Minar Renewable Energy Projects Private Limited vs Kerala State Electricity Board Limited & Ors on 5 January 2026

J U D G M E N T

PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER

1. The Appellant has, in this appeal, assailed the order dated 6th September, 2019 passed by 3rd Respondent – Kerala State Electricity Regulatory Commission (hereinafter referred to as “the Commission”) in petition bearing No. OA 8 of 2018 filed by the Appellant. Even though, the Appellant had filed the petition under Section 86(i)(e) of the Electricity Act, 2003 for determination of generic tariff for its small hydro project having capacity above 5 MW for the year 2016-17 and subsequent years yet the Commission has proceeded to determine project specific tariff for the said project of the Appellant in view of the direction/decision of the State Government dated 1st July, 2017.

2. Therefore, the crucial issue which arises for our determination in this appeal would be :- “Whether the Sate Regulatory Commission, while discharging its adjudicatory functions in relation to determination of tariff for a

power project, is bound by the directions issued by the State Govt. in this regard”.

3. Before proceeding to decide the said issue, we find it pertinent to advert to the facts and circumstances of the case in which the petition came to be filed before the Commission by the Appellant.

4. As per GO NO. 30 of 2012 dated 12th December, 2012 the Government of Kerala invited bids for setting up 62 small hydro power projects on Build, Own, Operate and Transfer (BOOT) basis. The bids were to be considered on the basis of the premium to be offered by the bidders, which was the only criteria for selection of successful bidder. It is to be noted that these bids were invited by the State Government in pursuance to the Kerala Small Hydro Power Policy, 2012 issued on 3rd October, 2012.

5. The Appellant was successful bidder for one of the 62 projects namely “Pathamkayam Small Hydro Electric Project”. The project was allotted to a consortium of companies on 21st July, 2014 which later on formed the Appellant as a special purpose vehicle for implementation of the project. Thereafter, an implementation agreement was entered into between the Appellant and the Government of Kerala on 10th April, 2015

wherein the terms and conditions upon which the project was to be implemented by the Appellant, were stated.

6. Though the capacity of the power project was initially envisaged as 4 MW yet the same was enhanced to 8 MW later on by the Government vide approval letter dated 7th July, 2015 on the request of the Appellant. The Appellant started construction work of the project in May, 2015. The entire construction was complete by 17th January, 2017. Meanwhile, the Appellant had applied to 1st Respondent – Kerala State Electricity Board Limited (KSEB) for grid connectivity in October, 2015. Thereafter, in March, 2016 a formal application was submitted by the Appellant for temporary connection for power evacuation which was granted in May, 2016. In July, 2016, the Appellant applied for formal sanction for category change of the project from Captive Power Plant (CPP) to Independent Power Producer (IPP) which came to be granted on 1st August, 2017.

7. The project was successfully synchronized with the grid system of 1st Respondent on 17th March, 2017 at 22:25 hours, which has been certified by the 1st Respondent vide certificate dated 27th March, 2017.

8. It appears that on account of disagreement between the Appellant and 1st Respondent with regards to certain terms of the draft PPA, the PPA has remained to be executed between the parties despite the fact

that the Appellant has been supplying electricity to the 1st Respondent since the year 2017. It appears that an interim tariff of Rs.4.65 per unit is being paid by the 1st Respondent to the Appellant for the power procured by it from the later.

9. It is in this backdrop that the Appellant had approached the Commission by way of petition bearing No. OA 8 of 2018 under section 86(1)(e) of the Electricity Act seeking determination of generic tariff for its small hydro project. The prayer made in the petition is relevant and is extracted herein below:- “Determine the generic tariff for small hydro projects having capacity above 5MW for the year 2016-17 and subsequent years and to allow the petitioner’s project to have the benefit of such determination in the matter of purchase of power by the Kerala State Electricity Board;”

10. Despite specific prayer of the Appellant in the petition to determine generic tariff for its small hydro project, the Commission decided to determine project specific tariff for the same in view of decision of the State Government dated 1st July, 2017. This is evident from the following portion of paragraph No. 3 of the impugned order. “3. The Commission admitted the petition as OA 8/2018. The Commission in view of the decision of the State

Government dated 01.07.2017, decided to determine the project specific tariff for the project for purchasing power from the project by KSEB Ltd.”

11. The primary ground on which the said impugned order of the Commission has been assailed by the Appellant is that the Commission has erred in not determining the generic tariff for its power project and thus has deviated from provisions of Regulation 20 of its own Regulations i.e. Kerala State Electricity Regulatory Commission (Renewable Energy Regulations), 2015. It is contended that as per Regulation 22 of these Regulations, the Commission can determine the project specific tariff only if the project developer submits an application in this regard. Thus, it is contended that the Commission has grossly erred in proceeding to determine the project specific tariff of the Appellant’s power project on the basis of direction given by the Government of Kerala.

