013-
14 to Financial Year 2016-17.
38
(ii) It is submitted that the NCDP has been held to
be a law for the purposes of the Electricity Act.
It is, therefore, submitted that the Generating
Companies are entitled to compensation for the
shortfall of coal in terms of NCDP 2013 and the
same has to be paid on actuals, i.e. to the
extent the shortfall in coal supply actually
exists.
(iii) It is submitted that the said issue is no more
res integra and is covered by the judgment of
this Court in the case of Energy Watchdog
(supra) and in Adani Rajasthan case (supra).
(iv) It is submitted that, as per the guideless issued
by the MoP, for Case-1 bidding, SHR and GCV
are not bid parameters. The SHR and GCV
mentioned in the bid is part of technical
information and is not relevant for computing
Change in Law compensation. It is submitted
39
that there are substantial distinctions between
Case-1 and Case-2 bid. The first one is that in
Case-1 bid, SHR and GCV are not bid
parameters, whereas in Case-2, SHR and GCV
are bid parameters. Secondly, in Case-1
bidding, energy charge is not computed since
the energy charge forms part of quoted tariff,
whereas in Case-2 bidding, energy charge is
computed based on the net heat rate quoted in
the financial bid. Thirdly, in Case-1 bidding, the
PPA has no definition of quoted Net Heat
Rate/SHR, whereas in Case-2 bid, the PPA
defines quoted Net Heat Rate/SHR. It is,
therefore, submitted that in Case-1 bid there is
no consideration of SHR and GCV in the
formula of energy charge, whereas in Case-2
bid, these two parameters provide the formula
for computing energy charge.
40
(v) It is submitted that the learned APTEL in the
case of Wardha Power v. Reliance
Infrastructure & Ors.4
 has held that if SHR
and GCV as submitted in the bid are considered
for Change in Law compensation, it may result
in over or under recovery and should be
considered only on ‘actuals’. It is submitted
that the said judgment in Wardha Power
(supra) has not been challenged/appealed
against and has thus attained finality.
(vi) The Generators further rely on the judgment of
this Court in Adani Rajasthan case (supra). It
is submitted that in the said case, the learned
APTEL had held that operational parameters
(like SHR and Auxiliary consumption) must be
considered as per ‘normative’ value, and this
view has been upheld by this Court.
4 Appeal No.288 of 2013
41
(vii) It is further submitted that the MERC in its
order dated 7th March 2018 in Case No.123 of
2017 (JSW v. MSEDCL) has held that the lower
of actual or normative parameter for Auxiliary
consumption (an operational parameter like
SHR) has to be considered for Change in Law
compensation. It is submitted that the
MSEDCL has not challenged the said judgment,
which has thus attained finality.
(viii) It is submitted that the SHR is continuously
being monitored and its actual value, as
certified by Energy Auditors, is submitted to
MSEDCL along with claims. As such, ‘actuals’
can be ascertained and verified for computation
purposes.
(ix) It is submitted that, equally, the GCV of coal is
certified by third party sampling agencies. A
GCV certificate is submitted to MSEDCL for
42
each railway rake separately, along with claim.
Such ‘actuals’ on ‘as received’ basis can be
ascertained/verified for computational
purposes.
(x) It is further submitted that some of the
DISCOMS in the proceedings before the CERC
have contended that the SHR shall be
considered after ascertaining actual design heat
rate and margin as per CERC Regulations from
time to time. They have further taken a stand
that Auxiliary Consumption shall be considered
as per CERC Regulations. On affidavit, it is also
stated that GCV of alternate coal shall be as
certified by a Third Party Sampling Agency, for
which the Commission should provide
appropriate guideline. It is, however, submitted
that now the DISCOMS are taking a U-turn by
43
contending that the SHR should be based on
bid assumed parameters.
(xi) It is submitted that, in any case, to maintain
balance, APML had itself offered for the benefit
to be granted on the lower of ‘actual’ or
‘normative’ SHR as per Regulations. The same
has been accepted by the learned APTEL. It is
submitted that this will ensure that no
inefficiency is passed on to consumers and, at
the same time, the Generator is restituted.
(xii) It is submitted that had there been no
occurrence of Change in Law event, i.e. there
was no shortfall in coal supply, the tariff
payment to the Generating Companies would
have been based on quoted energy charge. In
such a situation, SHR and GCV of coal would
not have come into the picture. However, when
there is an occurrence of Change in Law event,
44
the principle of ‘Restitution’ comes into play. It
is submitted that ‘restitution’ can take place
only with consideration of ‘actual’ parameters.
(xiii) It is submitted that taking this into
consideration, expert bodies like the CERC and
APTEL have allowed the SHR and GCV to be
determined on ‘actual’ basis.
(xiv) It is submitted that the SHR indicated in the bid
as part of technical information does not
conform to the mandate of restitution as it
cannot put the Generator back to the same
economic position had Change in Law event not
occurred.
(xv) It is submitted as per the NCDP 2007, 100%
normative requirement of coal was to be
supplied by the CIL. However, due to shortfall
of coal in the country, the responsibility of CIL
to supply coal was reduced to 65%, 65%, 67%
45
and 75% of the ACQ. The shortfall in coal was
to be met either by the CIL or by the Generating
Companies/Generators by importing coal. It is
submitted that the higher cost of such imported
coal was allowed to be a pass-through.
(xvi) It is submitted that a conjoint reading of CERC
statutory advice dated 20th May 2013, CCEA
decision dated 21st June 2013, MoP letter dated
31st July 2013, and clause 6.1 of the Tariff
Policy 2016 issued by the MoP would reveal that
pass-through of the higher cost of quantity of
shortfall in coal procured from alternate sources
was to be allowed. It is submitted that this
position has been upheld by the judgments of
this Court in the case of Energy Watchdog
(supra) and Adani Rajasthan case (supra).
(xvii) It is submitted that this pass-through is by way
of restitution due to shortfall in 100% assured
46
quantity of coal and it cannot be limited to the
percentages/trigger levels specified in the NCDP
2013. It is submitted that the principle of
restitution would require the pass-through to
the extent the supply from CIL was cut down. It
is submitted that an argument to the contrary
has already been rejected by this Court in the
case of Adani Rajasthan case (supra).
(xviii) In addition to the judgments of this Court in the
cases of Energy Watchdog (supra) and Adani
Rajasthan case (supra), the Generating
Companies also rely on the judgment of this
court in the case of Uttar Haryana Bijli Vitran
Nigam Limited (UHBVNL) and another v.
Adani Power Limited and others5
.
(xix) It is also submitted that the contention on the
part of the DISCOMS that Adani Rajasthan
5 (2019) 5 SCC 325
47
case (supra) would not be applicable to the
facts of the present case, inasmuch as there
was no FSA scenario, is also factually incorrect.
45. In addition to the aforesaid submissions, the respondent
in Civil Appeal No.6927 of 2021 i.e. GMR, the following
submissions have been made.
(i) That Schedule 10 of the PPA executed between
GMR and MSEDCL clearly mentions that the
levelized tariff will be as per CERC Regulations.
(ii) It is submitted that the normative SHR as
mentioned in the bid is computed assuming
power plant is operating at 85% of the Plant
Load Factor (“PLF” for short). It is, however,
submitted that the PLF is at the sole discretion
of the procurer-DISCOMS as they decide the
quantum of power to off-take.
(iii) It is submitted that the SHR is a real-time
operating parameter which varies from time to
48
time, and it is computed by working out the
total electricity generated from the amount of
coal consumed in heat value (kCal) terms.
(iv) It is further submitted that the GCV of coal
actually delivered at site and fed to the boiler
varies from wagon to wagon. It cannot be a
homogeneous value.
(v) It is further submitted that the details given in
the bid with regard to SHR and GCV were only
indicative of the coal linkage to show that GMR
had the necessary means to supply power on
sustained basis and was a serious bidder, and
to further demonstrate its meeting of the
eligibility requirement prescribed under the
RFP.
(vi) It is submitted that the supporting
documents/information regarding fuel only
provides the quantity of coal required for the
49
project at Normative PLF and SHR computed as
per CERC norms, which is 2355 kCal/kWh. It
is submitted that MSEDCL is now insisting on
Design Gross Heat Rate of 2211 kCal/kWh,
which was not considered even for computation
of quantum of coal at the time of bid
submission.
(vii) It is further submitted that the Central
Electricity Authority, vide Notifications dated
17th October 2017 and 18th October 2017, has
even allowed for loss in GCV from ‘as received
basis’ to ‘as fired basis’ and as such, there is no
reason as to why GCV could not be computed
on ‘as received basis’.
(viii) It is further submitted that the MSEDCL cannot
be permitted to equate GMR’s case with APML
and Rattan India Power Limited inasmuch as
GMR falls under the jurisdiction of CERC,
50
whereas the other two fall under the jurisdiction
of MERC.
(ix) Insofar as late payment charges are concerned,
it is submitted that MSEDCL had unilaterally
deducted the amount, which is contrary to the
provisions of the PPA and as such, both CERC
and learned APTEL have rightly held that GMR
was entitled to late payment surcharge in terms
of Article 8.3.5. Reliance in this respect is
placed on the judgment of this Court in the case
of Maharashtra State Electricity
Distribution Company Limited v.
Maharashtra Electricity Regulatory
Commission and others6 and Tamil Nadu
Generation & Distribution Corporation
6 (2022) 4 SCC 657
51
Limited v. PPN Power Generating Company
Private Limited7
RELEVANT DOCUMENTS
46. For considering the rival submissions, it will be relevant to
refer to certain documents placed on record.
47. The MoP notified the Competitive Bidding Guidelines,
2005 (hereinafter referred to as “the said Guidelines”) on 19th
January 2005. The said Guidelines were framed under Section
63 of the Electricity Act. It will be relevant to refer to the
following part of the preamble of the said Guidelines.
“1. Preamble
………..
These guidelines have been framed under
the above provisions of section 63 of the Act.
The specific objectives of these guidelines are
as follows:
1. Promote competitive procurement of
electricity by distribution licensees;
2. Facilitate transparency and fairness in
procurement processes;
3. Facilitate reduction of information
asymmetries for various bidders;
7 (2014) 11 SCC 53
52
4. Protect consumer interests by
facilitating competitive conditions in
procurement of electricity;
5. Enhance standardization and reduce
ambiguity and hence time for
materialization of projects;
6. Provide flexibility to suppliers on
internal operations while ensuring
certainty on availability of power and
tariffs for buyers.”
48. Paragraph 2 of the said Guidelines deals with the scope of
the Guidelines. Para 2.2 of the said Guidelines reads thus:
“2.2. The guidelines shall apply for
procurement of base-load, peak-load and
seasonal power requirements through
competitive bidding, through the
following mechanisms:
(i) Where the location,
technology, or fuel is not
specified by the procurer
(Case 1);
(ii) For hydro-power projects, load
center projects or other
location specific projects with
specific fuel allocation such as
captive mines available, which
the procurer intends to set up
under tariff based bidding
process (Case 2).
53
However separate RFP shall be used for
procuring base load or peak load or
seasonal load requirements as the case
may be.”
