# RELIANCE INFRASTRUCTURE LIMITED v. STATE OF MAHARASHTRA AND ORS

- **Citation:** [2019] 1 S.C.R. 886
- **Court:** Supreme Court of India
- **Decided:** 2019-01-21
- **Case number:** Civil Appeal No. 879 of 2019
- **Bench:** Dr. Dhananjaya Y Chandrachud, Hemant Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/reliance-infrastructure-limited-v-state-of-maharashtra-and-ors-33442
- **Pages:** 34

## Headnote

MERC (Multi Year Tariff) Regulations, 2011 - Regn. 44.2(d) -
Jurisdiction to decide validity of regulations - The grievance of the
appellant arises from the fact that regn. 44.2(d) prescribed a tighter
standard for its thermal generating station Dahanu TPS as compared
to other generating stations in the State - Petition filed by the
appellant before Maharashtra Electricity Regulatory Commission
(MERC) - Appellant requested for relaxation of the norms and to
bring it in the line with the normative Station Heat Rate (SHR) -
MERC held that it had considered the norms for SHR based on the
MYT regulations and it did not find any merit in altering the MYT
norms for SHR - The appellant filed an appeal u/s.111 of the
Electricity Act 2003 before the Appellate Tribunal for Electricity
(APTEL) - Also, appellant instituted a Writ petition u/Art.226 of the
Constitution before the Bombay High Court for the purpose of
challenging regn 44.2(d) which specifies a separate SHR for the
Dahanu TPS as compared to other generating stations in the State
- The High Court dismissed the Writ petition and imposed costs of
Rs. 1 lakh on the appellant, and held that having approached the
Appellate Tribunal for Electricity, the appellant was not justified in
moving the High Court u/Art.226 "on the same issue" when the
Tribunal was in a position to provide adequate relief - On appeal,
held: The position in law is established by the judgment of
Constitution Bench in PTC India Limited case that while the Tribunal
may decide upon a dispute involving the interpretation of a
regulation, for which an appeal under Section 111 of the Act would
be maintainable, no appeal can lie before the Tribunal on the validity
of a regulation - Thus, High Court was not right in holding that the
Writ petition u/Art.226 was not maintainable - Indeed, a challenge
to the validity of the regulations framed by the MERC could lie only
before the High Court - Thus, the imposition of costs for having
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adopted the remedy u/Art.226 was unjustified - However, there is
no infirmity in the impugned regulation and accordingly ultimate
conclusion of the High Court to dismiss the Writ petition u/Art.226
affirmed - Electricity Act, 2003 - ss.61, 82, 111 and 181 - MERC
(Terms and Conditions of Tariff) Regulations, 2005 - National Tariff
Policy, 2006 - Constitution of India - Art.226 - Jurisdiction.
MERC (Multi Year Tariff) Regulations, 2011 - Regn. 44.2(d)
- Validity of - Plea of discrimination by the appellant - The grievance
of the appellant arises from the fact that a tighter standard or norm
has been prescribed for its thermal generating station Dahanu TPS
as compared to other generating stations in the State - The
discrimination, according to the appellant, lied in a statutory
regulations determining the Station Heat Rate (SHR) - Held: The
power to frame regulations is of a legislative nature - The Central
Power Research Institute (CPRI) report was an input before the
Maharashtra Electricity Regulatory Commission (MERC) in carrying
out that exercise - MERC followed the statutory procedures laid
down for the determination of tariffs - It took into account factors
which it is mandated by the statute to consider - The National Tariff
Policy, suggestions of stakeholders as well as the assessment carried
out by the CPRI were duly considered - Thus, the present case does
not fall in the paradigm of manifest unreasonableness or
arbitrariness to warrant the interference of the Supreme Court -
Regulation 44.2(d) of the MERC (Multi Year Tariff) Regulations,
2011 does not suffer from any constitutional or statutory infirmity -
National Tariff Policy, 2006.
On 04.02.2011, the MERC (Multi Year Tariff) Regulations,
2011 were notified. Regulation 44 provides norms for the
operation of thermal generating stations. Regulation 44.2
stipulates gross station heat rates for existing generating stations.
The above regulation indicated that save and except for the
exclude

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RELIANCE INFRASTRUCTURE LIMITED
v.
STATE OF MAHARASHTRA AND ORS.
