TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED v. M/S RAIN CALCINING LIMITED & OTHERS

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A Particular of Expenditure Amt. Rs.Crs. Wages and salaries 490.65 Administration and General Expenses 105.20 Repairs and Maintenance 185.66 B Rent Rates and Taxes 5.13 Approved Loan interest 5609.31 Security deposit interest 31.37 Legal Charges 0.97 C Audit and other fees 2.23 Depreciation 508.59 Other Expenses 39.30 Contribution to staff pension and gratuity. 64.95 D Contribution to Contingency Reserve 21.45 Sub Total of Expenditure 2015.81 Reasonable Return 82.37 Total Gross Revenue Required 2098.18 E Less Non-Tariff Income 529.86 NET REVENUE REQUIREMENT 1568.32

Million Units (Gross) 41954 Network Charges including reasonable F 37 ps/ kwh return (1568.32 Crs 41954 MU Wheeling Charges (External) 3 ps/kwh (Based on Information) G Balancing and ancillary Charges 10 ps/ kwh Total Wheeling Charges in ps/ unit. 50 ps/ kwh (Total of above three charges) H

TRANSMISSION CORP. OF ANDHRA PRADESH LTD. v. 519 M/S RAIN CALCINING LTD. & OTHERS [ARUN MISHRA, J.]

b) In-kind: A In addition, wheeling charges in kind of 28.4 % of energy input by the project developer into the Licensee’s grid being the system loss are leviable.”

61Copy pinpoint61. The High Court could not have interfered with the findings on merits taken by the experts without entering into the various aspects considered by the Commission. Thus, the finding on merits as to the determination of charges being illegal and improper in any manner, cannot be said to be sustainable. The High Court has not gone into various reasons, and the details considered by the Commission and once the expert body has determined specific tariffs, it is not for the courts to interfere ordinarily in such matters. We find the determination to be proper and do not suffer from any infirmity or illegality. The Commission has made an elaborate discussion for arriving at the figure mentioned above. The recovery network charges, tariff structure, and the question of wheeling charges in cash or kind have also been considered. Various relevant factors have been taken into consideration. The nature of the arrangement between APTRANCO and DISCOMS and inter se DISCOMS has been considered while deciding issue No.4.

62Copy pinpoint62. The use of the system cannot be isolated from losses in the system as they form an integral part of the system. All persons using the system should bear the system losses, whether technical or non- technical. Incidentally, the terms of a licence issued by APTRANSCO and DISCOMS specifically refer to deliver such electricity, adjust losses of electricity to a designated point. Technical losses in the system to be taken into account as these are also an integral part of the system. It is an integrated system where the electricity is supplied on displacement basis rather than direct conveyance of the particular electricity which is generated, the technical losses up to the voltage level at which the electricity is delivered along cannot be measured. The technical losses of the total system need to be taken into account as it is impossible to determine from which source electricity is being supplied to which particular customer. The electricity from all sources gets combined in the system and loses its identity. As investment in the system has also been made, it was evident that requisite charges have to be paid. H

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A IN RE: GRID SUPPORT CHARGES

63Copy pinpoint63. With respect to Grid Support Charges, it has been conceded by the learned counsel for the parties that the decision in the aforesaid batch of matters as to wheeling charges has to govern grid support charges as we have upheld the order of the Commission with respect to wheeling charges, the order of the High Court has to be set aside.

64Copy pinpoint64. Any Government Order or Incentive Scheme does not govern the Grid Support Charges. Grid Code is the basis for levy of the Grid Support Charges, which came to be approved by the Commission on 26.5.2001. The same is also reflected in the impugned order. Thus, in case of installation of another CPP, that would be an additional load on the grid, and there is no embargo for setting up additional grid CPP in the form of expansion as grid acts as cushioning. The Grid Support Charges can be levied, and the order dated 8.2.2002 of the Commission is, thus on the parity of the reasonings, has to be upheld considering the provisions of Section 21 (3) of the Reforms Act, 1998. Under D section 11 read with section 26 of the Reforms Act, 1998, all fixed charges under the distribution and Grid Support Charges are leviable only at the instance of a distribution company, and because of the discussion above, the Commission has the powers to determine it. In the agreements also there is a power where the Board could have fixed the Grid Support Charge unilaterally, but because of Reforms Act, 1998 came to be enacted, the application was filed in the Commission. After that, the Commission has passed the order in accordance with the law. We find no fault in the same. Thus, the order of the Commission concerning the Grid Support Charges has to be upheld. The judgment and order of the High Court are liable to be set aside concerning wheeling charges as well as Grid Support Charges. IN RE: INCENTIVES TO NON-CONVENTIONAL ENERGY