49. It can thus be seen that Para 2.2 distinguishes two types
of cases, viz., Case-1 and Case-2. Case-1 deals with the case
where the location, technology, or fuel is not specified by the
procurer. Case-2 deals with hydro-power projects, load center
projects or other location specific projects with specific fuel
allocation such as captive mines available, which the procurer
intends to set up under tariff based bidding process.
50. Paragraph 3 of the said Guidelines deals with preparation
for inviting bids. Clause (I) of Para 3.2 deals with Case-2,
whereas clause (II) of Para 3.2 deals with Case-1. Sub-clause (i)
of clause (II) of Para 3.2 requires the bidder to undertake site
identification and land acquisition. The bidder is required to
submit a copy of notification issued for the land in question
under Section 4 of the Land Acquisition Act, 1894. For the part
of land excluding that which is to be acquired under the Land
54
Acquisition Act, 1894, the bidder is required to furnish
documentary evidence to establish allotment/ lease/
ownership/ vesting of at least one-third area of the said land.
Under sub-clause (ii), the bidder is required to submit
environmental clearance for the power station. Under subclause (iii), the bidder is required to supply forest clearance, if
applicable, for the land for the power station. Sub-clause (iv) is
the most important for the resolution of the present dispute,
which reads thus:
“3. Preparation for inviting bids
3.1 …………
3.2 (I) ……………
(II) ………………
(i) ………………
(ii) ………………
(iii) ………………
iv) Fuel Arrangements: (a) In the
following cases fuel arrangements
shall have to be made for the quantity
of fuel required to generate power
from the phase of the power station
from which power is proposed to be
55
supplied at Normative Availability for
the term of the PPA.
 In case of domestic coal, the
Bidder shall have made firm
arrangements for fuel tie up
either by way of coal block
allocation or fuel linkage
 In case of domestic gas, the
Bidder shall have made firm
arrangements for fuel tie up by
way of long term fuel supply
agreement for the term &
quantity as per Government of
India gas allocation policy
b) Fuel arrangements in the following
cases shall have to be made for the
quantity of fuel required to generate
power from the power station for the
total installed capacity.
 In case of imported coal, the
Bidder shall have either
acquired mines having proven
reserves for at least 50% of the
quantity of coal required OR
shall have a fuel supply
agreement for at least 50% of
the quantity of coal required for
a term of at least five (5) years
or the term of the PPA,
whichever is less.
 In case of RLNG, the Bidder
shall have made firm
arrangements for fuel tie up by
56
way of fuel supply agreement for
at least 50% of the quantity of
fuel required for a term of at
least five (5) years or the term of
the PPA, whichever is less.
Blending of Imported and Domestic
coal may be used in which case,
criteria for imported and domestic
coal shall be met separately in the
ratio of blending.”
51. It can thus be seen that in case of domestic coal, the
bidder is required to make firm arrangements for fuel tie up
either by way of coal block allocation or fuel linkage.
52. Clause (b) of sub-clause (iv) of clause (II) of Para 3.2 deals
with imported coal, in which case the bidder shall have either
acquired mines having proven reserves for at least 50% of the
quantity of coal required OR shall have a fuel supply agreement
for at least 50% of the quantity of coal required for a term of at
least five years or the term of the PPA, whichever is less.
57
53. Paragraph 4 of the said Guidelines deals with Tariff
Structure. It will be relevant to refer to Para 4.2, which reads
thus:
“4. Tariff Structure
4.1 ……..
4.2. In case of long term procurement
with specific fuel allocation (Case 2), the
procurer shall invite bids on the basis of
capacity charge and net quoted heat
rate. The net heat rate shall be ex-bus
taking into account internal power
consumption of the power station. The
energy charges shall be payable as per
the following formula:
Energy Charges = Net quoted heat rate X
Scheduled Generation X Monthly
Weighted Average Price of Fuel/Monthly
Average Gross Calorific Value of Fuel
If the price of the fuel has not been
determined by the Government of India,
government approved mechanism or the
Fuel Regulator, the same shall have to
be approved by the appropriate
Regulatory Commission.
In case of coal/lignite fuel, the cost of
secondary fuel oil shall be factored in the
capacity charges.”
58
54. It can thus be seen that insofar as Case-2 is concerned,
the procurer is required to invite bids on the basis of capacity
charge and net quoted heat rate. The net heat rate is required
to be ex-bus taking into account internal power consumption of
the power station. It further provides that if the price of the fuel
is not determined by the Government of India, government
approved mechanism or the Fuel Regulator, the same shall
have to be approved by the appropriate Regulatory Commission.
55. Para 4.4 provides that the capacity charge shall be paid
based on actual availability, as per charges quoted in Rs./kwh
and shall be limited to the normative availability. It further
provides that the normative availability for Case-1 and thermal
stations under Case-2 shall be a maximum of 85%.
56. Para 4.7 is another important clause for the resolution of
the present dispute, which reads thus:
“4.7. Any change in law impacting cost
or revenue from the business of selling
electricity to the procurer with respect to
59
the law applicable on the date which is 7
days before the last date for RFP bid
submission shall be adjusted separately.
In case of any dispute regarding the
impact of any change in law, the
decision of the Appropriate Commission
shall apply.”
57. It can thus be seen that any Change in Law impacting cost
or revenue from the business of selling electricity to the
procurer with respect to the law applicable on the date which is
7 days before the last date for RFP bid submission shall be
adjusted separately. It provides that in case of any dispute
regarding the impact of any Change in Law, the decision of the
Appropriate Commission shall apply.
58. It will also be relevant to refer to Para 4.12, which reads
thus:
“4.12 No adjustment shall be provided for
heat rate degradation of the generating
stations. Even in case of bids based on net
heat rate, the bidder shall factor in site
conditions, loading conditions, frequency
variations etc and no adjustment shall be
allowed on the quoted net heat rate for the
duration of the contract.”
60
59. It can thus be seen that no adjustment is to be provided
for heat rate degradation of the generating stations. Even in
case of bids based on net heat rate, the bidder shall factor in
site conditions, loading conditions, frequency variations etc.
and no adjustment shall be allowed on the quoted net heat rate
for the duration of the contract.
60. The NCDP 2007 would be of vital importance. Clause 2.2
thereof deals with Power Utilities including Independent Power
Producers (IPPs)/Captive Power Plants (CPPs) and Fertilizer
Sector. Clause 2.2 reads thus:
“2. Distribution and Pricing of coal
to different consumers/sector(s):
2.1. ………………
2.2 Power Utilities including
Independent Power Producers
(IPPs)/Captive Power Plants(CPPs) and
Fertilizer Sector
100% of the quantity as per the
normative requirement of the consumers
would be considered for supply of coal,
61
through Fuel Supply Agreement (FSA) by
Coal India Limited (CIL) at fixed prices to
be declared/notified by CIL. The
units/power plants, which are yet to be
commissioned but whose coal
requirements has already been assessed
and accepted by Ministry of Coal and
linkage/Letter of Assurance (LoA)
approved as well as future commitments
would also be covered accordingly.”
61. It can thus be seen that the NCDP 2007 assured 100% of
the quantity as per the normative requirement of the consumers
for supply of coal, through FSA by CIL at fixed prices to be
declared/notified by CIL. It further provided that the
units/power plants, which are yet to be commissioned but
whose coal requirements has already been assessed and
accepted by MoC and linkage/Letter of Assurance (LoA)
approved as well as future commitments would also be covered
in accordance therewith.
62. It will also be relevant to note the following part of clause
5.2 of the NCDP 2007.
“5. Policy for New Consumers
62
5.1. ……………
5.2. …………… In order to meet the
domestic requirement of coal, CIL may
have to import coal as may be required
from time to time, if feasible. CIL may
adjust its overall price accordingly.
Thus, it will be the responsibility of
CIL/Coal companies to meet full
requirement of coal under FSAs even by
resorting to imports, if necessary.”
63. It can thus be seen that clause 5.2 of the NCDP 2007
provides that in order to meet the domestic requirement of coal,
CIL may have to import coal as may be required from time to
time, if feasible. It further provided that CIL would adjust its
overall price accordingly. The NCDP 2007 emphasizes the
responsibility of CIL/Coal Companies to meet full requirement
of coal under FSAs even by resorting to imports, if necessary.
64. It will also be relevant to refer to the communication
addressed by the MoP dated 9th May 2013 to the Secretary,
CERC.
63
“Subject: Impact on tariff on the
concluded PPAs due to domestic coal
availability.
Sir,
Coal linkages have been granted for
power projects under the New Coal
Distribution Policy 2007 (NCDP), which
mandates that CIL will meet 100% of
normative requirement of power sector.
Para 5.2 of NCDP provides that “In order
to meet the domestic requirement of coal,
CIL may have to import coal as may be
required from time to time, if feasible. CIL
may adjust its overall price accordingly.
Thus, it will be the responsibility of
CIL/Coal companies to meet full
requirement of coal under FSAs even by
resorting to imports, if necessary”. Post
NCDP MoC granted linkages between
2008-2010 with the assumption that it
would meet coal requirement at around
85% PLF. On this basis LoAs were
issued by coal companies, after getting
commitment guarantees in the form of
Bank Guarantee from the developers
thereby undertaking an explicit
obligation to supply coal to the extent of
the specified quantity to the power
developer. Having obtained the LOA the
developers would have proceeded on the
assumption of getting the requisite
quantity of domestic coal with the
disincentive trigger of 90% of LoA
64
quantity prevailing under the then Fuel
Supply Agreement (FSA) with a provision
for CIL resorting to import of coal to
bridge the gap, if any. It is assumed
that the power producers would have
factored this assurance regarding coal
supply while submitting their bids in
response to Case 1 and Case 2
competitive bidding for long term power
purchase agreements. Thus, while the
fuel price risk would have been taken
into account and factored in the
escalable component of energy charges,
it is assumed that no fuel availability
risk would have been taken into
consideration on account of the LOAs
given by CIL.
2. It now transpires that on account
of the limited availability of coal Ministry
of Col has indicated that CIL may not be
in a position to supply more than 60 to
65% of ACQ to those power producers
who had been earlier issued LOAs of
normative quantities corresponding to
85% PLF. Simultaneously, it has been
proposed that the disincentive trigger for
coal supply would be brought down from
90% to 60 to 65% by CIL in the new fuel
supply agreements to be signed with
these power producers. This obviously
would create a situation where the power
producers would have to arrange fuel
from open market including imports
either through CIL or directly. In view of
65
this scenario, PPAs which are already
concluded between the developers and
discoms as a result of competitive
bidding in the last few years based on
domestic coal linkage (LOA) may have to
use imported coal to bridge the shortage
of domestic coal in order to fulfil that
contractual obligations. The Association
of Power Producers represented on this
issue of shortage of domestic coal and its
consequential effect on the concluded
PPAs through competitive bidding route.
3. The Cabinet Committee on
Economic Affairs (CCEA) has also
considered the situation arising out of
the inadequate availability of coal
leading to this non-fulfilment of the LOA
commitments on the part of CIL. CCEA
has decided the following guidelines in
its meeting held on 06.02.2013 in
respect of generating plants
commissioned/to be commissioned
during the period 1.4.09 to 31.03.15:
i) CIL will provide imported coal on
cost plus basis to all producers
willing to take such cost;
ii) That the higher cost of imported
coal will be allowed as a pass
through.
