Supreme Court dismissed GUVNL’s appeal, ruling it must follow public policy, not just profits. SC upheld GERC and APTEL’s orders on fair wind energy tariffs.
New Delhi: On August 4, the Supreme Court of India has ruled that Gujarat Urja Vikas Nigam Limited (GUVNL), a government-owned power company, cannot work only to protect its own financial interests like a private business.
Since it is a public sector company and a state-run body, it must behave like a “model citizen,” upholding the government’s renewable energy policies.
A two-judge bench comprising Justice Sanjay Kumar and Justice Satish Chandra Sharma made these strong remarks while dismissing GUVNL’s appeal.
The appeal had challenged a 2015 decision by the Appellate Tribunal for Electricity (APTEL), which had upheld earlier rulings of the Gujarat Electricity Regulatory Commission (GERC).
These rulings were in favour of four wind energy companies that had approached the GERC to fix the price of electricity that GUVNL would purchase from their renewable projects.
The Supreme Court clearly supported the stand taken by the GERC and APTEL. The main issue was whether these four companies had the right to approach the GERC for deciding the tariff (price) for selling wind power to GUVNL.
The GERC had ruled in favour of the companies, and APTEL had agreed. Now, the Supreme Court has also agreed with these decisions.
The judges highlighted that GUVNL is bound by the government’s policies to promote renewable energy and cannot ignore these duties just to make more profit. In the judgment, the bench stated:
“GUVNL cannot be guided only by its own commercial interests, like a private business entity and it’s conduct, as a State-instrumentality, must be of the standard of a model citizen.”
The court said that GUVNL was trying to treat the four companies unfairly by forcing them to accept a tariff (price per unit) that did not apply to them. The judges were critical of this approach and said:
“Such conduct, akin to a Shylock, does not reflect positively upon GUVNL.”
The Supreme Court also addressed GUVNL’s argument that the four companies had agreed to the earlier price and could not now ask for a new tariff.
GUVNL claimed that the companies had signed power purchase agreements (PPAs) at a fixed tariff applicable to projects that used the “accelerated depreciation” benefit under tax laws. But the court dismissed this argument, stating:
“As GUVNL failed to obtain commitments from the respondent companies that they would only avail accelerated depreciation at the time they had to choose that option, GUVNL has no indefeasible right to bind them to a tariff which was applicable only to such wind energy projects that availed accelerated depreciation.”
The court added that GERC had earlier made it very clear that the tariff of Rs 3.56 per kilowatt-hour was only for wind energy projects that used the accelerated depreciation benefit. Therefore, GUVNL could not apply that rate to companies that had not opted for that benefit. The bench remarked:
“GUVNL cannot apply that wholly inapplicable tariff to the respondent companies which, admittedly, did not avail accelerated depreciation. The orders passed by the GERC and the APTEL holding to this effect, therefore, do not brook any interference.”
The judges also reminded GUVNL of its role as a government entity, saying:
“It said GUVNL was an instrumentality of the state and, therefore, bound by its policy directives.”
They emphasized that GUVNL could not operate with purely profit-driven motives and ignore the larger policy objectives of the government. The court stated:
“It cannot advance commercial considerations in isolation on par with a private party, divorced from its responsibility to abide by and further the policy objectives of the state.”
Finally, while dismissing the appeals, the court also removed a restriction it had placed earlier in February 2023. That earlier order had allowed GERC to conduct tariff hearings but said that no final order could be passed without the Supreme Court’s permission. Now, that restriction has been lifted.
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