12. We have heard Learned Counsel for the Appellant as well as Learned Counsels appearing for 1st Respondent and 3rd Respondent. We have also perused the impugned order as well as written submissions filed by the Learned Counsels.

13. It is not in dispute that the Appellant had filed formal application for grid connection in March, 2016 and the 1st Respondent KSEB sanctioned

temporary grid connection in May, 2016. It is also not in dispute that the Appellant’s power project was synchronized with the grid of 1st Respondent on 17th March, 2017.

14. It appears that as per clause 1.1 (j) of the Implementation Agreement dated 10th April, 2015, a Coordination Committee comprising of three members from KSEB and 2 members from Appellant was formed for the power project and based on the recommendations of the said committee, COD of the power project was declared as 14th August, 2017. On 11th November, 2015, the Commission notified the Kerala State Electricity Regulatory Commission Renewable Energy Regulations, 2015 (hereinafter referred to as 2015 RE Regulations). These regulations stipulated the norms for tariff determination of renewable projects commissioned during the period of five years from the Financial Year 2012-13. Regulation 20 of these Regulations is material and is extracted herein below:- “20. Generic tariff for the electricity generated from renewable sources of energy.- (1) The Commission may determine, by order published in the official gazette, the generic tariff for each financial year for the electricity generated from various categories of renewable sources of energy in accordance with the principles, norms and parameters specified or adopted by the Commission as

per regulation 17 above and the normative values of capital cost and rate of interest notified under the proviso under sub-regulation (2) of regulation 18.

(2) The generic tariff shall be determined on levelised basis for the useful life of the renewable energy project.”

15. Regulation 22 of these Regulations specifies the conditions for determining of project specific tariff for certain categories of renewable energy projects and is extracted herein below :-

22. Project specific tariff for the electricity generated from renewable sources of energy.- (1) The Commission may, on application from the project developer, determine by order, the project specific tariff for the electricity generated from the following categories of renewable energy projects in accordance with the principles, norms and parameters specified or adopted by the Commission as per regulation 17 above keeping in view the procedure for determination of tariff for generation projects as per the Kerala State Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations, 2014,-

(i) municipal solid waste project; and

(ii) any other projects as decided by the Commission.

The tariff period for the projects for which the Commission determines project specific tariff, shall be as specified by the Commission in the tariff order.

The Commission may, on application from the generator or the purchaser of electricity from a renewable energy project, for which a project specific tariff has been determined under sub-regulation (1) above, revise such project specific tariff applicable to the said project and issue appropriate orders, in case the actual average capacity utilization factor for three consecutive years immediately following the date of commissioning of the said project varies due to site specific reasons, by more than ten percent of the capacity utilization factor adopted earlier for the determination of the project specific tariff applicable to that project.”

16. Regulation 23 specifies the normative parameters as well as generic tariff applicable to the renewable energy projects Commissioned during Financial Year 2014-15 and 2015-16.

17. A combined reading of Regulation 20 and 22 would reveal that the Commission was required to determine generic tariff for renewable power projects for each Financial Year in accordance with the principles, norms and parameters specified or adopted by the Commission as per Regulation 17 and it is only when a project developer submits an

application in this regard to the Commission, the Commission could proceed to determine project specific tariff for that particular power project.

18. In the instant case, manifestly, the Appellant in its petition before the Commission, had prayed for determination of generic tariff for its 8 MW hydro power project. It is nowhere the case of any of Respondents including the Commission that the Appellant had submitted an application under Regulation 22 for determination of project specific tariff for its small hydro power project. Therefore, the Commission ought to have proceed to determine the generic tariff for the power project of the Appellant.

19. We may also note here that as already stated herein above, the bids for 62 small hydro power projects, out of which one was allotted to the Appellant being the successful bidder, had been invited in pursuance to the Kerala Small Hydro Power Policy, 2012 issued by the State Government on 3rd October, 2012. Clause 18.2 of the policy provides that KSEB and other Distribution Licensees may procure power from the small hydro power projects at the Feed in Tariff fixed by KSERC. Thus, the tariff for small hydro power projects allotted to the successful bidders under the policy was to be Feed in Tariff i.e. generic tariff.

20. It is very discontenting to note that in spite of these clear provisions contained in the 2012 policy as well as in the 2015 RE Regulations, the Commission proceed to determine project specific tariff for the Appellant’s power project merely on the basis of some directions dated 1st July, 2017 issued by the State Government. Copy of such decision/direction dated 1st July, 2017 issued by the State Government has not been produced on record by any of the respondents. However, the Appellant has along with the additional documents submitted by way of IA No. 578 of 2025 filed copy of the minutes of meeting dated 1st July, 2017 held by Chief Minister of the State of Kerala. Clause 10 of these minutes is relevant and is extracted herein below:- “10. Tariff for renewable power developed till date by private IPPS shall be got fixed for PPAs through KSERC. If necessary a 108 Govt policy directive to KSERC to fix project specific tariffs for such renewable IPP shall be issued to KSERC.”

