Southern Power Distribution Company of Andhra Pradesh Ltdv.Green Infra Wind Solutions Ltd & Ors

Synopsis

This judgment resolves a critical conflict between the tariff‑fixing authority of State Electricity Regulatory Commissions (SERCs) and the executive policy of the Union Government to promote renewable energy through financial incentives. The Andhra Pradesh Electricity Regulatory Commission (APERC) had, in its tariff determination, deducted the Generation Based Incentive (GBI) – a grant disbursed by the Ministry of New and Renewable Energy (MNRE) to wind power generators – from the tariff payable by distribution companies (DISCOMs). The APTEL reversed this, holding that the SERC had no power to alter the destination of a parliamentary grant. The Supreme Court, while affirming that tariff determination is the exclusive province of SERCs, held that the GBI was intended to be a generator‑focused incentive over and above the tariff, and that the SERC’s power to “take into consideration” such incentives must be exercised in a manner that respects the purpose of the grant. The Court dismissed the DISCOM’s appeal, restored the APTEL’s order, and laid down principles for the collaborative functioning of regulators and other duty bearers in the electricity sector.

2. Basic Information of the Judgment

Case Title: Southern Power Distribution Company of Andhra Pradesh Ltd. & Anr. vs. Green Infra Wind Solutions Ltd. & Ors.

Civil Appeal No.: 4495 of 2025

Bench: Justice Pamidighantam Sri Narasimha and Justice Jatul S. Chandurkar

Judgment Author: The judgment is delivered by the Bench collectively (per curiam)

Date of Decision: March 25, 2026

Citation: 2026 INSC 294

Appeal From: Judgment and order dated 19.12.2024 of the Appellate Tribunal for Electricity (APTEL) in Appeal No. 284 of 2018, setting aside the order of the Andhra Pradesh Electricity Regulatory Commission (APERC) dated 28.07.2018.

3. Legal Framework

This judgment involves the interpretation of the Electricity Act, 2003, the powers of State Electricity Regulatory Commissions, the constitutional provisions relating to parliamentary grants, and the principles governing collaborative regulation.

A. Key Provisions of Law:

• Electricity Act, 2003:
  Section 61: Guiding principles for tariff determination, including promotion of generation from renewable sources (clause (h)).
  Section 62: Determination of tariff by the Appropriate Commission.
  Section 64(6): Tariff order continues in force for such period as specified, unless amended or revoked.
  Section 86: Functions of State Commissions, including promoting cogeneration and generation from renewable sources.
  Section 181: Power to make regulations.

• Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for Tariff Determination for Wind Power Projects) Regulations, 2015:
  Regulation 20: “The Commission shall take into consideration any incentive or subsidy offered by the Central or State Government … if availed by the generating company … while determining the tariff.”

• Constitution of India:
  Article 112: Annual financial statement (Budget).
  Article 113: Procedure in Parliament with respect to estimates.
  Article 114: Appropriation Bills.
  Article 282: Expenditure defrayable by the Union or a State out of its consolidated fund for any public purpose.

• General Clauses Act, 1897:
  Section 21: Power to issue notifications includes power to add, amend, vary or rescind them.

B. Related Precedents (Discussed in the Judgment):

• M.K. Ranjitsinh v. Union of India (2024) 9 SCC 693: Highlighted India’s international obligations and policy commitments to transition from fossil fuels to renewable energy.

• State of Himachal Pradesh v. JSW Hydro Energy Ltd. (2025) 4 SCC 639: Emphasised that tariff determination is the exclusive province of expert regulators, and courts must enable the regulator to exercise comprehensive jurisdiction without fragmenting regulation.

• Power Grid Corporation of India Ltd. v. Central Electricity Regulatory Commission (2016) 14 SCC 659: Discussed the nature of regulatory commissions as expert bodies with wide powers.

• BSES Rajdhani Power Ltd. v. Delhi Electricity Regulatory Commission (2011) 13 SCC 119: Recognised the socio‑economic obligations of regulators.

4. Relevant Facts of the Case

1. GBI Scheme (2009): The Ministry of New and Renewable Energy (MNRE) introduced a Generation Based Incentive (GBI) for wind power producers, granting ₹0.50 per unit of electricity fed into the grid for up to 10 years, with a cap of ₹62 lakhs per MW. The Scheme explicitly stated: “This incentive is over and above the tariff that may be approved by the State Electricity Regulatory Commissions … this incentive … will not be taken into account while fixing tariff by State Regulators.”

2. APERC Tariff Regulations (2015): Regulation 20 mandated that the Commission “shall take into consideration any incentive or subsidy offered by the Central or State Government … while determining the tariff.”

3. Tariff Orders (2015 & 2016): APERC issued tariff orders for wind power projects without factoring in GBI. The DISCOMs requested amendment to take GBI into account.

