Summary and Analysis of Gujarat Urja Vikas Nigam Ltd. vs. Green Infra Corporate Wind Power Ltd. & Ors

1. Heading of the Judgment

Gujarat Urja Vikas Nigam Ltd. vs. Green Infra Corporate Wind Power Ltd. & Ors.
(Civil Appeal Nos. 14098-14101 of 2015)
Date: August 4, 2025
Bench: Justices Sanjay Kumar and Satish Chandra Sharma

2. Relevant Laws and Sections

The judgment interprets provisions from:

• Electricity Act, 2003:
  Section 61(h): Guides tariff determination terms.
  Section 62(1)(a): Mandates Appropriate Commission (State/Central Regulatory Commission) to determine tariffs.
  Section 86(1)(a) & (b): Empowers State Commissions (like GERC) to regulate tariffs and power procurement processes.

• Income Tax Act, 1961:
  Section 32(1): Allows depreciation benefits for power-generating assets.
  Income Tax Rules, 1962 (Rule 5 & Appendix I): Specifies 80% accelerated depreciation for renewable energy devices (e.g., windmills).

3. Basic Case Details

• Parties:
  Appellant: Gujarat Urja Vikas Nigam Ltd. (GUVNL), a state-owned power distributor.
  Respondents: Four wind power producers (Green Infra, Vaayu Power, etc.).

• Dispute:
  GUVNL challenged orders by the Appellate Tribunal for Electricity (APTEL) and Gujarat Electricity Regulatory Commission (GERC).
  The respondents (wind power producers) signed Power Purchase Agreements (PPAs) with GUVNL during 2010–2012 at a fixed tariff of ₹3.56/kWh.
  This tariff was set by GERC’s Order No. 1 of 2010 only for projects availing accelerated depreciation (a tax benefit).
  Later, the respondents claimed they did not avail accelerated depreciation and sought fresh tariff determination from GERC.

• Outcome:
  Supreme Court upheld GERC and APTEL’s orders, allowing the respondents to seek project-specific tariffs.

4. Explanation of the Judgment

Background

• GUVNL signed PPAs with four wind power producers during 2010–2012. The PPAs fixed the power purchase tariff at ₹3.56/kWh as per GERC’s Order No. 1 of 2010.

• This order clarified:
  The tariff applied only to projects using accelerated depreciation (80% tax benefit under Income Tax Act).
  Projects not availing this benefit could approach GERC for case-specific tariff determination.

GUVNL’s Argument

• The wind producers voluntarily signed PPAs at ₹3.56/kWh. They could not later demand higher tariffs by opting out of accelerated depreciation.

• Allowing fresh tariff determination would force GUVNL to pay more, breaching the contract.

Respondents’ Argument

• They never availed accelerated depreciation (a choice under Income Tax Act).

• The ₹3.56/kWh tariff was inapplicable to them, as per GERC’s own order.

Court’s Key Findings

1. Statutory Tariff Overrides Commercial Contracts:
   Tariffs under the Electricity Act are statutorily determined by regulators (GERC), not by mutual agreement. PPAs merely incorporate these tariffs.
   GUVNL, as a state entity, must prioritize renewable energy policies over commercial interests.

2. No Commitment to Avail Accelerated Depreciation:
   The PPAs did not bind the respondents to avail accelerated depreciation.
   The tax option can only be exercised when filing income returns after commissioning the project. Thus, the respondents could not commit to it while signing PPAs.

3. Unfair to Apply Inapplicable Tariff:
   Forcing the respondents to accept ₹3.56/kWh (meant for tax-benefited projects) when they got no such benefit was "patently unfair" and akin to "Shylock-like conduct."

4. Distinguishing Precedents:
   In EMCO Ltd. (a solar power case), the PPA had a specific clause linking tariffs to the commissioning date. Here, no such clause existed.
   Tarini Infrastructure Ltd. affirmed that regulators can redetermine tariffs post-PPA if statutory grounds exist.

Final Ruling

• The respondents were entitled to seek fresh tariffs from GERC since they did not avail accelerated depreciation.

• GUVNL’s appeals were dismissed, and GERC was directed to determine project-specific tariffs.

Core Takeaway

Public interest in renewable energy promotion prevails over rigid contracts. Regulators retain the power to ensure tariffs align with statutory policies, and power producers cannot be bound to rates designed for tax benefits they never received.