3. In view of the circumstances stated
above CERC is requested to advice the
Government on the manner in which the
66
issue of fuel availability risk arising out
of CIL’s inability to meet its LOA
commitments could be addressed with
regard to power producers who have
already entered into long term PPAs with
distribution companies based on such
commitments and the feasibility of
passing on the additional cost of
procuring market fuel incurred by the
power developers on account of the
circumstances stated in the aforesaid
paras. CERC is also requested to suggest
appropriate ways for issuing advisory to
SERCs/State Governments which may
necessitated to be issued by MoP for the
implementation of the above.
4. CERC’s considered advice is
requested in this matter at the earliest.
5. This issues with the approval of
MOSP (I/C).”
65. Perusal of the communication dated 9th May 2013 would
clearly show that the NCDP 2007 mandates that CIL will meet
100% of normative requirement of power sector. It states that,
post NCDP 2007, MoC has granted linkages between 2008-2010
with the assumption that it would meet coal requirement at
around 85% of the PLF. On that basis, the LoAs were issued by
67
Coal Companies, after getting commitment guarantees in the
form of Bank Guarantees from the developers, thereby
undertaking an explicit obligation to supply coal to the extent of
the specified quantify to the power developer. It further states
that having obtained the LoA, the developers would have
proceeded on the assumption of getting the requisite quantity of
domestic coal with the disincentive trigger of 90% of LoA
quantity prevailing under the then FSA with a provision for CIL
resorting to import of coal to bridge the gap, if any. It
specifically mentions that the power producers would have
factored in this assurance regarding coal supply while
submitting their bids in response to Case-1 and Case-2
competitive bidding for long-term PPAs.
66. The said communication further records that it now
transpires that on account of the limited availability of coal,
MoC has indicated that CIL may not be in a position to supply
more than 60 to 65% of ACQ to those power producers who had
been earlier issued LoAs of normative quantities corresponding
68
to 85% of the PLF. It was proposed that the disincentive trigger
for coal supply would be brought down from 90% to 60 to 65%
by CIL in the new FSAs to be signed with these power
producers. It further states that in view of this scenario, PPAs
which are already concluded between the developers and the
DISCOMS as a result of competitive bidding in the last few
years based on domestic coal linkage (LoA) may have to use
imported coal to bridge the shortage of domestic coal in order to
fulfil their contractual obligations.
67. The communication further records that the CCEA has
also considered the situation arising out of the inadequate
availability of coal leading to the non-fulfilment of its LOA
commitments on the part of the CIL. The CCEA, therefore, in
its meeting held on 6th February 2013 has decided the following
guidelines in respect of generating plants commissioned/to be
commissioned during the period 1st April 2009 to 31st March
2015:
69
ii) That CIL will provide imported coal on cost plus basis
to all producers willing to take such cost;
iii) That the higher cost of imported coal will be allowed as
a pass-through.
68. The communication therefore requested the CERC to
advise the Government on the manner in which the issue of fuel
availability risk, arising out of CIL’s inability to meet its LOA
commitments, could be addressed. The CERC was also
requested to suggest appropriate ways for issuing advisories to
SERCs/State Governments by the MoP, which may be
necessitated for the implementation of the above.
69. In pursuance of the aforesaid Communication dated 9th
May 2013, the CERC issued Statutory Advice on 20th May 2013
under Section 79(2) of the Electricity Act regarding impact on
tariff of the concluded PPAs due to domestic coal availability. It
will be relevant to refer to the following part of the said
statutory advice.
70
“2. The matter was considered in the
Commission. The Commission appreciates
the need for securing fuel supply for various
projects in order to ensure optimum
generation from the power plants in the
country. Non-availability of adequate
quantum of coal has posed serious challenge
to power generation as reflected in the data
compiled by the Central Electricity Authority
(CEA): the Plant Load Factor (PLF) of the
generating stations across the country has
been severely affected for want of adequate
coal supply by CIL/Coal Companies.
3. The proposal to make CIL supply imported
coal on cost plus basis to all power projects
commissioned or to be commissioned during
the period 1.4.2009 to 31.3.2015 and willing
to take such coal would require appropriate
change in the NCDP, as at present it is the
full responsibility of CIL to meet full
requirement of coal under FSAs even by
resorting to import; if necessary. As a follow
up, the FSAs between the CIL/its
subsidiaries and the power producers will
have to be modified through Supplementary
Agreements.”
70. It can thus clearly be seen that the CERC has noted that
the non-availability of adequate quantum of coal has posed
serious challenge to power generation as reflected in the data
compiled by the Central Electricity Authority (CEA). It further
71
noted that the PLF of the generating stations across the country
has been severely affected for want of adequate coal supply by
CIL/Coal Companies. It further records that to give effect to the
proposal to make CIL supply imported coal on cost plus basis to
all power projects commissioned or to be commissioned during
the period from 1st April 2009 to 31st March 2015 and willing to
take such coal, would require appropriate change in the NCDP,
as at present it is the full responsibility of CIL to meet full
requirement of coal under FSAs even by resorting to import, if
necessary. It further states that as a follow up, the FSAs
between the CIL/its subsidiaries and the power producers will
have to be modified through Supplementary Agreements.
71. After referring to clause 10.1.1 of the Standard PPA for
Procurement of Power under Case-1 Bidding Procedure, which
deals with ‘Change in Law’, the statutory advice states thus:
“For claiming any benefits under change in
law, the Project Developer would have to
move the appropriate Commission and the
decision of that Commission in this regard
would be final, in terms of the provisions
72
of Articles 10.3.3 and 10.3.4 of the
Standard PPA. The appropriate
Commissions are expected to take
decisions on the merits of each case
including the claims of the Project
Developers for compensation on account of
imported coal after consultation with the
stakeholders.”
72. It can thus be seen that the CERC states that for claiming
any benefits under the Change in Law, the Project Developer
would have to move the appropriate Commission. It further
records that the appropriate Commissions are expected to take
decisions on the merits of each case including the claims of the
Project Developers for compensation on account of imported
coal after consultation with the stakeholders.
73. Subsequent to the aforesaid communication, the MoC
issued a Press Release on 21st June 2013. It will be relevant to
refer to the following part of the said Press Release.
“The Cabinet Committee on Economic
Affairs (CCEA) today approved the
following mechanism for supply of coal
to power producers:
73
(i) Coal India Ltd. (CIL) to sign Fuel
Supply Agreements (FSA) for a total
capacity of 78000 MW including cases of
tapering linkage, which are likely to be
commissioned by 31.03.2015. Actual
coal supplies would however commence
when long term Power Purchase
Agreements (PPAs) are tied up.
(ii) Taking into account the overall
domestic availability and actual
requirements, FSAs to be signed for
domestic coal quantity of 65 percent, 65
percent, 67 percent and 75 percent of
Annual Contracted Quantity (ACQ) for
the running four years of the 12th Five
Year Plan.
(iii) To meet its balance FSA obligations,
CIL may import coal and supply the
same to the willing Thermal Power
Plants (TPSs) on cost plus basis. TPPs
may also import coal themselves. MoC to
issue suitable instructions.
(iv) Higher cost of imported coal to be
considered for pass through as per
modalities suggested by CERC. MoC to
issue suitable orders supplementing the
New Coal Distribution Policy (NCDP).
MoP to issue appropriate advisory to
CERC/SERCs including modifications if
any in the bidding guidelines to enable
the appropriate Commissions to decide
74
the pass through of higher cost of
imported coal on case to case basis.”
74. It is thus clear that taking into account the overall
domestic availability and actual requirements, FSAs were to be
signed for domestic coal quantity of 65%, 65%, 67% and 75% of
ACQ for the running/remaining four years of the 12th Five Year
Plan. It can further be seen that the CCEA has also taken a
decision that CIL may import coal to meet its balance FSA
obligations and supply the same to the willing TPPs on cost plus
basis. TPPs may also be permitted to import coal themselves. It
further provided that the higher cost of imported coal was to be
considered for pass-through as per the modalities suggested by
the CERC.
75. In pursuance thereof, the Government of India, through
MoC, issued Office Memorandum dated 26th July 2013. The
said Office Memorandum reads thus:
“Sub: New Coal Distribution Policy -
further instructions regarding
implementation thereof.
75
The New Coal Distribution Policy
(NCDP) was issued vide this Ministry's
Office Memorandum NO. 23011/4/2007-
CPD dated 18.10.2007, laying down the
guidelines for distribution and pricing of
coal to various sectors. As per para 2.2 of
the said policy, Power Utilities including
Independent Power Producer were to be
supplied 100 per cent of the quantity as
per their normative requirement through
Fuel Supply Agreement(s) (FSAs) by Coal
India Limited (CIL) at fixed prices to be
declared/notified by CIL. As per para 5.2,
in order to meet the domestic requirement,
CIL was to import coal as required from
time to time, if feasible and adjust the
overall price accordingly.
2. Government has now approved a
revised arrangement for supply of coal to
the identified Thermal Power Stations
(TPPs) of 78,000 MW capacity
commissioned or likely to be
commissioned during the period from
01.04.2009 to 31.03.2015. Taking into
account the overall domestic availability
and the likely actual requirements of these
TPPs, it has been decided that FSAs will be
signed for the domestic coal quantity of
65%, 65%, 67% and 75% of ACQ for the
remaining four years of the 12th Plan for
the power plants having normal coal
linkages. Cases of tapering linkage would
get coal supplies as per the Tapering
76
Linkage Police. To meet its balance FSA
obligations towards the requirement of the
said 78,000 MW TPPs, CIL may import
coal and supply the same to the willing
power plants on cost plus basis. Power
plants may also directly import coal
themselves, if they so opt, in which case,
the FSA obligations on the part of CIL to
the extent of import component would be
deemed to have been discharged.
3. Para 2.2 and 5.2 of the New Coal
Distribution Policy issued vide OM No.
23011/4/2007-CPD dated 18.10.2007
stand modified to the above extent.
4. The above guidelines will also be
applicable to the distribution of coal from
Singreni Collieries Company Limited
(SCCL).
5. CIL and its subsidiaries and SCCL
are advised to take further action
accordingly.”
76. It can thus be seen that the NCDP 2013 also specifically
states that, as per NCDP 2007 and specifically paragraph 2.2
thereof, Power Utilities, including IPPs, were to be supplied
100% of the quantity as per their normative requirement
through FSAs by CIL at fixed prices to be declared/notified by
77
CIL. It further reiterates that, as per para 5.2, in order to meet
the domestic requirement, CIL was to import coal as required
from time to time, if feasible, and adjust the overall price
accordingly.
77. Para 2 of the NCDP 2013 states that the Government has
now approved a revised arrangement for supply of coal to the
identified TPPs of 78,000 MW capacity commissioned or likely
to be commissioned during the period from 1st April 2009 to 31st
March 2015. It states that, taking into account the overall
domestic availability and the likely actual requirements of these
TPPs, it was decided that FSAs will be signed for the domestic
coal quantity of 65%, 65%, 67% and 75% of ACQ for the
remaining four years of the 12th Plan for the power plants
having normal coal linkages. It further states that to meet the
balance FSA obligations towards the requirement of the said
78,000 MW TPPs, CIL may import coal and supply the same to
the willing power plants on cost plus basis. It further states
that the power plants may also directly import coal themselves,
78
if they so opt, in which case, the FSA obligations on the part of
CIL to the extent of import component would be deemed to have
been discharged.