21. Thus, in view of these minutes, the State Government was, if necessary, to issue policy directive under Section 108 of the Electricity Act, 2003 to the Commission to fix project specific tariff for renewable power projects. Whether or not was any such policy directive actually issued by the State Government is not clear from the record.

22. However, it appears that on 2nd November, 2017, the Commission amended the 2015 RE Regulations. One of the amendments was with regards to the Regulation 23 in the following manner :-

(vii) After Regulation 23, the following regulation shall be inserted namely;- “23 – A : Normative parameters and the tariff applicable to the renewable energy projects commissioned during the financial years 2016-17.- Notwithstanding anything contrary contained in these regulation the normative parameters, the generic tariff and the tariff period applicable to the renewable energy project commissioned during the financial year 2016-17 shall be as specified in the Annexures I to VII attached to these regulation, the list of which is shown below,- List of Annexures I to VII

S. No. Description Tariff Rs/kWh

Levelised Tariff Benefit of Accelerated Depreciation Net levelised tariff upon adjusting for Accelerated Depreciation benefit I Small hydro-electric projects having installed capacity below 5MW 5.54

II Wind energy generation projects, located in wind zone – 1 (CUF-20%) 6.60 0.71 5.89

III Wind energy generation projects, located in wind zone – 2 (CUF-22%) 6.00 0.64 5.36 IV Wind energy generation projects, located in wind zone – 3 (CUF-25%) 5.28 0.57 4.71 V Wind energy generation projects, located in wind zone – 4(CUF-30%) 4.40 0.47 3.93 VI Wind energy generation projects, located in wind zone – 5(CUF-32%) 4.13 0.45 3.68 VII Solar photo voltaic energy generation projects 5.68 0.60 5.08

23. The amended Regulation 23 provides for levelized tariff for small hydro electricity projects having installed capacity below 5 MW as well as for wind energy projects and solar photovoltaic energy projects. It does not provide any levelized tariff for the small hydro electricity projects having installed capacity above 5 MW. Therefore, this amended Regulations 23 was clearly not applicable to the power project of the Appellant which was having the installed capacity of 8 MW.

24. Even if we assume for the sake of arguments that any such policy direction was issued by the State Government to the Commission to determine project specific tariff for the small hydro power projects, then also the Commission was not bound by the same. Determination of tariff for a power project is in the exclusive domain of the State Electricity

Regulatory Commission which has to do such exercise while keeping in mind the parameters specified in Section 61 of the Electricity Act, 2003 as well as the Regulations framed by the Commission from time to time. The State Government has no say in the tariff determination process of the Commission which is a quasi-judicial function of the Commission and has to be conducted in a fair and impartial manner. In this regard, we may profitably refer to following paragraphs of a recent judgement dated 30th September, 2024 of the Hon’ble Supreme Court in Kerala State Electricity Board Ltd. Vs. Jabhua Power Li mited & Ors. (Civil Appeal Nos. 10046-10047 of 2024); “16. We are in agreement with the judgment of APTEL insofar as it holds that the directive which was issued by the State government under Section 108 could not have displaced the adjudicatory function which was entrusted to KSERC. The State government while issuing a policy directive in the exercise of its power under section 108 cannot impinge on the adjudicatory discretion which is vested in an authority under the Act. In this regard, we may helpfully refer to the observations of this Court in A.P. TRANSCO v. Sai Renewable Power (P) Ltd., in the context of a similar provision in the erstwhile Andhra Pradesh Electricity Reforms Act 1998 (which was repealed by the

Electricity Act 2003). A two-judge bench of this Court, speaking through Justice Swatanter Kumar, observed:

“59. Section 12 of the Act vests the State Government with the power to issue policy directions on matters concerning electricity in the State including the overall planning and coordination. All policy directions shall be issued by the State Government consistent with the objects sought to be achieved by this Act and, accordingly, shall not adversely affect or interfere with the functions and powers of the Regulatory Commission including, but not limited to, determination of the structure of tariffs for supply of electricity to various classes of consumers. The State Government is further expected to consult the Regulatory Commission in regard to the proposed legislation or rules concerning any policy direction and shall duly take into account the recommendation by the Regulatory Commission on all such matters. Thus the scheme of these provisions is to grant supremacy to the Regulatory Commission and the State is not expected to take any policy decision or planning which would adversely affect the functioning of the Regulatory Commission or interfere with its functions. This provision also clearly implies that fixation of tariff is the function of the Regulatory

Commission and the State Government has a minimum role in that regard.”