(Civil Appeal No. 879 of 2019)
JANUARY 21, 2019
[DR. DHANANJAYA Y CHANDRACHUD
AND HEMANT GUPTA, JJ.]
MERC (Multi Year Tariff) Regulations, 2011 - Regn. 44.2(d) -
Jurisdiction to decide validity of regulations - The grievance of the
appellant arises from the fact that regn. 44.2(d) prescribed a tighter
standard for its thermal generating station Dahanu TPS as compared
to other generating stations in the State - Petition filed by the
appellant before Maharashtra Electricity Regulatory Commission
(MERC) - Appellant requested for relaxation of the norms and to
bring it in the line with the normative Station Heat Rate (SHR) -
MERC held that it had considered the norms for SHR based on the
MYT regulations and it did not find any merit in altering the MYT
norms for SHR - The appellant filed an appeal u/s.111 of the
Electricity Act 2003 before the Appellate Tribunal for Electricity
(APTEL) - Also, appellant instituted a Writ petition u/Art.226 of the
Constitution before the Bombay High Court for the purpose of
challenging regn 44.2(d) which specifies a separate SHR for the
Dahanu TPS as compared to other generating stations in the State
- The High Court dismissed the Writ petition and imposed costs of
Rs. 1 lakh on the appellant, and held that having approached the
Appellate Tribunal for Electricity, the appellant was not justified in
moving the High Court u/Art.226 "on the same issue" when the
Tribunal was in a position to provide adequate relief - On appeal,
held: The position in law is established by the judgment of
Constitution Bench in PTC India Limited case that while the Tribunal
may decide upon a dispute involving the interpretation of a
regulation, for which an appeal under Section 111 of the Act would
be maintainable, no appeal can lie before the Tribunal on the validity
of a regulation - Thus, High Court was not right in holding that the
Writ petition u/Art.226 was not maintainable - Indeed, a challenge
to the validity of the regulations framed by the MERC could lie only
before the High Court - Thus, the imposition of costs for having
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adopted the remedy u/Art.226 was unjustified - However, there is
no infirmity in the impugned regulation and accordingly ultimate
conclusion of the High Court to dismiss the Writ petition u/Art.226
affirmed - Electricity Act, 2003 - ss.61, 82, 111 and 181 - MERC
(Terms and Conditions of Tariff) Regulations, 2005 - National Tariff
Policy, 2006 - Constitution of India - Art.226 - Jurisdiction.
MERC (Multi Year Tariff) Regulations, 2011 - Regn. 44.2(d)
- Validity of - Plea of discrimination by the appellant - The grievance
of the appellant arises from the fact that a tighter standard or norm
has been prescribed for its thermal generating station Dahanu TPS
as compared to other generating stations in the State - The
discrimination, according to the appellant, lied in a statutory
regulations determining the Station Heat Rate (SHR) - Held: The
power to frame regulations is of a legislative nature - The Central
Power Research Institute (CPRI) report was an input before the
Maharashtra Electricity Regulatory Commission (MERC) in carrying
out that exercise - MERC followed the statutory procedures laid
down for the determination of tariffs - It took into account factors
which it is mandated by the statute to consider - The National Tariff
Policy, suggestions of stakeholders as well as the assessment carried
out by the CPRI were duly considered - Thus, the present case does
not fall in the paradigm of manifest unreasonableness or
arbitrariness to warrant the interference of the Supreme Court -
Regulation 44.2(d) of the MERC (Multi Year Tariff) Regulations,
2011 does not suffer from any constitutional or statutory infirmity -
National Tariff Policy, 2006.
On 04.02.2011, the MERC (Multi Year Tariff) Regulations,
2011 were notified. Regulation 44 provides norms for the
operation of thermal generating stations. Regulation 44.2
stipulates gross station heat rates for existing generating stations.
The above regulation indicated that save and except for the
excluded categories set out in clauses (b), (c) and (d), the Station
Heat Rate (SHR) for existing coal based thermal generating
stations is pegged at a uniform level of 2450 kCal/kWh (for 200/
210/250 MW sets) and 2425 kCal/kWh (for 500 MW sets and
above). As opposed to the uniform criterion of 2450 kCal/kWh in
Regulation 44.2(a), the SHR for the Dahanu TPS was varied
between 2350 in financial year 2011-12 to 2370 in financial year
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2015-16. It was this prescription of a more stringent SHR in the
case of R-Infra's Dahanu TPS which forms the focus of dispute in
the present case.