78. Immediately thereafter, on 31st July 2013, the MoP
addressed a communication to the Secretary, CERC. It will be
relevant to refer to Para 2 of the said communication, which
reads thus:
“2. After considering all aspects and the
advice of CERC in this regard, Government
has decided the following in June, 2013:
i) taking into account the overall
domestic availability and actual
requirements, FSAs to be signed
for domestic coal component for
the levy of disincentive at the
quantity of 65%, 65%, 67% and
75% of Annual Contracted
Quantity (ACQ) for the
remaining four years of the 12th
Plan.
ii) to meet its balance FSA
obligations, CIL may import coal
and supply the same to the
willing TPPs on cost plus basis.
79
TPPs may also import coal
themselves if they so opt.
iii) higher cost of imported coal to
be considered for pass through
as per modalities suggested by
CERC.”
79. It can thus clearly be seen that the Government, after
considering all aspects and the advice of CERC in this regard,
decided that the higher cost of imported coal was to be
considered for pass-through as per modalities suggested by the
CERC.
80. It will also be relevant to refer to Para 4 of the said
communication, which reads thus:
“4. As per decision of the Government, the
higher cost of import/market based eauction coal be considered for being made a
pass through on a case to case basis by
CERC/SERC to the extent of shortfall in the
quantity indicated in the LoA/FSA and the
CIL supply of domestic coal which would be
minimum of 65%, 65%, 67% and 75% of LoA
for the remaining four years of the 12th Plan
for the already concluded PPAs based on
tariff based competitive bidding.”
80
81. Perusal of para 4 would clearly reveal that the higher cost
of import/market based e-auction coal was to be considered for
being made a pass-through on a case to case basis by
CERC/SERC to the extent of shortfall in the quantity indicated
in the LoA/FSA. It further reiterates that CIL may supply
domestic coal which would be minimum of 65%, 65%, 67% and
75% of LoA for the remaining four years of the 12th Plan for the
already concluded PPAs based on tariff based competitive
bidding.
82. The MoP thereafter vide Resolution dated 28th January
2016 notified the ‘Tariff Policy’. It will be relevant to refer to
clause 6.1 of the said Policy, which reads thus:
“6.0 GENERATION
………………
6.1 Procurement of power
As stipulated in para 5.1, power
procurement for future requirements
should be through a transparent
competitive bidding mechanism using the
guidelines issued by the Central
Government from time to time. These
guidelines provide for procurement of
81
electricity separately for base load
requirements and for peak load
requirements. This would facilitate setting
up of generation capacities specifically for
meeting such requirements.
However, some of the competitively bid
projects as per the guidelines dated 19th
January, 2005 have experienced
difficulties in getting the required quantity
of coal from Coal India Limited (CIL). In
case of reduced quantity of domestic coal
supplied by CIL, vis-a-vis the assured
quantity or quantity indicated in Letter of
Assurance/FSA the cost of
imported/market based e-auction coal
procured for making up the shortfall, shall
be considered for being made a pass
through by Appropriate Commission on a
case to case basis, as per advisory issued
by Ministry of Power vide OM No. FU12/2011-IPC (Voi-IJI) dated 31.7.2013.”
83. It is thus clear that the Tariff Policy dated 28th January
2016 provided that the power procurement for future
requirements should be through a transparent competitive
bidding mechanism using the guidelines issued by the Central
Government from time to time. It further provides the
guidelines for procurement of electricity separately for base load
82
requirements and for peak load requirements. It further notes
that some of the competitively bid projects as per the guidelines
dated 19th January, 2005 have experienced difficulties in getting
the required quantity of coal from CIL. It further provides that
in case of reduced quantity of domestic coal supplied by CIL visà-vis the assured quantity or quantity indicated in LoA/FSA,
the cost of imported/market based e-auction coal procured for
making up the shortfall shall be considered for being made a
pass-through by Appropriate Commission on a case to case
basis. This is in pursuance of the advisory issued by Ministry of
Power dated 31st July 2013.
JUDGMENTS CITED
84. Having considered these documents, we will now consider
the judgments which are relied on by both the parties.
85. In the case of Energy Watchdog (supra), after several
rounds of litigation, the learned APTEL held that generation and
sale of power by Adani Power to GUVNL and Haryana Utilities
was a composite scheme within the meaning of Section 79(1)(b)
83
of the Electricity Act and, therefore, the CERC would have
jurisdiction to proceed further in the matter. It further held
that force majeure was made out on the facts of the said cases
and reversed the CERC’s/Commission’s order on that score. It
also held that the Change in Law provisions do not apply to
foreign law and, therefore, changes in Indonesian law did not
come within the scope of the provisions. Insofar as changes in
Indian law were concerned, it held that the government policies
that were relied upon did not constitute “law”. The said
decision of the learned APTEL was assailed before this Court.
This Court while rejecting the argument on the ground of force
majeure observed thus:
“42. It is clear from the above that the
doctrine of frustration cannot apply to
these cases as the fundamental basis of
the PPAs remains unaltered. Nowhere do
the PPAs state that coal is to be procured
only from Indonesia at a particular price.
In fact, it is clear on a reading of the PPA
as a whole that the price payable for the
supply of coal is entirely for the person
who sets up the power plant to bear. The
fact that the fuel supply agreement has to
84
be appended to the PPA is only to indicate
that the raw material for the working of the
plant is there and is in order. It is clear
that an unexpected rise in the price of coal
will not absolve the generating companies
from performing their part of the contract
for the very good reason that when they
submitted their bids, this was a risk they
knowingly took. We are of the view that the
mere fact that the bid may be nonescalable does not mean that the
respondents are precluded from raising the
plea of frustration, if otherwise it is
available in law and can be pleaded by
them. But the fact that a non-escalable
tariff has been paid for, for example, in the
Adani case, is a factor which may be taken
into account only to show that the risk of
supplying electricity at the tariff indicated
was upon the generating company.”
86. This Court, thereafter, considered as to whether any
Change in Law could be stretched to mean “all laws”. This
Court held that Clause 4.7 read with Clause 5.17 of the
Guidelines would reveal that it would not include changes in
Indonesian law, being foreign and not Indian law.
87. In Energy Watchdog (supra), this Court also had an
occasion to consider the MoP communication dated 31st July
85
2013, the relevant part of which has already been reproduced
by us herein above. This Court observed thus:
“56. However, insofar as the applicability of
Clause 13 to a change in Indian law is
concerned, the respondents are on firm
ground. It will be seen that under Clause
13.1.1 if there is a change in any consent,
approval or licence available or obtained for
the project, otherwise than for the default of
the seller, which results in any change in any
cost of the business of selling electricity, then
the said seller will be governed under Clause
13.1.1. It is clear from a reading of the
Resolution dated 21-6-2013, which resulted
in the letter of 31-7-2013, issued by the
Ministry of Power, that the earlier coal
distribution policy contained in the letter
dated 18-3-2007 stands modified as the
Government has now approved a revised
arrangement for supply of coal. It has been
decided that, seeing the overall domestic
availability and the likely requirement of
power projects, the power projects will only
be entitled to a certain percentage of what
was earlier allowable. This being the case, on
31-7-2013…..”
88. This Court, thereafter, referred to the Tariff Policy dated
28th January 2016, the relevant part of which has already been
reproduced by us herein above. This Court observed thus:
86
“57. Both the letter dated 31-7-2013 and the
revised Tariff Policy are statutory documents
being issued under Section 3 of the Act and
have the force of law. This being so, it is clear
that so far as the procurement of Indian coal
is concerned, to the extent that the supply
from Coal India and other Indian sources is
cut down, the PPA read with these
documents provides in Clause 13.2 that while
determining the consequences of change in
law, parties shall have due regard to the
principle that the purpose of compensating
the party affected by such change in law is to
restore, through monthly tariff payments, the
affected party to the economic position as if
such change in law has not occurred.
Further, for the operation period of the PPA,
compensation for any increase/decrease in
cost to the seller shall be determined and be
effective from such date as decided by the
Central Electricity Regulation Commission.
This being the case, we are of the view that
though change in Indonesian law would not
qualify as a change in law under the
guidelines read with the PPA, change in
Indian law certainly would.”
89. It can thus clearly be seen that insofar as the arguments
with regard to effect of the Change in Law being given on the
basis of ACQ is concerned, the same stands specifically
rejected.
87
90. A bench of three learned Judges of this Court in Adani
Rajasthan case (supra) also had an occasion to consider a
similar issue. An argument which is sought to be advanced
before us that the Change in Law claim may be confined only to
35 to 40% was also advanced in the said case. Rejecting the
said contention, this Court observed thus:
“50. Shri C. Aryama Sundaram argued that
the FSA related approximately 61 per cent
of the fuel requirement. Thus, the change in
law claim may be confined to 35 to 40 per
cent. The argument cannot be accepted as
bidding was not based on dual fuel, but was
evaluated on domestic coal. There was no
such stipulation that evaluation of bidding
was done on domestic basis; the tariff was
to be worked out in the aforesaid ratio of
60 : 40 per cent of imported coal and
domestic coal respectively. Apart from that,
we find from the order of the APTEL, that
change in law provision would be limited to
a shortfall in the supply of domestic linkage
coal......
51. It was clarified that APRL would be
entitled to relief under the change in law
provision to the extent of shortage in supply
in domestic linkage coal. Thus, we find no
merit in the submission raised. We find the
88
findings of the APTEL to be reasonable,
proper, and unexceptional.”
91. In the said case (i.e. Adani Rajasthan case) also, the
provision with regard to the Change in Law was similar to the
one that falls for consideration in the present case. This Court
observed thus:
 “59. The change in policy and in the terms
and conditions prescribed for obtaining any
consents, clearances and permits or the
inclusion of any new terms or conditions for
obtaining such consents, clearances, and
permits are also included. The submission
raised on behalf of appellant that there is no
question seeking benefit due to change in
foreign law is based on wrong factual
premise. The relief was not claimed on the
basis of change in foreign law. Apart from
that, admission has been relied upon
change in law. The PPA was based on the
domestic law and there was a change in
domestic law. Thus, consequences must
follow. The Government of Rajasthan
entered into a MoU with APRL with respect
to coal linkage in 2008 to provide coal
linkage or coal from other sources.
89
60. We find similarity in the present case as
well as the Energy Watchdog. The factual
matrix was similar with the present case.
We find that the RERC and the APTEL have
recorded the concurrent finding on facts. We
find no ground to interfere. No substantial
question of law is involved. It was held
in Energy Watchdog, that change in law was
brought about in the NCDP of 2007 by the
decision of 26.7.2013. It is provided in
Article 10.2.1 how the change in law is to be
applied to compensate for the impact.”