65Copy pinpoint65. The question involved in the third batch of appeals is whether incentives to be continued to the non-conventional energy. The tariff orders were passed in the years 2004-05, 2005-06, and 2006-09 by the APERC in exercise of the power conferred under Section 62 of the Electricity Act, 2003. The appeals were preferred before the APTEL under Section 111 of the Electricity Act, 2003. The main question for consideration was whether Government Orders issued on 18.11.1997 H and 22.12.1998, by the Andhra Pradesh Government, extending specific

TRANSMISSION CORP. OF ANDHRA PRADESH LTD. v. 521 M/S RAIN CALCINING LTD. & OTHERS [ARUN MISHRA, J.]

incentives to the producers of electricity from non-conventional energy A resources, are binding and Doctrine of Promissory Estoppel against the Government and Commission was bound to give effect to them.

66Copy pinpoint66. The Government Order dated 18.11.1997, encourages renewable energy/non-conventional energy sources. The Government decided to provide specific incentives, thus: B “The Government, after careful examination of the recommendations and with a view to encourage generation of electricity from renewable sources of energy hereby allow the following uniform incentives to all the projects based on renewable sources of energy viz. Wind, Biomass, Co-generation, C Municipal Waste, and Mini Hydel: Sl.No. DESCRIPTION

1. Power Purchase Price Rs.2.25/-

2. Escalation 5% per annum with 1997-98 D as base year and to be revised on 1st April of every year up to the year 2000 A.D.

3. Wheeling Chargers 2% E

4. Third-Party sales Allowed at a tariff not lower than H.T. Tariff of A.P.S.E. Board.

5. Banking Allowed upto 12 months F (a) Captive Allowed throughout the year Consumptionon 2% banking charges (b) Third party sale Allowed on 2% banking charges from August to March G This order issues with the concurrence of Finance & Planning (Fin.) Department vide their U.O. No.46291/351/EBS-EFES&T/ 97, dated 18.11.1997.”

67Copy pinpoint67. The Government issued another GO MS No.112 dated 22.12.1998, making precise clarification that the benefits shall be H

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A available only to the power projects where fuel used is from non- conventional energy sources, which are of the nature of renewable sources of energy. The Scheme shall be watched for three years. After that, the State Electricity Board shall come up with suitable proposals for the continuance of incentives in the present form or modified form.

68Copy pinpoint68. The Commission had passed the tariff orders dated 22.3.2005 and 23.3.2006 for the years 2004-05, 2005-06, and 2006-09. The APTEL vide impugned judgment and order has allowed the appeals and has held that effect of the policy decisions dated 18.11.1997 and 22.12.1998, which had a statutory flavor, had not been taken away by the provisions contained in the Electricity Act, 2003. The policy has created vested rights in favour of entrepreneurs, and these vested rights could not have been taken away. The rights created by GOMS No.93 dated 18.11.1997, would continue to operate until and unless they are withdrawn in accordance with law. The Doctrine of Promissory Estoppel is attracted, though the Commission has the power to regulate wheeling charges. It needed to address the question. The Commission has lost sight of the spirit behind G.O. MS Nos.93 and 112, dated 18.11.1997 and 22.12.1998, respectively. Aggrieved by the decision of APTEL, the APTRANSCO has preferred the appeals.

69Copy pinpoint69. To consider the applicability of Promissory Estoppel, it has to be seen whether the aforementioned Government Orders contained an unequivocal commitment to extend benefits. On the contrary, the benefit was confined only to three years. The Commission under the provisions of the Reforms Act, 1998 extended it from time to time and the last such extension came to an end on 28.7.2001. The Commission decided not to extend the benefit by the impugned order determining the tariff.