Disposing of the appeal, the Court
HELD: 1. On the maintainability of the petition under Article
226 of the Constitution, the High Court, has overlooked the
position in law established by the judgment of a Constitution
Bench of this Court in PTC India Limited v Central Electricity
Regulatory Commission. The Constitution Bench considered
whether the Appellate Tribunal for Electricity has jurisdiction to
decide upon the validity of the regulations framed by the Central
Electricity Regulatory Commission (CERC). CERC has been
entrusted with the power to frame regulations under Section 178
of the Electricity Act 2003. The Constitution Bench held that the
validity of a regulation framed under Section 178 can be tested
only before the court exercising judicial review. While the
Tribunal may decide upon a dispute involving the interpretation
of a regulation, for which an appeal under Section 111 of the Act
would be maintainable, no appeal can lie before the Tribunal on
the validity of a regulation. [Para 18][905-E-H]
2. In view of the legal position settled by the Constitution
Bench, the High Court was not justified in disparaging the
appellant for taking recourse to a constitutional remedy under
Article 226. Indeed, a challenge to the validity of the regulations
framed by the Maharashtra Electricity Regulatory Commission
(MERC) could only lie before the High Court. Hence, the
imposition of costs for having adopted the remedy under Article
226 was unjustified. There was no suppression of fact on the
part of the appellant which had indicated the recourse it had taken
in the appeal before the Tribunal, arising from its prayer for
relaxation of the Station Heat Rate (SHR) norms before MERC.
The plea before the Appellate Tribunal was for relaxation of the
SHR norms. The plea before the High Court was that the SHR
fixed was discriminatory and ultra vires. Undoubtedly, if the
appellant were to succeed before the Tribunal, it would perhaps
obviate the challenge in the High Court. The appellant, did not
press ahead with its plea before the Tribunal. Hence, the writ
petition could not have been held not to be maintainable.
[Para 18][906-G-H; 907-A-B]
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3. The substratum of the case of the appellant is founded
on a plea of discrimination. Simply put, the plea is founded on
the hypothesis that the Central Power Research Institute (CPRI)
report regarded the units of Dahanu TPS (DTPS) as identical to
Parli Unit 6 and Paras Unit 3 (of MSPGCL) and Trombay Unit 8
(of TPC-G). The observations contained in the Central Power
Research Institute (CPRI) report must be read in their entirety.
The fact that the manufacturing specifications of the units may be
similar (assuming they are so) is only one aspect of the total range
of considerations which are required to be borne in mind under
the terms of the National Tariff Policy notified u/s. 3 of the
Electricity Act 2003. The tariff policy requires that the operating
norms should be efficient, relatable to past performance, capable
of achievement and progressively reflect increased efficiencies.
They may also take into consideration technical advancements,
fuel, vintage of equipment, nature of operations and the level of
service among other factors. Appellant laid emphasis on clause
5.3(f) of the National Tariff Policy where it prescribes that the
operating parameters and tariffs should be at "normative levels"
only and not at the "lower of normative and actuals" except in
the case of those units governed by para 5.3(h)(2). This
submission will not, however, carry the case of the appellant any
further. Normative levels are those which are fixed by the
application of the standards guided by the terms of the tariff policy
while actual levels are those which have been achieved as a matter
of fact, in the past. The emphasis in the tariff policy is on creating
incentives for achieving higher efficiency in order to enable the
ultimate consumer to have the benefit of efficient operations.
[Para 29][915-G-H; 916-A-D]
4. MERC is an expert body which is entrusted with the
duty and function to frame regulations, including the terms and
conditions for the determination of tariff. The Court, while
exercising its power of judicial review, can step in where a case
of manifest unreasonableness or arbitrariness is made out.