17. That the state regulatory commissions are not ‘bound’ by the directions of the state government, or the Central Government is also evident from the text of Section 108. The provision reads: “In the discharge of its functions, the State Commission shall be guided by such directions in matters of policy ….”. This indicates that the state commission shall only be ‘guided’ by the directions issued by the state government and is not automatically bound by them. This interpretation is strengthened by the divergence in the language used in other provisions of the Act, such as Section 11 of the Act which reads as follows: “Section

11. (Directions to generating companies): --- (1) Appropriate Government may specify that a generating company shall, in extraordinary circumstances operate and maintain any generating station in accordance with the directions of that Government. Explanation. – For the purposes of this section, the expression “extraordinary circumstances” means circumstances arising out of threat to security of the State, public order or a natural calamity or such other circumstances arising in the public interest.…”

18. The above provision uses mandatory language and provides that the generating company “shall … operate

and maintain any generating station in accordance with the directions of that Government” in extraordinary circumstances. This can be distinguished from the language in Section 108, which merely requires that the state commission “be guided by” the directions of the State Government. The provision, in no manner, seeks to control the exercise of quasi-judicial power by the state commissions based on directions issued by the state government.”

25. Therefore, it is evident that any policy direction issued by the State Government, even if under Section 108 cannot impinge upon the adjudicatory functions vested in the Electricity Regulatory Commissions and the Commission is not bound by such direction. The State Government has no power or authority to control or interfere into the quasi-judicial /adjudicatory functions of the State Electricity Regulation Commissions.

26. In the instant case, the record would indicate that the State Govt. had even not issued any formal direction to the Commission to fix the project specific tariff for small renewable power projects. Only a decision to this effect was taken in the meeting dated 01.07.2017 to issue such policy directive under Section 108 of the Electricity Act, if required. Therefore, the Commission ought not to have considered such decision

taken in the said meeting even as no formal policy directive had been issued under Section 108.

27. On behalf of the Commission, it was vehemently argued by its counsel as under :- “(i) That the COD of the project of the appellant was declared by the competent authority to be achieved on 14-08-2017. Therefore the relevant FY was 2017-18. The appellant was well aware that the KSERC Renewable Energy Regulations 2015 was valid only till 31.03.2017. That is why the appellant mischievously opted for generic tariff for the FY 2016-17, knowing fully well that there is no valid regulations framed by the commission in operation for the FY 2017-18.

(ii) As per Regulation 17 (4) of KSERC (RE) Regulation 2015 till the commission notify separate norms and parameters for determining the tariff for electricity generated from RE projects the norms and parameters notified by the CERC for the purpose of determination of tariff for the electricity generated from RE projects may be adopted for determining the tariff of electricity generated from RE projects.

(iii) The CERC vide notification No. 1/21/2017 Reg. Aff.(RE Tariff 2017) CERC dated 17.04.2017 has notified the CERC (Terms and conditions for Tariff determination from Renewable Energy Sources) Regulations 2017 applicable

for three years from 17.04.2017. Accordingly commission rightly adopted the norms and parameters specified by CERC for the financial year 2017-18 for the project of the Appellant.

(iv) In view of the above, the Commission has decided to determine the project specific tariff in the Appellant’s project. Therefore, soon after admitting the petition, this Commission vide letter dated 04.06.2018 has informed the appellant that, the Commission had decided to determine the project specific tariff of the project, and directed the appellant to submit the additional details for the determination of project specific tariff of the project.”

28. We do not find any merit in these submissions on behalf of the Commission. The impugned order of the Commission nowhere reflects that the Commission had proceeded to adopt the parameters notified by CERC for the purpose of determination of tariff for the electricity generated from RE project of the Appellant, in view of Regulation 17(4) of 2015 RE Regulations. We have already extracted the relevant portion of paragraph No. 3 of the impugned order herein above which clearly indicates that the Commission proceeded to determine the project specific tariff for the Appellant’s power project in view of the decision dated 1st July, 2017 of the State Government.

Conclusion

29. Thus, in view of the foregoing discussion, the impugned order of the Commission cannot be sustained as the same is absolutely erroneous and flawed. Accordingly, we allow the appeal and set aside the impugned order. The case is remanded back to the Commission with the direction to determine the generic tariff for the power project of the Appellant in terms of the provisions contained in Kerala Small Hydro Power Policy and 2012 RE Regulations. We also direct that in the meanwhile, the Appellant shall be paid interim tariff @Rs.4.65 per unit as used to be paid to it prior to passing of impugned order by the Commission.

30. Needless to say that the Commission shall conclude the exercise within three months from the date of receipt of this judgement. Pronounced in the open court on this 5th day of January, 2026.

(Virender Bhat)

(Seema Gupta)

Judicial Member

Technical Member (Electricity)

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REPORTABLE / NON REPORTABLE

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