92. In the case of Uttar Haryana Bijli Vitran Nigam Limited
(UHBVNL) (supra), this Court observed thus:
“13. A reading of Article 13 as a whole,
therefore, leads to the position that
subject to restitutionary principles
contained in Article 13.2, the adjustment
in monthly tariff payment, in the facts of
the present case, has to be from the date
of the withdrawal of exemption which was
done by administrative orders dated 6-4-
2015 and 16-2-2016. The present case,
therefore, falls within Article 13.4.1(i).
This being the case, it is clear that the
adjustment in monthly tariff payment has
to be effected from the date on which the
exemptions given were withdrawn. This
being the case, monthly invoices to be
90
raised by the seller after such change in
tariff are to appropriately reflect the
changed tariff. On the facts of the present
case, it is clear that the respondents were
entitled to adjustment in their monthly
tariff payment from the date on which the
exemption notifications became effective.
This being the case, the restitutionary
principle contained in Article 13.2 would
kick in for the simple reason that it is
only after the order dated 4-5-2017
[Adani Power Ltd. v. Uttar Haryana Bijli
Vitran Nigam Ltd., 2017 SCC OnLine
CERC 66] that CERC held that the
respondents were entitled to claim added
costs on account of change in law w.e.f.
1-4-2015. This being the case, it would
be fallacious to say that the respondents
would be claiming this restitutionary
amount on some general principle of
equity outside the PPA. Since it is clear
that this amount of carrying cost is only
relatable to Article 13 of the PPA, we find
no reason to interfere with the judgment
of the Appellate Tribunal.
93. This Court specifically rejected the contention of the
DISCOMS that the Generator was claiming the restitutionary
amount on some general principle of equity outside the PPA.
This Court held that the amount of carrying cost was relatable
to Article 13 of the PPA.
91
STATUTORY PROVISIONS WITH REGARD TO REGULATORY
MECHANISM
94. We will now consider the relevant provisions of the
Electricity Act.
95. Section 70 of the Electricity Act deals with constitution of
the Central Electricity Authority (“CEA”). The CEA shall consist
of not more than 14 Members (including its Chairperson) of
whom not more than 8 are required to be full-time Members to
be appointed by the Central Government. It will be relevant to
refer to sub-section (5) of Section 70 of the Electricity Act,
which reads thus:
“(5) The Members of the Authority shall
be appointed from amongst persons of
ability, integrity and standing who have
knowledge of, and adequate experience
and capacity in, dealing with problems
relating to engineering, finance,
commerce, economics or industrial
matters, and at least one Member shall
be appointed from each of the following
categories, namely:—
(a) engineering with specialisation in
design, construction, operation
92
and maintenance of generating
stations;
(b) engineering with specialisation in
transmission and supply of
electricity;
(c) applied research in the field of
electricity;
(d) applied economics, accounting,
commerce or finance.”
96. It can thus clearly be seen that the Members of the CEA
are required to be persons who have adequate experience and
capacity in dealing with problems relating to engineering,
finance, commerce, economics or industrial matters. Four of the
Members are required to be from the categories as mentioned in
clauses (a) to (d). One of them has to be an engineer with
specialization in design, construction, operation and
maintenance of generating stations. One of them has to be an
engineer with specialization in transmission and supply of
electricity; one has to be a person who is expert in applied
research in the field of electricity; one of them has to be an
expert in applied economics, accounting, commerce or finance.
93
97. Section 73 of the Electricity Act deals with functions and
duties of the CEA. The CEA is required to advise the Central
Government on various matters with regard to generation,
transmission, trading, distribution and utilization of electricity.
It is also required to advise the Central Government on any
matter on which its advice is sought or make recommendation
to that Government on any matter if, in the opinion of the CEA,
the recommendation would help in improving the generation,
transmission, trading, distribution and utilization of electricity.
98. Section 76 of the Electricity Act provides for constitution of
the CERC. The CERC is a five member body which consists of a
Chairperson and three other Members, and the Chairperson of
the CEA who shall be the ex officio Member. A high-level
Selection Committee consisting of 6 high officials selects the
Members of the CERC and the learned APTEL.
99. Section 77 of the Electricity Act provides for qualifications
for appointment of Members of the CERC. Sub-section (1) of
Section 77 provides that Chairperson and the Members of the
94
CERC shall be persons having adequate knowledge of, or
experience in, or shown capacity in, dealing with, problems
relating to engineering, law, economics, commerce, finance or
management. It further requires that one person to be
appointed must be having qualifications and experience in the
field of engineering with specialization in generation,
transmission or distribution of electricity. One person to be
appointed has the qualifications and experience in the field of
finance. Clause (c) of sub-section (1) of Section 77 of the
Electricity Act requires that two persons are required to have
qualifications and experience in the field of economics,
commerce, law or management. The proviso to sub-section (1)
of the Section 77 of the Electricity Act provides that not more
than one Member shall be appointed under the same category
under clause (c).
100. Sub-section (2) of Section 77 of the Electricity Act, which
is a non-obstante clause, empowers the Central Government to
appoint any person as the Chairperson from amongst persons
95
who is, or has been, a Judge of the Supreme Court or the Chief
Justice of a High Court notwithstanding anything contained in
sub-section (1). However, such appointment cannot be made
except after consultation with the Chief Justice of India.
101. Section 79 of the Electricity Act deals with the functions of
the CERC. One of the functions of the CERC under clause (a) of
sub-section (1) of Section 79 is to regulate the tariff of
generating companies owned or controlled by the Central
Government. Clause (b) requires it to regulate the tariff of
generating companies other than those owned or controlled by
the Central Government specified in clause (a), if such
generating companies enter into or otherwise have a composite
scheme for generation and sale of electricity in more than one
State.
102. Similarly, Section 82 of the Electricity Act deals with
constitution of a State Commission. Section 83 of the
Electricity Act permits a Joint Commission to be constituted by
an agreement between two or more Governments of States. It
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also permits the Central Government to constitute a Joint
Commission in respect of one or more Union Territories, and
one or more Governments of States. Under Section 84, the
persons to be appointed as the Chairperson and the Members of
the State Commission are required to have adequate knowledge
of, and have shown capacity in, dealing with problems relating
to engineering, finance, commerce, economics, law or
management. Sub-section (2) of Section 84 of the Electricity
Act permits the State Government to appoint any person as the
Chairperson from amongst persons who is, or has been, a
Judge of a High Court. However, such an appointment can be
made only after consultation with the Chief Justice of that High
Court. A high-level Selection Committee under the
Chairmanship of a person who has been a Judge of the High
Court, the Chief Secretary of the concerned State and the
Chairperson of the CEA or the Chairperson of the CERC selects
the Chairperson and the Members of the State Commission.
Analogous to Section 79, Section 86 of the Electricity Act
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defines the functions of the State Commission. Clause (b) of
sub-section (1) of Section 86 of the Electricity Act requires the
State Commission to regulate electricity purchase and
procurement process of distribution licensees including the
price at which electricity shall be procured from the generating
companies or licensees or from other sources through
agreements for purchase of power for distribution and supply
within the State.
103. Section 110 of the Electricity Act provides for
establishment of the Appellate Tribunal. Section 111 of the
Electricity Act provides for appeal to Appellate Tribunal by any
person aggrieved by an order made by an adjudicating officer
under the said Act (except under Section 127) or an order made
by the Appropriate Commission. Section 112 deals with
composition of the Appellate Tribunal. It provides that it shall
consist of a Chairperson and three other Members. Section 113
provides for qualifications for appointment of Chairperson and
Members of Appellate Tribunal. Only a person who is, or has
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been a Judge of the Supreme Court or the Chief Justice of a
High Court is entitled to be the Chairperson of the Appellate
Tribunal. For being a Member of the Appellate Tribunal,
following three categories have been provided for:
(i) A person is, or has been, or is qualified to be, a Judge of
a High Court; or
(ii) A person is, or has been, a Secretary for at least one
year in the Ministry or Department of the Central
Government dealing with economic affairs or matters or
infrastructure; or
(iii) A person is, or has been, a person of ability and
standing, having adequate knowledge or experience in
dealing with the matters relating to electricity
generation, transmission and distribution and
regulation or economics, commerce, law or
management.
104. It can thus be seen that the CEA, CERC and learned
APTEL are bodies consisting of experts in the field.
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CONSIDERATIONS
105. The issues with regard to SHR and GCV have been
considered by the CERC in its order dated 15th November 2018
in the case of GMR Warora Energy Limited v. Maharashtra
State Electricity Distribution Company Limited & Anr8
. It
will be relevant to reproduce the relevant part of the CERC’s
order dated 15th November 2018, which reads thus:
“29. The submissions regarding SHR and
GCV have been considered. The APTEL in its
judgement dated 12.9.2014 in Appeal No.
288 of 2013 (M/s Wardha Power Company
Limited V Reliance Infrastructure Limited &
anr) has ruled that compensation under
Change in Law cannot be correlated with the
price of coal computed from the energy
charge and the technical parameters like the
Heat Rate and gross GCV of coal given in the
bid documents for establishing the coal
requirement. The relevant observations of
APTEL are extracted as under:
“26. The price bid given by the
Seller for fixed and variable charges
both escalable and non-escalable is
based on the Appellant’s perception
of risks and estimates of
expenditure at the time of
8 Petition No.88/MP/2018
100
submitting the bid. The energy
charge as quoted in the bid may
not match with the actual energy
charge corresponding to the actual
landed price of fuel. The seller in its
bid has also not quoted the price of
coal. Therefore, it is not correct to
co-relate the compensation on
account of Change in Law due to
change in cess/excise duty on coal,
to the coal price computed from the
quoted energy charges in the
Financial bid and the heat rate and
Gross Calorific value of Coal given
in the bidding documents by the
bidder for the purpose of
establishing the coal requirement.
The coal price so calculated will not
be equal to the actual price of coal
and therefore, compensation for
Change in Law computed on such
price of coal will not restore the
economic position of the Seller to
the same level as if such Change in
Law has not occurred.”
30. In the light of the above observations, the
technical parameters such as Heat Rate and
GCV of coal as per the bidding document
cannot be considered for deciding the coal
requirement for the purpose of calculating
the relief under Change in law. Therefore,
the submissions of the Respondent,
MSEDCL to consider the bid parameters are
not acceptable. The Respondent has also
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relied on MERC order with regard to GCV. As
regards SHR, it was also suggested by MERC
that net SHR as submitted in the bid or SHR
norms specified for new thermal stations as
per MYT Regulations, whichever is superior,
shall be applicable. In our view, the decision
in the said order has been given in the facts
of the case and does not have any binding
effect in case of the projects regulated by this
Commission. Moreover, the SHR given in the
bid are under test conditions and may vary
from actual SHR. The Commission after
extensive stakeholders‟ consultation has
specified the SHR norms in the 2014 Tariff
Regulations. Therefore, it would be
appropriate to take SHR specified in the
Regulations as a reference point instead of
other parameters as suggested by MSEDCL.