4. APERC Order (28.07.2018): The Commission allowed the DISCOMs’ petition, holding that Regulation 20 required it to consider GBI, and that the GBI Scheme’s stipulation that it would not be considered was an executive action that could not override the statutory regulation. APERC directed deduction of GBI from the tariff.

5. APTEL Order (19.12.2024): The APTEL reversed, holding that Regulation 20 only required “consideration”, not mandatory deduction; that the tariff orders had already been passed without factoring GBI; and that the GBI was a parliamentary grant intended for generators, which could not be subverted into a consumer subsidy.

6. Appeal to Supreme Court: DISCOMs appealed, arguing that the SERC had plenary power over tariff and that Regulation 20 made factoring GBI mandatory.

5. Issues Identified by the Supreme Court

1. Whether the State Electricity Regulatory Commission (SERC) has the power and jurisdiction to take into consideration the Generation Based Incentive (GBI) while determining tariff for wind power projects.

2. Given such power, what are the duties and obligations of the SERC while determining tariff, particularly in relation to grants made by the Central Government under Article 282.

6. Ratio Decidendi (The Reasoning and Decision of the Court)

The Supreme Court dismissed the appeal and affirmed the APTEL’s order. The reasoning is as follows:

A. Issue (i) – Scope of SERC’s Tariff Determination Power

• The Electricity Act, 2003 is a complete code. Tariff determination is the exclusive province of the Regulatory Commissions. There is no unallocated regulatory residue left outside their jurisdiction.

• Regulation 20 of the 2015 Tariff Regulations, framed under Sections 61 and 181, uses the word “shall”, indicating a statutory obligation to “take into consideration” any incentive or subsidy. However, “take into consideration” does not automatically translate into a mandatory deduction or automatic pass‑through; it requires a contextual and purposive treatment.

• The argument that factoring GBI into tariff would violate the constitutional scheme of parliamentary grants under Articles 112–114 and 282 was rejected. The GBI reaches its intended destination when disbursed to the GENCO. The Commission does not intercept the grant; it merely determines the tariff payable by the DISCOM. The grant remains with the generator; its treatment in tariff does not alter its destination.

B. Issue (ii) – Duties and Obligations of the SERC

• The Court adopted the concept of “regulation as an enterprise” rather than “regulation as control”. SERCs must act as “governments in miniature”, collaborating with other duty bearers (Central Government, State Governments, MNRE) to achieve the larger purposes of the Electricity Act, including promotion of renewable energy, energy security, and consumer protection.

• The GBI Scheme was designed to achieve a critical public purpose: reducing dependence on fossil fuels, attracting investment in renewable energy, and meeting national and international climate commitments. The SERC, while exercising its tariff‑fixing power, must respect the underlying purpose of such policy incentives.

• Section 61(h) of the Electricity Act obligates the Commission to promote generation from renewable sources. Reading Regulation 20 in harmony with the GBI Scheme, the Commission must not nullify the incentive by deducting it from the tariff.

• The Commission’s power is plenary, but it must be exercised as a collaborative enterprise, not in isolation. The GBI was intended as a generator‑focused incentive over and above the tariff, as expressly stated in the Scheme. Factoring it into the tariff would defeat the purpose of the grant.

C. Conclusion

• The APTEL was correct in holding that the GBI should not be deducted from the tariff. The APERC’s order factoring in GBI was erroneous. The DISCOM’s appeal was dismissed.

7. New Legal Principles Established / Reiterated

1. Plenary Power of SERCs, but Not in Isolation: Tariff determination is exclusively within the domain of SERCs. However, this power must be exercised harmoniously with other statutory and policy frameworks, respecting the intent of grants made by the Government.

2. Regulation as an Enterprise: The Court explicitly adopted the “regulation as an enterprise” model, where regulators act in collaboration with other stakeholders, rather than the “regulation as control” model, where they act as independent technocratic bodies solely focused on efficiency. This is particularly relevant in sectors with social and environmental objectives.

3. Parliamentary Grants Not Immune from Regulatory Consideration: A grant made under Article 282 does not create a perpetual immunity from being considered in tariff fixation. The grant reaches its destination when disbursed; regulatory treatment of the generator’s overall economics does not divert the grant.

4. Purposive Interpretation of “Take into Consideration”: The expression “shall take into consideration” in Regulation 20 does not mandate deduction; it requires the Commission to weigh the incentive in light of its purpose and then determine the appropriate treatment.

5. Collaborative Federalism in Electricity Regulation: The Court emphasised that the Union Government, State Governments, and independent regulators must work in tandem to achieve the goals of the Electricity Act, especially the transition to renewable energy.