70Copy pinpoint70. This Court in Transmission Corporation of Andhra Pradesh Limited & another v. Sai Renewable Power Private Limited & others, (2011) 11 SCC 34, has considered the abovementioned G.O. MS dated 18.11.1997 and 22.12.1998, in which APERC undertook the review of tariff applicable to the producers of electricity from non- conventional energy resources. In the year 2003, the Commission undertook a further review of the tariff. Contrary to the expectations of the producers of electricity from non-conventional energy resources, the Commission vide order dated 20.3.2004, has reduced the amount of tariffs. The producers from non-conventional energy resources

TRANSMISSION CORP. OF ANDHRA PRADESH LTD. v. 523 M/S RAIN CALCINING LTD. & OTHERS [ARUN MISHRA, J.]

challenged this order before the APTEL, which vide order dated A 2.6.2006, declared the order dated 20.3.2004 of the Commission as valid. One of the grounds raised before the Tribunal was that purchase price of 2.25 per unit was fixed based on the Central Government letter dated 7.9.1993 and Andhra Pradesh abovementioned G.O. MS. Therefore, the Commission could not back out from the promise made B in these Government communications. The plea found favour with the Tribunal. The Tribunal’s order dated 2.6.2006 was challenged in the appeals, which were decided by this Court. One of the issues before this Court was whether the Commission was estopped from passing an order, which would be contrary to the provisions of the Government communications dated 7.9.1993, 18.11.1997, and 22.12.1998. The C appeals were allowed by this Court, and this Court held that the Tribunal fell in error of law in concluding that Regulatory Commission had no powers either in law or otherwise of reviewing the tariff and so-called incentives. There was no unequivocal commitment to the respondent/ purchasers/ generators/ developers to bind the State for all times to come. There was no definite, unambiguous representation, hence plea of estoppel was not attracted. This Court has observed: “68. In addition to the statutory provisions and the judgments aforereferred, we must notice that all the PPAs entered into by the generating companies with the appropriate body, as well as the orders issued by the State in GOMs Nos. 93 and 112, in turn, had provided for review of tariff and the conditions. The Tribunal appears to have fallen in error of law in coming to the conclusion that the Regulatory Commission had no powers either in law or otherwise of reviewing the tariff and so-called incentives. Every document on record refers to the power of the authority/ F Commission to take a review on all aspects including that of the tariff.

74. Again, vide GOMs No. 112 dated 22-12-1998, referring to the extension of all these uniform incentives, certain amendments were carried out to GOMs No. 93 dated 18-11-1997. Clause 2 G of this order referred that the operation of the incentive scheme shall be watched for a period of three years and at the end of three years the Electricity Board shall come up with suitable proposals for review for further continuance of the incentives in that form, or to be modified suitably. Keeping these guidelines in mind, the State of Andhra Pradesh vide GOMs No. 93 dated 18- H

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A 11-1997, while referring to the guidelines issued by the Government of India for promotional and fiscal incentives, noticed the various representations which were received from the non- conventional energy developers for extension of benefits as afore referred in relation to all non-conventional energy resources uniformly. B

80. On the basis of this factual matrix, the respondents claimed that the State Government and the Regulatory Commission both were bound to continue the incentives as were provided to them in furtherance of the letters and orders of the Central as well as the State Governments discussed above. They have a legitimate right to expect that these incentives were to be continued indefinitely in the same manner, and the authorities concerned are estopped from altering the rates and/or imposing the condition of no sale to third parties. We are unable to find any merit in this contention. In our view, the Tribunal has erred in law in treating these inter se letters and guidelines between the Government of India, State Government and the Commission/the State Electricity Board as unequivocal commitments to the respondent/purchasers/generators/developers so as to bind the State for all times to come. For the principle of estoppel to be attracted, there has to be a definite and unambiguous representation to a party which then should act thereupon and then alone, the consequences in law can follow.