31. In the present case, the Petitioner has
considered SHR of 2355 kcal/Kwh whereas,
the Respondent MSEDCL has considered the
Design Heat Rate of 2211 kcal/kWh as
submitted in the RFP. It is pertinent to
mention that the CERC norms applicable for
the period 2009-14 and 2014-19 do not
provide the norms for 300 MW units, but
provide for a degradation factor of 6.5% and
4.5% respectively towards Heat Rate over
and above the Design Heat Rate. As the
Design Heat Rate is 2211 kcal/kWh, the
gross Heat Rate works out to 2355 kcal/kWh
(2211 x 1.065)and 2310 kcal/kWh (2211 x
1.045) for the period 2009- 14 and 2014-19
respectively. Accordingly, we direct that the
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SHR of 2355 kcal/kWh during the period
2009-14 and 2310 kcal/kwh during the
period 2014- 19 or the actual SHR whichever
is lower, shall be considered for calculating
the coal consumption for the purpose of
compensation under change in law. The
Petitioner and the Respondent MSEDCL are
directed to carry out reconciliation on
account of these claims annually.
32. In case of GCV, the Respondent has
submitted that it should be mid value of
GCV band which should be applied on GCV
measured on ‘as billed’ basis. In our view, on
account of the grade slippage of the coal
supplied by CIL, it would not be appropriate
to consider GCV on ‘as billed’ basis. In the
2014 Tariff Regulations of the Commission,
the measurement of GCV has been specified
as on ‘as received’ basis. Therefore, it will be
appropriate if the GCV on ‘as received’ basis
is considered for computation of
compensation for Change in law.”
106. The CERC has referred to the judgment of the learned
APTEL dated 12th September 2014 in Appeal No. 288 of 2013 in
the case of M/s Wardha Power Company Limited v. Reliance
Infrastructure Limited & anr. wherein the learned APTEL has
held that it is not correct to co-relate the compensation on
account of Change in Law due to change in cess/excise duty on
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coal to the coal price computed from the quoted energy charges
in the financial bid and the heat rate and GCV of coal given in
the bidding documents by the bidder for the purpose of
establishing the coal requirement. The learned APTEL has held
that the coal price so calculated will not be equal to the actual
price of coal and therefore, compensation for Change in Law
computed on such price of coal will not restore the economic
position of the seller to the same level as if such Change in Law
had not occurred.
107. The CERC has further found that the SHR given in the bid
are under test conditions and may vary from actual SHR. The
CERC has specifically observed that after extensive
stakeholders’ consultation, the CERC has specified the SHR
norms in the 2014 Tariff Regulations. It, therefore, found that
it will be appropriate to take SHR specified in the Regulations
as a reference point instead of other parameters as suggested
by MSEDCL.
104
108. The CERC further found that the CERC norms applicable
to the period 2009-14 and 2014-19 do not provide the norms
for 300 MW units, but provide for a degradation factor of 6.5%
and 4.5% respectively towards Heat Rate over and above the
Design Heat Rate. The CERC found that since the Design Heat
Rate was 2211 kcal/kWh, the gross Heat Rate worked out to
2355 kcal/kWh (2211 x 1.065) and 2310 kcal/kWh (2211 x
1.045) for the period 2009-14 and 2014-19 respectively. The
CERC, therefore, directed that the SHR of 2355 kcal/kWh
during the period 2009-14 and 2310 kcal/kwh during the
period 2014-19 or the actual SHR, whichever is lower, shall be
considered for calculating the coal consumption for the purpose
of compensation under the Change in Law.
109. These findings of the CERC are affirmed by the learned
APTEL in its Judgment dated 16th July 2021. The learned
APTEL observed thus:
“8.8 We are in agreement with the
observations made by the CERC.
Relegating the Appellant to the
105
contractual remedy under the FSA when
the genesis of the Appellant’s claim is
Change in Law under the PPA would not
be appropriate. It is, however, made
clear that if the Appellant were to receive
any disincentive or compensation from
the coal company on account of short
supply or grade slippage, such
compensation will be adjusted/credited
against the Change in Law compensation
payable by the Respondent, MSEDCL.”
110. The learned APTEL in its judgment dated 14th September
2020 in Appeal No.182 of 2019 in the case of Adani Power
Maharashtra Limited (APML) v. Maharashtra State
Electricity Distribution Company Ltd. (impugned in Civil
Appeal No. 684 of 2021) has referred to the order of MERC
dated 7th March 2018 in Case No.123 of 2017 (JSW Energy
Ltd. v. MSEDCL), wherein it held that Auxiliary Consumption
has to be considered as lower of actual or MYT norms for the
purpose of the Change in Law compensation. The learned
APTEL held that in view of its earlier order, the State
Commission, being MERC, ought to have followed the same
approach for SHR in the present case also. It has been found
106
that there is no reason for the MERC to apply two different
principles for Auxiliary Consumption and SHR, when both are
operational parameters and the Commission was dealing with
the same PPA in both cases.
111. The learned APTEL has also referred to the following
observations of the CERC in its order dated 16th May 2019 in
the case of GMR Warora Energy Limited v. MSEDCL and
Anr. (Petition No.284/MP/2018):
“52. It is pertinent to mention that
similar submissions of the
Respondent, MSEDCL were
considered by the Commission
in Petition No.88/MP/2018
and it was observed by order
dated 15.11.2018 that SHR
given in the bid is under test
conditions and may vary from
actual SHR. Therefore, it
would only be correct to
take SHR specified in the
tariff Regulations as a
reference point instead of
other parameters suggested
by MSEDCL. It was also held
that SHR as a bidding
document cannot be
considered for deciding the
107
coal requirement for the
purpose of calculating relief
under change in law…”
[emphasis supplied]
112. The learned APTEL thereafter held that the SHR submitted
in the bid was not a bid parameter as per the bidding
guidelines. It concurred with the findings of the CERC that the
SHR specified in the Tariff Regulations was as a reference point.
It held that it cannot be used as the basis for computing the
coal shortfall requirement and, thereby, for computation of
Change in Law compensation to be awarded to the generating
company. It held that such linking of Change in Law
compensation to the SHR mentioned in the bid documents
would not restitute the affected party to the same economic
position as if the approved Change in Law event had not
occurred.
113. Insofar as the GCV is concerned, the CERC in the case of
GMR Warora Energy Limited (supra) has specifically rejected
the contention of the MSEDCL that the GCV should be taken at
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the mid value of GCV band which should be applied on GCV
measured on ‘as billed’ basis. The CERC held that, on account
of the grade slippage of the coal supplied by CIL, it would not be
appropriate to consider GCV on ‘as billed’ basis. It has been
held that in the 2014 Tariff Regulations of the Commission, the
measurement of GCV has been specified as on ‘as received’
basis. Therefore, it will be appropriate if the GCV on ‘as
received’ basis is considered for computation of compensation
for the Change in Law. This finding of the CERC is affirmed by
the learned APTEL.
114. The learned APTEL in the case of Adani Power
Maharashtra Limited (APML) (supra) has also considered the
issue as to whether the reference GCV of domestic coal supplied
by CIL for computing the Change in Law compensation should
be “the middle value of GCV range of assured coal grade in
LoA/FSA/MoU”. The learned APTEL observed that it was a fact
that there is no guidance in the PPAs or in the bidding
Guidelines as to the reference GCV that should be applied in
109
case of the Change in Law claims in Case 1 bid projects where
SHR or GCV is not a bid parameter. It, however, held that the
overarching principle for Change in Law compensation was that
the generating company should not be left with in a worse
economic position. It held that the GCV ‘as received’ should be
the appropriate basis to assess the quantum of shortfall in
domestic coal and calculate the Change in Law compensation
accordingly.
115. It is also relevant to note that the Comptroller and Auditor
General of India (“C&AG” for short), in its Performance Audit
Report on “Fuel Management of Coal Based Power Stations of
NTPC Limited” submitted to MoP, had observed that the ‘quality
assessment of coal has inherent as well as manmade infirmities
due to heterogeneous nature of coal and sampling errors’. The
C&AG, therefore, recommended to the MoP that there was a
need to appropriately review the methods for energy pricing and
had requested the MoP to coordinate with CERC in light of the
audit findings. The MoP, therefore, addressed a communication
110
dated 28th June 2017 to the CEA. In the said communication,
the MoP had stated that the NTPC has highlighted the issues of
sampling error on account of change of point of sampling for
measurement of GCV from “as fired” to “as received” basis as
per the 2014 Tariff Regulations, non-homogeneous nature of
samples taken from the wagons, loss of GCV from point of “as
received” to the point of “as fired”, and difficulty with coal
sampling through ‘Augurs’. It further states that the MoP had
also sought views of the CERC on the said issue. The CERC
had, therefore, requested the MoP for consulting CEA in this
regard and accordingly the matter was referred to CEA.
116. The CEA in its communication dated 17th October 2017
stated thus:
“The issue has been examined in CEA. After
preliminary discussions with NTPC on the
issue on 05.09.2017, CEA has also taken
views of other specialist agencies in the field
of coal such as CIMFR and CPRI in the
meeting held on 21.09.2017.
It is acknowledged that there is a loss of
GCV from point of “as received” to the point
111
of “as fired” inside a power plant mainly due
to following factors:
(i) Effect of Moisture in GCV of
coal sample taken from Wagon
Top
As stated by C&AG, there are
sampling errors on account of
heterogeneous nature of coal.
This issue was deliberated in
detail with CIMFR and CPRI. Both
CIMFR and CPRI acknowledged
the difference in wagon topbottom GCV due to heterogeneous
nature of coal, tendency of
moisture to settle at the bottom
and exposure of top layer to
atmosphere.
CEA is of the view that GCV
measurement of wagon top coal
will give comparatively higher GCV
value due to steeling of moisture
at the bottom of the wagon and
loss of moisture from wagon top
during transportation of coal,
however, loss in GCV will vary as
per seasonal variations.
(ii) Loss in GCV during coal storage
inside power plant
CEA is of the view and also
substantiated by many national
112
and international papers that
there is a loss of GCV in the coal
stock where coal is stored inside
the power plant, mainly due to
oxidation and weathering effect.
Further, most of the losses in GCV
during long storage of coal takes
place in the initial period of
storage, mostly due to loss in
volatile content.
(iii) Reduction in GCV during
handling inside power plant
C&AG in its Performance Audit
Report has observed that GCV of
coal progressively decreased from
‘as billed’ stage to ‘as fired’ stage.
It is acknowledged that there are
minor unavoidable losses inside
the power plant in handling the
coal starting from unloading point
to the point of bunkering. Loss in
GCV may occur mainly due to
dust suppression measures used
around coal conveyors and
transfer points, loss in volatile
matter during crushing of the coal
etc.
CEA has also examined the views taken by
various state regulators for considering such
loss for the purpose of tariff allowed to
generators. However, as the margin would
113
vary from plant to plant, season to season
and varying coal characteristics, CEA is of
the opinion that a margin of 85-100 kcal/kg
for a non-pit head station may be considered
as a loss of GCV measured at wagon top till
the point of firing of coal in boiler.”
117. Vide Corrigendum dated 18th October 2017, in the last
sentence, after the words wagon top, the words “at unloading
point” were added.
118. The aforesaid advice was given by the CEA after holding
meeting on 21st September 2017 with specialist agencies in the
field of coal such as CIMFR and CPRI. It has also examined the
views taken by various state regulators for considering such
loss for the purpose of tariff allowed to generators. While
considering at what point of time the margin may be considered
as a loss of GCV, the CEA considered the views of all the
stakeholders. It, thereafter, opined that the loss of GCV should
be measured at wagon top till the point of firing of coal in boiler.