8. The Court’s Analysis and Examination of Concepts

• Regulatory Power and Parliamentary Grants: The Court carefully examined the constitutional scheme of grants under Articles 112–114 and 282. It rejected the argument that factoring GBI into tariff would amount to “altering the destination” of the grant. The grant’s destination is the generator; once disbursed, it is within the generator’s control. Tariff determination, being a separate statutory function, does not impinge on the grant.

• Two Models of Regulation: The Court drew from academic literature (Paul Craig) to distinguish “regulation as control” (efficiency-focused, independent) from “regulation as an enterprise” (collaborative, social‑justice oriented). It held that in sectors with public goods and environmental concerns, the latter model is more appropriate.

• Harmonious Construction of Regulation 20 and GBI Scheme: The Court interpreted Regulation 20 in light of Section 61(h) (promotion of renewable energy) and the express purpose of the GBI Scheme (to incentivise generators). It concluded that deduction would defeat the very purpose of the incentive, and therefore “taking into consideration” meant respecting the incentive’s objective, not nullifying it.

• Doctrine of Merger and Finality: The Court noted that the tariff orders had already been passed and were not challenged on their merits; the APERC’s attempt to amend them after the fact was not warranted, especially when the amendment would undermine a statutory policy.

9. Critical Analysis of the Judgment

• Strength – Balancing Regulatory Autonomy with Policy Intent: The judgment strikes a fine balance: it affirms the SERC’s exclusive tariff‑fixing power, but reminds it that this power must be exercised in a manner that advances, not defeats, the legislative and policy goals of promoting renewable energy. This prevents regulatory capture and ensures that technical expertise does not operate in a vacuum.

• Adoption of “Regulation as Enterprise”: This is a significant jurisprudential shift. By embracing the collaborative model, the Court acknowledges that sectoral regulators cannot ignore the larger socio‑economic and environmental context. This will have implications for other regulated sectors (telecom, oil, etc.).

• Clarity on the Effect of Article 282 Grants: The Court’s reasoning that a grant under Article 282 is not a “shield” against regulatory action is important. It prevents the government from using grants to bypass regulatory frameworks, while also ensuring that regulators do not use their power to nullify grants.

• Potential Critique – Over‑reliance on Executive Policy: One could argue that the Court gave undue weight to the executive’s policy (GBI Scheme) over the statutory regulation (Regulation 20). However, the Court reconciled them by holding that Regulation 20 must be interpreted in light of the overall statutory objective of promoting renewable energy, which the GBI Scheme also subserves.

• Impact on Future Tariff Determinations: The judgment will guide SERCs to carefully evaluate the purpose of incentives before deducting them from tariff. It also encourages DISCOMs and generators to approach tariff determination with a view to the larger policy goals.

10. Final Outcome

The Supreme Court dismissed Civil Appeal No. 4495 of 2025 filed by the Southern Power Distribution Company. It upheld the judgment of the APTEL dated 19.12.2024, which had set aside the APERC’s order of 28.07.2018. Consequently, the GBI was held to be a generator incentive payable over and above the tariff determined by the SERC, and the deduction made by the DISCOMs was invalid. The Court directed that the amounts deducted be refunded with interest as per the APTEL’s order (12% per annum). Applications for intervention were allowed, and pending applications were disposed of.

11.  (MCQs)

1. Which of the following best describes the Supreme Court’s view on the nature of regulation under the Electricity Act, 2003?
a) Regulation is exclusively “regulation as control”, focusing only on efficiency and independence.
b) Regulation is “regulation as an enterprise”, where regulators collaborate with other stakeholders to achieve socio‑economic and environmental goals.
c) Regulation is a purely executive function with no independent role for the Commission.
d) Regulation is limited to fixing rates and does not involve policy considerations.

2. What was the effect of the APTEL’s order that was upheld by the Supreme Court?
a) It held that the GBI must be deducted from the tariff payable to the GENCOs.
b) It held that the GBI is a generator incentive over and above the tariff and cannot be deducted.
c) It held that the APERC had no power to consider the GBI at all.
d) It held that the GBI Scheme was unconstitutional.

3. Regulation 20 of the APERC’s 2015 Tariff Regulations states that the Commission “shall take into consideration” any incentive or subsidy. The Supreme Court interpreted this phrase to mean:?
a) A mandatory deduction of the incentive from the tariff.
b) A mandatory addition of the incentive to the tariff.
c) A contextual and purposive consideration, not necessarily a deduction.
d) That the Commission cannot consider the incentive at all.

4. The Supreme Court rejected the argument that factoring GBI into tariff would violate the constitutional scheme of parliamentary grants under Article 282 because:?
a) Article 282 grants are subject to judicial review.
b) The GBI reaches its intended destination when disbursed to the generator; tariff determination is a separate statutory function that does not divert the grant.
c) Article 282 does not apply to the electricity sector.
d) The GBI Scheme was not approved by Parliament.