Similarly, where the delegate of the legislature has failed to follow
statutory procedures or to take into account factors which it is
mandated by the statute to consider or has founded its
determination of tariffs on extraneous considerations, the Court
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in the exercise of its power of judicial review will ensure that the
statute is not breached. However, it is no part of the function of
the Court to substitute its own determination for a determination
which was made by an expert body after due consideration of
material circumstances. [Para 30][917-F-G]
5. The power to frame regulations is of a legislative nature.
The CPRI report was an input before the MERC in carrying out
that exercise. MERC followed the statutory procedures laid down
for the determination of tariffs. It took into account factors which
it is mandated by the statute to consider. The national tariff policy,
suggestions of stakeholders as well as the assessment carried
out by the CPRI were duly considered. Hence, the present case
does not fall in the paradigm of manifest unreasonableness or
arbitrariness to warrant the interference of this Court. It would
be rather formulaic for the Court to accept that merely because
DTPS was placed at par in the immediately previous period (200607) and the period immediately succeeding (2016-20), that this
must necessarily be extrapolated to the intervening period
governed by the MYT Regulations 2011. A body which is
entrusted with the task of framing subordinate legislation has a
range of options including policy options. If on an appraisal of all
the guiding principles, it has chosen a particular line of logic or
rationale, this Court ought not to interfere. [Para 31][918-D-F]
5. Thus, this Court has come to the conclusion that
regulation 44.2(d) of the MERC (Multi Year Tariff) Regulations,
2011 does not suffer from any constitutional or statutory infirmity.
However, the ultimate decision of the High Court to dismiss the
writ petition is affirmed. The High Court was not right in holding
that the writ petition under Article 226 was not maintainable and
accordingly the direction on the imposition of costs is set aside.
However, this Court holds that there is no infirmity in the
impugned regulation and accordingly affirm the ultimate
conclusion of the High Court to dismiss the writ petition under
Article 226. [Para 32][918-F-H]
PTC India Limited v. Central Electricity Regulatory
Commission (2010) 4 SCC 603 : [2010] 3 SCR 609 -
followed.
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Transmission Corporation of Andhra Pradesh Ltd. v.
Sai Renewable Power Pvt. Ltd. (2011) 11 SCC 34 :
[2010] 8 SCR 636; Association of Industrial Electricity
Users v. State of Andhra Pradesh (2002) 3 SCC 711 :
[2002] 2 SCR 273 - relied on.
Case Law Reference
[2010] 3 SCR 609
followed
Para 18
[2010] 8 SCR 636
relied on
Para 30
[2002] 2 SCR 273
relied on
Para 30
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 879 of
2019.
From the Judgment and Order dated 18.04.2016 of the High Court
of Judicature at Bombay in Writ Petition No. 2474 of 2013.
P. Chidambaram, S. K. Rungta, Sr. Advs., Ms. Anjali Chandurkar,
Hasan Murtaza, Ms. Divya Anand, Kartik Anand, Alok Kumar, Ankur
Kashyap, Rajesh Kumar, A. V. Rangam, Buddy A. Ranganadhan,
Ms. Stuti Krishn, Ms. Deepa M. Kulkarni, Nishant R. Katneshwarkar,
Advs. for the appearing parties.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J. 1. Leave
granted.
2. The validity of a tariff regulation framed by the Maharashtra
Electricity Regulatory Commission (MERC) was questioned before the
High Court of Judicature at Bombay. Bereft of jargon - both legal and
scientific - the plea of the appellant is of discrimination. The
discrimination, according to the appellant, lies in a statutory regulation
determining the Station Heat Rate. According to the appellant, its thermal
power station at Dahanu has been subjected to a more stringent norm
than other comparable units. MERC, it is asserted, breached the National
Tariff Policy 2006. The High Court held against the appellant both on
the maintainability of its writ petition under Article 226 of the Constitution
and on the merits of the challenge to the validity of the statutory regulation.
The case has thus travelled to this Court.
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3. The Electricity Act 2003 came into force on 10 June 2003.
Electricity Regulatory Commissions constituted under Section 82 are
empowered to frame regulations under Section 181, including the terms
and conditions for determination of tariff under Section 611. The MERC
framed the MERC (Terms and Conditions of Tariff) Regulations 20052
for a period of five years, upto financial year 2010-11. The regulations,
in so far as the appellant is concerned were extended for a further period
of one year upto financial year 2011-12.
4. Regulation 33.1.3 prescribed the Station Heat Rate (SHR).
The SHR is the heat energy required to generate one unit of electrical
energy. The SHR is significant because it represents the ratio between
heat input and the energy output. SHR has a co-relationship with
efficiency: a higher SHR reflects comparative inefficiency while a
reduction in the SHR is associated with increasing levels of efficiency.
In the Tariff Regulations 2005, the gross SHR was defined in the following
terms:
"33.1.3. Gross station heat rate
(a) Gross station heat rate for coal-based generating stations
Note 1:
In respect of 500 MW and above units where the boiler feed
pumps are electrically operated, the gross station heat rate shall be 40
kCal/kWh lower than the station heat rate indicated above.
