IN THE SUPREME COURT OF INDIA    CIVIL APPELLATE JURISDICTION    

CIVIL APPEAL NO. 684 OF 2007    

POWER GRID CORPORATION OF INDIA                             ...APPELLANT

VERSUS

TAMIL NADU GENERATION AND DISTRIBUTION               ...RESPONDENTS  CO. LTD. & ORS. ETC. ETC

WITH     

CIVIL APPEAL NO. 13452 OF 2015    

NTPC LIMITED     ...APPELLANT

VERSUS

CENTRAL ELECTRICITY REGULATORY                           ...RESPONDENTS COMMISSION AND ORS.                                                                     

J U D G M E N T    

N.V.RAMANA, J.    

Civil Appeal No.684 of 2007

1. The present appeal arises out of the decisions of the Central

Electricity Regulatory Commission, New Delhi [“CERC”] wherein

an issue relating to capitalization of Foreign Exchange Rate

REPORTABLE

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Variation [“FERV”] was determined by the Commission and

thereafter affirmed in a review petition,  vide  orders dated

30.06.2003 and 04.12.2003 respectively. On appeal, the

Appellate Tribunal for Electricity, New Delhi vide judgment dated

04.10.2006 in Appeal Nos. 135­140 of 2005, approved the

methodology for ascertaining the FERV; however, with respect to

apportionment of the FERV, the appeal was allowed and FERV

was directed to be apportioned only in respect of debt liability. It

is this judgment  of the  Appellate  Tribunal for  Electricity,  New

Delhi which is in challenge before us.

2. The appellant is a transmission company which plans,

executes and makes available transmission systems for

conveyance of power from one place to another. The tariff which

it charges for the conveyance is fixed by the CERC. FERV is a

pass through which is kept to ensure that any liability or gain by

virtue of fluctuation in foreign exchange rates passes to the

beneficiary in a staggered manner.  

3. The limited issue before us is apportionment of FERV into

debt and equity after FERV has been calculated and added to

capital cost.

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4. The learned counsel on behalf  of the appellant contended

that any foreign exchange gets added to the capital cost and not

individually to debt or equity. This capital cost is thereafter

divided into debt and equity, on the basis of a normative debt­

equity ratio. As a natural corollary, even the FERV needs to be

apportioned both towards debt and equity. Further, he contends

that FERV has been apportioned as such, as a matter of practice.

5. On the other hand, the learned counsel for respondent no.1

disputed the existence of such practice. He contended that the

Electricity Regulatory  Commissions Act, 1998 [“the Act”] was

enacted to do away with such practices. He referred to

Regulations 1.3 and 1.7 of Tariff Regulations, 2001 and argued

that liability accrued on account of FERV can be recovered by the

appellants directly from respondent  no.1 and the question of

capitalization of FERV does not arise.  

6. Having heard the counsels and from a detailed perusal of

the record, at the outset,  we note that the present question

regarding the apportionment of FERV between debt and equity is

not a question of law, much less a substantial question of law.

Regulation 1.13(a) of Central Electricity Regulatory Commission

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(Terms and Conditions of Tariff) Regulations, 2001 [“Tariff

Regulations, 2001”] which has been cited before us to buttress

the argument of apportionment of FERV does not in fact provide

for apportionment of FERV and rather, is restricted only to the

methodology of calculation of FERV. This methodology of FERV

calculation is not in challenge before us and has already been

affirmed by the CERC as well as the Appellate Tribunal for

Electricity, New Delhi. No rule, regulation, statute or precedent

has been cited before us to substantiate the argument that post

calculation FERV needs to be necessarily apportioned in a debt­

equity ratio, much less to substantiate what exactly this ratio is

and on  what factors the same is determined. Thus, on this

ground alone, for lack of  a  substantial  question of law, these

appeals ought to be dismissed.

7. In any case, once the FERV is calculated, in terms of

Regulations 1.3 and 1.7 of the Tariff Regulations, 2001, the same

can be recovered by the appellants from respondent no.1 without

even filing a petition before the CERC. Regulations 1.3 and 1.7 of

Tariff Regulations, 2001 provide as under:

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“1.3  These Regulations shall apply  where the capital cost­based tariff is determined by the Commission.

… 1.7  Recovery of Income Tax and Foreign Exchange Rate Variation shall be done directly by the utilities from the beneficiaries without filing a petition before the Commission. In case of  any objections by  the beneficiaries to the  amounts  claimed on these counts, they  may file an appropriate petition before the Commission.”

(emphasis supplied)

8. This has not been done in the present case, i.e., Civil Appeal

No. 684 of 2007. Further, FERV is sought to be capitalized by the

appellant in the normative debt­equity ratio of 50:50 as a matter

of practice, without citing any rule, regulation, statute or

precedential law.  

9. This observation becomes pertinent in light of the fact that

the  Act  was introduced to reform  the  problems in the  power

sector prior to 1998,  inter alia, the lack of rational retail tariffs,

poor planning and operation, the neglect of the consumer and the

absence  of an independent regulatory authority. The  Act also

aimed at  protecting  and improving the financial  health  of the

State Electricity Boards, which were losing heavily on account of

irrational tariffs and lack of budgetary support. Thus, noting the

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premise on which the Act was enacted and the fact that the Tariff

Regulations, 2001 prescribed under the aegis of this Act do not

provide  for  apportionment  of  FERV  in a particular  debt­equity

ratio, this Court is not inclined to interfere in the matter.

10. Further, the  present  dispute  arises  with respect to tariff

charged between 01.04.2001 and 31.03.2004 on account of

FERV calculation and apportionment. Any variation in the

apportionment of FERV now, for the abovementioned period, will

consequently be passed on to the consumers. This will be unfair

to the consumers who were not consumers for the

abovementioned period but will eventually bear the brunt of

transactions which took place 15­18 years ago. This is another

ground for non­interference in the present  matter [See  U.P.

Power Corpn. Ltd. v. NTPC Ltd., (2009) 6 SCC 235].

11. In light of the abovementioned observations, the appeal is

dismissed. No order as to costs.

Civil Appeal No. 13452 of 2015

12. This appeal is preferred against the impugned judgment and

order dated 18.08.2015 passed  by the  Appellate Tribunal for

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Electricity  whereby the  appeal  preferred  by the  appellant  was

dismissed. Further, the order of the CERC was upheld by

observing that the CERC has rightly applied the decision dated

04.10.2006, which is the same order that is impugned in Civil

Appeal No. 684 of 2007, to the instant matter and directed that

the entire FERV should be apportioned only in respect of debt

liability. Thus, the issue  being the same, this appeal is also

dismissed in a sequel to the discussion set out above. No order as

to costs.

                                                    .........................J.        (N.V. RAMANA)

 ........................J.

(MOHAN M. SHANTANAGOUDAR)

........................J. (INDIRA BANERJEE)

NEW DELHI; MAY 09, 2019.

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