81. In the present case, the policy guidelines issued by the Central Government were the proposals sent to the State Government, which the State Government accepted to consider, amend or alter as per their needs and conditions and then make efforts to achieve the objects of encouraging non-conventional energy generators and purchasers to enter into this field. These are the matters, which will squarely fall within the competence of the Regulatory Commission/the State Electricity Board at the relevant points of time. Besides that, there was no definite and clear promise made by the authorities to the developers that would invoke the principle of promissory estoppel. Undoubtedly, to encourage participation in the field of generation of energy through non-conventional methods, some incentives were provided, but these incentives under the guidelines, as well as under the PPAs H signed between the parties from time to time, were subject to

TRANSMISSION CORP. OF ANDHRA PRADESH LTD. v. 525 M/S RAIN CALCINING LTD. & OTHERS [ARUN MISHRA, J.]

review. In any case, the matter was completely put at rest by the order of 20-6-2001 and the PPAs voluntarily signed by the parties at that time, which had also provided such stipulations. If such stipulations were not acceptable to the parties, they ought to have raised objections at that time or at least within a reasonable time thereafter. The agreements have not only been signed by the parties, but they have been fully acted upon for a substantial period. We have already referred to various statutory provisions where the Regulatory Commission is entitled to determine the tariff. In this situation, we are unable to agree with the view taken by the Tribunal that the Regulatory Commission had no jurisdiction and that fixation of tariff does not include purchase price for buy-back of the generated power.

82. The principle of promissory estoppel, even if it was applicable as such, the Government can still show that equity lies in favour of the Government and can discharge the heavy burden placed on it. In such circumstances, the principle of promissory estoppel would not be enforced against the Government as it is primarily a principle of equity. Once the ingredients of promissory estoppel are satisfied, then it could be enforced against the authorities, including the State, with very few extraordinary exceptions to such enforcement. In the United States, the doctrine of promissory estoppel displayed remarkable vigour and vitality, but it is still developing and expanding. In India, the law is more or less settled that where the Government makes a promise knowing or intending that it would be acted upon by the promisee and in fact the promisee has acted in reliance of it, the Government may be held to be bound by such promise.” F (emphasis supplied)

71Copy pinpoint71. Concerning aforesaid Government Orders dated 18.11.1997 and 22.12.1998, this Court already held that plea of promissory estoppel is not attracted, and there was no unequivocal promise. We are of the G opinion that there was no material change in the facts and circumstances of the case to attract the plea of promissory estoppel based on Government orders mentioned earlier. The Tribunal has passed an order, by which it had temporarily extended the period to 24.7.2001. In the impugned order dated 24.3.2002, the objection raised of the non- conventional energy developers regarding wheeling charges was dealt H

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A with and it was stated that non-conventional energy have to pay the wheeling charges without discrimination and it was also stated that if Government wants to pay any subsidy, it may pass fresh order to compensate the licensee. The Government has, after that, never given any subsidy, for subsidy care is taken by the statutory provision contained in the Electricity Act, 2003. Section 65 of the Electricity Act, B 2003, provides that if State Government requires grant of any subsidy to any consumer in the tariff determined by the State Commission under Section 62, the State Government shall, notwithstanding, any direction which may be given under Section 108, pay, in advance and in such manner as may be specified, the amount to compensate the person C affected by the grant of subsidy in the manner the State Commission may direct. Subsidy/incentive is governed by Section 65, and the Government has not issued any such direction to continue the incentives in the form of subsidy. It was open to the Government to do so because of the order passed by the Commission, but it has not extended such benefit. No command can be given to State to grant subsidy. D

72Copy pinpoint72. Thus, we find that the order of APTEL based on the Doctrine of Promissory Estoppel for continuing the benefit of Government Orders dated 18.11.1997 and 22.12.1998, cannot be said to be in accordance with the law. The order of APTEL is liable to be set-aside, and that passed by the APERC has to be restored. E

73Copy pinpoint73. Resultantly, we have to allow the appeals. The judgment and order passed by the High Court relating to wheeling charges and grid support charges and that passed by the APTEL regarding continuance of incentive as per G.O. MS dated 18.11.1997 and 22.12.1998, are set aside. The appeals are allowed, and the orders passed by APERC are F restored. No costs.

Devika Gujral Appeals allowed.