119. As already discussed herein above, the CEA is an
independent body having Members who are experts in various
114
fields related to electricity generation, transmission, finance,
etc.
120. It could thus be seen that two expert bodies i.e. the CERC
and the learned APTEL have concurrently held, after examining
the material on record, that the factors of SHR and GCV should
be considered as per the Regulations or actuals, whichever is
lower. The CERC as well as the State Regulatory bodies, after
extensive consultation with the stakeholders, had specified the
SHR norms in respective Tariff Regulations. In addition, insofar
as GCV is concerned, the CEA has opined that the margin of
85-100 kcal/kg for a non-pit head station may be considered as
a loss of GCV measured at wagon top till the point of firing of
coal in boiler.
121. In this respect, we may refer to the following observations
of this Court in the case of Reliance Infrastructure Limited v.
State of Maharashtra and others9
.
“38. MERC is an expert body which is
entrusted with the duty and function to
9 (2019) 3 SCC 352
115
frame regulations, including the terms and
conditions for the determination of tariff.
The Court, while exercising its power of
judicial review, can step in where a case of
manifest unreasonableness or
arbitrariness is made out. Similarly, where
the delegate of the legislature has failed to
follow statutory procedures or to take into
account factors which it is mandated by
the statute to consider or has founded its
determination of tariffs on extraneous
considerations, the Court in the exercise of
its power of judicial review will ensure that
the statute is not breached. However, it is
no part of the function of the Court to
substitute its own determination for a
determination which was made by an
expert body after due consideration of
material circumstances.
39. In Assn. of Industrial Electricity
Users v. State of A.P. [Assn. of Industrial
Electricity Users v. State of A.P., (2002) 3
SCC 711] a three-Judge Bench of this
Court dealt with the fixation of tariffs and
held thus : (SCC p. 717, para 11)
“11. We also agree with the High
Court [S. Bharat Kumar v. State of A.P.,
2000 SCC OnLine AP 565 : (2000) 6
ALD 217] that the judicial review in a
matter with regard to fixation of tariff
has not to be as that of an appellate
authority in exercise of its jurisdiction
116
under Article 226 of the Constitution.
All that the High Court has to be
satisfied with is that the Commission
has followed the proper procedure and
unless it can be demonstrated that its
decision is on the face of it arbitrary or
illegal or contrary to the Act, the court
will not interfere. Fixing a tariff and
providing for cross-subsidy is essentially
a matter of policy and normally a court
would refrain from interfering with a
policy decision unless the power
exercised is arbitrary or ex facie bad in
law.”
122. As already discussed herein above, various expert bodies
including the CERC and the learned APTEL, after taking into
consideration various relevant factors, have decided the issue
with regard to SHR and GCV. Not only that, but another
expert body i.e. CEA has also advised that GCV value has to be
taken not only on ‘as received’ but on ‘as fired’ basis.
123. Recently, the Constitution Bench of this Court in the case
of Vivek Narayan Sharma v. Union of India10 has held that
the Courts should be slow in interfering with the decisions
10 2023 SCC OnLine SC 1
117
taken by the experts in the field and unless it is found that the
expert bodies have failed to take into consideration the
mandatory statutory provisions or the decisions taken are
based on extraneous considerations or they are ex facie
arbitrary and illegal, it will not be appropriate for this Court to
substitute its views with that of the expert bodies.
124. That leaves us with the third issue as to whether the
MERC was correct in holding that, for the purpose of Change in
Law compensation, shortfall in domestic linkage coal shall be
assessed by considering the coal supply as the maximum of (1)
actual quantum of coal offered for offtake by CIL under the
LoA/FSA and (2) the minimum assured quantum in NCDP 2013
for the respective year.
125. Undisputedly, vide the NCDP 2007, insofar as the power
utilities including IPPs/CPPs and Fertilizer Sector are
concerned, the MoC had assured 100% of the quantity as per
the normative requirement of the consumers for supply of coal,
through FSA by CIL at fixed prices to be declared/notified by
118
CIL. The units/power plants, which were yet to be
commissioned but whose coal requirements has already been
assessed and accepted by the MoC and linkage/LoA approved
as well as future commitments, were also to be covered by the
said Policy. Para 5.2 of the NCDP 2007 also provided that in
order to meet the domestic requirement of coal, CIL may have to
import coal as may be required from time to time, if feasible.
The CIL was to adjust its overall price accordingly. There was
an unequivocal assurance given that it will be the responsibility
of CIL/Coal Companies to meet full requirement of coal under
FSAs even by resorting to imports, if necessary.
126. However, in 2013, on account of the limited availability of
coal, the MoC had indicated that CIL may not be in a position to
supply more than 60 to 65% of ACQ. The Union of India,
therefore, realised that PPAs which are already concluded
between the developers and the DISCOMS as a result of
competitive bidding in the last few years based on domestic coal
linkage (LoA) may have to use imported coal to bridge the
119
shortage of domestic coal in order to fulfill their contractual
obligations.
127. The CCEA considered the issue and decided that the
higher cost of imported coal will be allowed as a pass-through.
This is evident from the communication dated 9th May 2013
addressed by the MoP to the CERC.
128. The CERC also considered the issue. It noted that it was
the full responsibility of CIL to meet full requirement of coal
under FSAs even by resorting to import, if necessary. After
referring to the Change in Law clause, the CERC, in its advice
dated 20th May 2013, stated that for claiming any benefit under
Change in Law, the Project Developer would have to move the
appropriate Commission and the appropriate Commissions are
expected to take decisions on the merits of each case including
the claims of the Project Developers for compensation on
account of imported coal. Such decisions were required to be
taken after consultation with the stakeholders.
120
129. The Government of India through MoP, in its Press Note
dated 21st June 2013, published the decision of the CCEA
which clearly provided that the higher cost of imported coal was
to be considered for pass-through as per the modalities
suggested by CERC.
130. The MoP, thereafter, addressed a communication dated
31st July 2013 to the Secretary, CERC specifically pointing out
the decision of the CCEA to the effect that the higher cost of
imported coal was to be considered for pass-through as per the
modalities suggested by CERC. The communication states that,
as per the decision of the Government, the higher cost of
import/market based e-auction coal will have to be considered
for being made a pass-through on a case to case basis by
CERC/SERC to the extent of shortfall in the quantity indicated
in the LoA/FSA.
131. The Tariff Policy dated 28th January 2016 issued by the
MoP in paragraph 6.1 also specifically notes this position and
states that, in case of reduced quantity of domestic coal
121
supplied by CIL vis-à-vis the assured quantity or quantity
indicated in LoA/FSA, the cost of imported/market based eauction coal procured for making up the shortfall shall be
considered for being made a pass-through by the Appropriate
Commission.
132. Undisputedly, in the case of Energy Watchdog (supra) as
well as in Adani Rajasthan case (supra) this Court has held
that on account of the Change in Law, the generating
companies were entitled to compensation so as to restore the
party to the same economic position as if such Change in Law
had not occurred. Had the Change in Law not occurred, the
generating companies would have been entitled to the supply as
assured by the CIL/Coal Companies under the FSA.
133. It is contended by the DISCOMS that in the case of
Energy Watchdog (supra), this Court has specifically held that
the doctrine of force majeure was not applicable if there was an
unexpected rise in the price of coal and, as such, it will not
absolve the generating companies from performing their part of
122
the contract. It is submitted that when the bidders submitted
their bids, this was a risk they knowingly took. We find the
said submission to be without substance. The generators are
not claiming compensation on the basis of rise in price of coal
or on the ground of force majeure. Their claims, in fact, are on
the basis of the Change in Law, which this Court, in the case of
Energy Watchdog (supra) as well as in Adani Rajasthan case
(supra), has upheld on the ground of Change in Law.
134. The contention of the DISCOMS that the Adani
Rajasthan case (supra) is not applicable to the facts of the
present case inasmuch as in Adani Rajasthan case (supra),
the State of Rajasthan had assured 100% coal supply and that
it was not a case of FSA, is, in our considered view, without
substance. In the present case also, the NCDP 2007 had
assured 100% fuel/coal supply of the normative value.
135. The restitutionary principle has been stated by this Court
in the case of Uttar Haryana Bijli Vitran Nigam Limited
(UHBVNL) (supra) thus:
123
“10. Article 13.2 is an in-built
restitutionary principle which
compensates the party affected by such
change in law and which must restore,
through monthly tariff payments, the
affected party to the same economic
position as if such change in law has not
occurred. This would mean that by this
clause a fiction is created, and the party
has to be put in the same economic
position as if such change in law has not
occurred i.e. the party must be given the
benefit of restitution as understood in
civil law. ………….”
136. Undisputedly, the claim of APML stands on the basis of
the Change in Law. The DISCOMS, which are instrumentalities
of the State, cannot be expected to argue contrary to the stand
of the Government, which clearly provides that the generators
would be entitled to pass-through for the coal required to be
imported or purchased from the open market on the ground of
Change in Law.
137. Shri M.G. Ramachandran, learned Senior Counsel has
also made a submission that though the Change in Law event is
dated 31st July 2013, the learned APTEL has erred in giving
124
effect to the same from 1st April 2013. In this respect, it is to be
noted that the Change in Law has been made applicable to the
remaining four years of the 12th Plan for power plants. The
MERC, in the case of APML, as well as the CERC, in the case of
GMR, has given effect to the Change in Law for the last four
financial years beginning from the Financial Year 2013-2014.
The financial year begins from 1st of April of every year. Apart
from that, from the perusal of the orders passed by the learned
APTEL in both the matters, it is clear that no such challenge
was made before the learned APTEL, and, even in the present
appeals, there is ground to this effect in the Memo of Appeals.
Only oral submissions have been sought to be made in that
regard.
138. In view of the concurrent orders of the authorities with
regard to the date on which the Change in Law compensation is
to be given, we see no reason to entertain such a plea, which
does not have a foundation in the pleadings.
125
139. Another contention raised on behalf of the DISCOMS is
that if the generators are permitted to claim compensation on
the basis of actual SHR or the SHR as per the Regulations,
whichever is lower, it will permit them to take advantage of their
inefficiency. It is submitted that lesser the SHR, greater the
efficiency of the machine and, therefore, higher the generation
of electricity. Per contra, when the machine is inefficient, the
SHR is higher and the electricity generation is lower. The SHR
is not only dependent on the efficiency of the machine but on
various other factors. One of the other factors is the PLF. In
this respect, it will be relevant to refer to the statutory advice
issued by the CERC on 20th May 2013, the relevant part of
which has already been reproduced hereinabove. It clearly
states that for want of adequate coal supply by CIL/Coal
Companies, the PLF of the generating stations across the
country has been severely affected. As such, the contention in
that regard, in our considered view, is without substance.