Note 2:
For generating stations having combination of 200/210/250 MW
seats and 500 MW and above sets, the normative gross station heat rate
shall be the weighted average station heat rate."
In the above regulations, uniform norms were fixed for all coal
based thermal generating stations, without any distinction between
individual generating stations. The norm applicable to the Dahanu Thermal
200/210/250 MW sets
500 MW and above sets
During stabilization
Period
2600 kCal/kWh
2550 kCal/kWh
Subsequent period
2500 kCal/kWh
2450 kCal/kWh
 1 Section 181(2)(zd)
 2 Tariff Regulations 2005
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Power Station of the appellant was 2500 kCal/kWh. This norm also
applied to other generating stations in the State of Maharashtra.
5. On 6 January 2006 the Union of India in the Ministry of Power
notified the National Tariff Policy under Section 3 of the Electricity Act
2003. The policy, inter alia, spelt out the general approach to be followed
for the purpose of determining tariffs including operating norms for
generating stations. Clause 4 of the policy laid out its objectives in the
following terms:
"(a) Ensure availability of electricity to consumers at reasonable
and competitive rates;
(b) Ensure financial viability of the sector and attract investments;
(c) Promote transparency, consistency and predictability in
regulatory approaches across jurisdictions and minimise
perceptions of regulatory risks;
(d) Promote competition, efficiency in operation and improvement
in quality of supply."
Clause 5.0 spells out the "general approach to tariff". Clause 5(f)
stipulates operating norms:
"(f) Operating Norms
Suitable performance norms of operations together with incentives
and dis-incentives would need be evolved along with appropriate
arrangement for sharing the gains of efficient operations with the
consumers. Except for the cases referred to in para 5.3 (h)(2),
the operating parameters in tariffs should be at "normative levels"
only and not at "lower of normative and actuals". This is essential
to encourage better operating performance. The norms should be
efficient, relatable to past performance, capable of achievement
and progressively reflecting increased efficiencies and may also
take into consideration the latest technological advancements, fuel,
vintage of equipments, nature of operations, level of service to be
provided to consumers etc. Continued and proven inefficiency
must be controlled and penalized. The Central Commission would,
in consultation with the Central Electricity Authority, notify
operating norms from time to time for generation and transmission.
The SERC would adopt these norms. In case where operations
have been much below the norms for many previous years, the
ve sets
Wh
Wh
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SERCs may fix relaxed norms suitably and draw a transition path
over the time for achieving the norms notified by the Central
Commission.
Operating norms for distribution networks would be notified by
the concerned SERCs. For uniformity of approach in determining
such norms for distribution, the Forum of Regulators should evolve
the approach including the guidelines for treatment of state specific
distinctive features."
Clause 5 (h) adverts to the Multi Year Tariff:
"(h) Multi Year Tariff
(1) Section 61 of the Act states that the Appropriate Commission,
for determining the terms and conditions for the determination of
tariff, shall be guided inter-alia, by multi-year tariff principles. The
MYT framework is to be adopted for any tariffs to be determined
from April 1, 2006. The framework should feature a five-year
control period. The initial control period may however be of 3
year duration for transmission and distribution if deemed necessary
by the Regulatory Commission on account of data uncertainties
and other practical considerations. In cases of lack of reliable
data, the Appropriate Commission may state assumptions in MYT
for first control period and a fresh control period may be started
as and when more reliable data becomes available.
(2) In cases where operations have been much below the norms
for many previous years, the initial starting point in determining
the revenue requirement and the improvement trajectories should
be recognised at "relaxed" levels and not the "desired" levels.
Suitable benchmarking studies may be conducted to establish the
"desired" performance standards. Separate studies may be
required for each utility to assess the capital expenditure necessary
to meet the minimum service standards..."
6. In August 2009, MERC published a 'draft approach paper' for
the purpose of enacting multi year tariff regulations for financial years
2010-11 to 2014-15. On 23 October 2009, the appellant furnished its
suggestions. In 2010, MERC commissioned a report from the Central
Power Research Institute (CPRI) for ascertaining achievable
performance parameters for thermal power plants in Maharashtra and
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to suggest improvements. CPRI carried out an independent assessment
in respect of the plant of the appellant (DTPS), Tata Power (Generation)
- TPCG, and Maharashtra State Power Generation Company Limited
(MSPGCL). According to the appellant, no recommendation was made
in respect of their plant since it was performing better than the prescribed
SHR.