126
140. Apart from that, it appears that various DISCOMS are
taking self-contradictory stands. In Petition No. 97 of 2017
between M/s Adani Power Limited v. Uttar Haryana Bijli
Vitran Nigam Ltd. & Anr., the DISCOMS have filed an
affidavit stating thus:
“a. While deciding the relief on account of
Change in Law under Article 13 of the PPA
may be pleased to consider improved
efficiency parameters in line with CERC
Tariff Regulations such that the impact on
consumers of the Respondents in minimal
in nature.
b. Any relief (if granted), may be passed after
considering the following significant
observations:
(i) The actual impact of the said period
should be calculated on the basis of
various factors namely the quantum
of requirement on normative
procedures such as the following:
i. Station Heat Rate shall be
considered after ascertaining
actual design heat rate and
margin as per CERC
regulations from time to
time.
127
ii. Similarly, Auxiliary
Consumption shall be
considered as per CERC
regulations.
iii. GCV of alternate coal shall
be as certified by Third Party
Sampling Agency for which
the Hon’ble Commission
should provide appropriate
the guideline.
iv. The targeted PLF;
v. The accurate date of actual coal
utilized by the Petitioner on a
monthly and yearly basis;
vi. The quantity of coal offered by
the MCL which was rejected or
not taken by the Petitioner;
vii. The quantum of actual of
electricity generated by the
Petitioner
Thus, it is submitted that the
Petitioner’s claim for relief in
this regard requires to be
computed in a categorical and
systematic manner taking the
above parameters into
consideration. The Petitioner’s
computation as stated in its
petition is therefore liable to be
rejected as it is general and
vague in nature.
(ii) Further, the Petitioner has indicated
the impact limited to the past period
128
only. However, the Respondents
humbly request the Hon’ble
Commission to only approve such
claims for the past period, after
considering the above along with a
formula for the future period.”
[emphasis supplied]
141. It can thus be seen that the DISCOM-UHBVNL has itself
stated that improved efficiency parameters in line with CERC
Tariff Regulations should be considered for deciding the relief
on account of Change in Law, such that the impact on
consumers of the respondents is minimal in nature. It has also
requested for any relief, if granted, to take into consideration
the SHR after ascertaining actual design heat rate and margin
as per CERC regulations from time to time. Similarly, it has
also requested that Auxiliary Consumption be considered as per
the CERC Regulations. Insofar as the GCV of alternate coal is
concerned, it has further stated that it has to be certified by
Third Party Sampling Agency.
129
142. It is not in dispute that the SHR is required to be audited
continuously and the GCV has to be certified by a Third Party
Sampling Agency.
143. It is further pertinent to note that the MERC itself in its
order dated 7th March 2018 in Case No.123 of 2017 (JSW v.
MSEDCL), has taken a totally contradictory stand. It will be
relevant to refer to paragraph 19.11 of the said order dated 7th
March 2013, which reads thus:
“19.11 In view of the above, financial
impact of Change in Law on the
auxiliary consumption to restore
the generator to the same
economic position as if such
Change in Law has not occurred is
allowed. The Change in Law
shall be applicable on auxiliary
consumption of the Unit as per
the Norms laid down by the
Commission or actual,
whichever is less since the
tariff of the project is based on
Competitive Bidding the
auxiliary power consumption
considered is not known.
However this auxiliary
consumption should be at a
normative value corresponding
130
to Scheduled generation only.
Moreover, this Change in Law
with respect to auxiliary
consumption shall not include
power consumption for staff
colonies of the generating
station.”
[emphasis supplied]
144. It is, thus, difficult to appreciate as to how the MERC, in
one case, has taken a view that Change in Law on the Auxiliary
Consumption has to be as per the Norms laid down by the
Commission or actual, whichever is less, when it has rejected
the same in the case of APML in the order dated 7th March
201811
.
145. We may gainfully refer to the stand taken by the Union of
India in the case of Energy Watchdog (supra), which reads
thus:
“15. The learned Attorney General
appearing on behalf of the Union of India,
submitted before us that he was not
interested in the ultimate outcome of the
11 Passed in Case Nos. 189 of 2013 and 140 of 2014
131
appeals before us. He was only
appearing in order to apprise us that
the electricity sector, having been
privatised, has largely fulfilled the
object sought to be achieved by the
2003 Act, which is that electricity
generation, being delicensed, should
result in production of far greater
electricity than was earlier produced.
He urged us not to disturb the delicate
balance sought to be achieved by the
Act i.e. that producers or generators
of electricity, in order that they set up
power plants, be entitled to a
reasonable margin of profit and a
reasonable return on their capital, so
that they are induced to set up more
and more power plants. This must be
consistent with competitiveness among
them, which then translates itself into
reasonable tariffs that are payable by
consumers of electricity. For this
purpose, he relied strongly upon Section
3 of the Electricity Act, which states that
the Central Government, shall from time
to time, prepare a National Electricity
Policy and a tariff policy in consultation
with the State Governments, and the
authority for development of the power
system, based on optimal utilisation of
natural resources. According to him,
the National Electricity Policy and
Tariff Policy that are issued from time
132
to time, being statutory in nature, are
binding on all concerned. This is, in
fact, further recognised by Section 61(i)
by which the appropriate Commission, in
specifying terms and conditions for
determination of tariffs, shall be guided
by the National Electricity Policy and
Tariff Policy. The Central Government's
role can further be seen even in
Section 63, where guidelines that are
binding on all are issued by the
Central Government in cases where
there is a transparent process of
bidding.
16. Further, according to the learned
Attorney General, Section 79(4) also
points in the same direction, stating that,
in discharge of its functions, the Central
Commission shall be guided by the
National Electricity Policy, National
Electricity Plan, and tariff policy
published under Section 3. He also
referred us to the Cabinet Committee
for Economic Affairs recognising the
overall shortfall in manufacture of
domestic coal and the new coal
distribution policy issued in July
2013 pursuant to the Cabinet
Committee which, according to him,
are in the nature of binding directions
making it clear that as generators of
electricity, who depend upon
133
indigenous coal, have been given less
coal than was anticipated, should be
allowed either to import the coal
themselves, or purchase imported coal
from Coal India Ltd., with the
difference in price being passed
through to them. He further referred to
and relied upon the revised tariff policy of
28-1-2016 for the same purpose.”
[emphasis supplied]
146. The submissions made by the learned Attorney General
have to be construed in reference to the purpose for which the
Electricity Act came to be enacted. Prior to the Electricity Act
coming into effect, matters with regard to generation,
transmission, distribution and supply of electricity were
governed by three enactments, viz., the Indian Electricity Act,
1910, the Electricity (Supply) Act, 1948 and the Electricity
Regulatory Commission Act, 1998. The Electricity (Supply) Act,
1948 mandated the creation of a State Electricity Board.
However, it was found that over a period of time, the
performance of the said Electricity Boards had deteriorated on
account of various factors. As such, it was found necessary to
134
enact a new legislation to meet various challenges. The
statement of objects and reasons would reveal that one of the
main features for enactment of the Electricity Act was
delicensing of generation and freely permitting captive
generation. As such, the learned Attorney General, in the case
of Energy Watchdog (supra), stated that the electricity sector,
having been privatized, had largely fulfilled the object sought to
be achieved by the Electricity Act. After the enactment of the
Electricity Act, delicensed electricity generation resulted in
production of far greater electricity than was earlier produced.
The learned Attorney General had further urged the Court not
to disturb the delicate balance sought to be achieved by the
Electricity Act, i.e. that producers or generators of electricity, in
order that they set up power plants, be entitled to a reasonable
margin of profit and a reasonable return on their capital, so
that they are induced to set up more and more power plants.
147. It is further to be noted that, though it was sought to be
contended in the case of Energy Watchdog (supra) that in a
135
case under Section 63 of the Electricity Act, the Commission
was only to adopt a tariff as determined through a transparent
process of bidding, this Court rejected the said contention. It
held that, in fact, Sections 62 and 63 of the Electricity Act deal
with ‘determination’ of tariff, which is part of ‘regulating’ tariff.
It further held in a situation where the guidelines issued by the
Central Government under Section 63 cover the situation, the
Central Commission is bound by those guidelines and must
exercise its regulatory functions.
148. It would be relevant to refer to clause 4.7 of the guidelines
issued by the Union of India, which have been held to be
binding in the case of Energy Watchdog (supra), which reads
thus:
“Clause 4.7. (amended)
Any change in law impacting cost or
revenue from the business of selling
electricity to the procurer with respect to
the law applicable on the date which is 7
days before the last date for RFP bid
submission shall be adjusted separately. In
case of any dispute regarding the impact of
136
any change in law, the decision of the
appropriate Commission shall apply.”
149. The judgment of this Court in the case of Energy
Watchdog (supra) has been approved by a three Judge Bench
of this Court in Adani Rajasthan case (supra).
150. In spite of this legal position and the stand taken by the
Union of India, the DISCOMS are taking a stand which is
contrary to the stand of the Union of India. In Energy
Watchdog (supra), it was also sought to be urged by DISCOMS
that even on account of Change in Law, adjustments would not
be permissible, which contention was outrightly rejected. We
have come across a number of matters wherein concurrent
orders passed by the Regulatory Body and the Appellate Forum
are assailed. Such a litigation would, in fact, efface the purpose
of the Electricity Act. As already discussed herein above, one of
the major reasons for the enactment of the Electricity Act was
the deterioration in performance of the State Electricity Boards.
137
151. In that view of the matter, we find that the stand taken by
the DISCOMS that, since the loss being sustained by the
generating companies is on account of non-fulfillment of
obligation by CIL/Coal Companies, they should be relegated to
the remedy available to them in law against the CIL/Coal
Companies, is totally unreasonable. The claim is based on
change of NCDP 2007 by NCDP 2013, which, undisputedly, is
covered by the term ‘Change in Law’.
152. Recently, this Court, in the case of Central Warehousing
Corporation v. Adani Ports Special Economic Zone Limited
(APSEZL) and others12
, has deprecated the practice of different
instrumentalities of the State taking contradictory/different
positions/stands on the same issue.
153. In the present case, the learned APTEL has also held that
SHR and GCV has to be taken into consideration as per the
‘actual’ or the Tariff Regulations, whichever is lower and as
12 2022 SCC OnLine SC 1398
138
such, balanced the interests of generators as well as
consumers.
154. That leaves us to deal with the additional point raised in
the case of GMR (i.e. Civil Appeal No.6927 of 2021).
155. The CERC, apart from its finding on SHR and GCV, has
also directed late payment surcharge to be paid. The same has
been affirmed by the learned APTEL. The CERC as well as the
learned APTEL, on the interpretation of Articles 8.3.5 and 8.8.3
of the PPA, have concurrently found that the procurer had
delayed the payment by not making the payment within the due
date and, as such, GMR was entitled to late payment surcharge.
We find no reason to interfere with the said concurrent findings
of fact.
156. We, therefore, find no merit in the appeals. The appeals
are dismissed. There shall be no order as to costs. Pending
application, if any, shall stand disposed of.
…….........................J.
[B.R. GAVAI]
139
…….........................J.
[VIKRAM NATH]
NEW DELHI;
MARCH 03, 2023
140

Comments

  1. for more information and additional your referency, read this papper to: https://repository.unair.ac.id/79342/3/JURNAL_Fis.HI.97%2018%20Asg%20u.pdf

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