7. In July 2010, MERC published another draft approach paper in
regard to the proposed multi year tariff regulations for financial years
2011-12 to 2015-16 together with draft regulations. On 26 October 2010,
the appellant made submissions on the draft approach paper. On 4
February 2011, the MERC (Multi Year Tariff) Regulations, 20113 were
notified. Regulation 2(32) defines the Gross Station Heat Rate thus:
"(32) "Gross Station Heat Rate" means the heat energy input in
kcal required to generate one kWh of electrical energy at generator
terminals."
Regulation 44 provides norms for the operation of thermal
generating stations. Regulation 44.2 stipulates gross station heat rates
for existing generating stations in the following terms:
"44.2 Gross Station Heat Rate - For existing Generating Stations:
a) Existing Coal-based Thermal Generating Stations, other than
those covered under clauses (b), (c) and (d), below:
Note 1
In respect of 500 MW and above Units, where the boiler feed
pumps are electrically operated, the gross Station Heat Rate shall
be 40 kcal/kWh lower than the gross Station Heat Rate indicated
above.
Note 2
For Generating Stations having combination of 200/210/250 MW
sets and 500 MW and above sets, the normative gross Station
Heat Rate shall be the weighted average station heat rate.
200/210/250 MW sets
500 MW and above sets
2450 kcal/kWh
2425 kcal/kWh
 3 Tariff Regulations 2011
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b) Thermal Generating Stations of Maharashtra State Power
Generation Company Ltd. (MSPGCL):
 K cal/kWh
Provided that the Commission may revise the norms for heat rate
for the above mentioned Generating Stations in case of Renovation
& Modernisation undertaken for the Generating Station.
c) Thermal Generating Units of the Tata Power Company Ltd.
Generation Business (TPC-G):
 K cal/kWh
* In case variation in Oil and Gas mix is more than +/- 5%, the
Heat Rate for Unit 6 shall be approved considering the actual Oil
and Gas Mix.
Year
Koradi Khaperkheda Chandrapur Nasik Bhusawal Paras
excluding
Unit
No.3
Parli
excluding
Unit
No.6
FY 201011
2965
2560
2617
2722
2734
3186
2745
FY 201112
2975
2568
2626
2731
2742
3199
2753
FY 201213
2985
2575
2635
2740
2751
3212
2762
FY 201314
2873
2424
2539
2664
2671
3225
2679
FY 201415
2881
2429
2544
2670
2677
3237
2684
FY 201516
2889
2433
2549
2677
2683
3250
2690
Year
Unit-4
Unit-5
Unit-6
With Oil & Gas
mix.in
proportion
of
50:50*
FY 2011-12
2570
2575
2519
FY 2012-13
2576
2583
2524
FY 2013-14
2581
2591
2529
FY 2014-15
2586
2573
2534
FY 2015-16
2591
2581
2539
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d) Thermal Generating Station of Reliance Infrastructure Ltd.-
Generation Business (RInfra-G):
K cal/kWh
"
8. The above regulation indicates that save and except for the
excluded categories set out in clauses (b), (c) and (d), the SHR for
existing coal based thermal generating stations is pegged at a uniform
level of 2450 kCal/kWh (for 200/210/250 MW sets) and 2425 kCal/kWh
(for 500 MW sets and above). The excluded categories are the generating
stations of (i) MSPGCL; (ii) TPC - G; and (iii) RInfra-G. As the table in
clause (b) of Regulation 44.2 indicates, a relaxed standard for the SHR
has been prescribed for the units of MSPGCL. However, there is an
exclusion within the exclusion for Unit 3 at Paras and Unit 6 at Parli,
since these units are governed by the uniform criterion prescribed in
clause (a). The dispensation for Units 4, 5 and 6 of TPC-G is prescribed
in clause (c). For Unit 8 of TPC-G, the applicable SHR is in terms of the
uniform rate of 2450 kCal/kWh, since this unit is not specified in clause (c).
9. The grievance of the appellant arises from the fact that a tighter
standard or norm has been prescribed for its Dahanu TPS. As opposed
to the uniform criterion of 2450 kCal/kWh in Regulation 44.2(a), the
SHR for the Dahanu TPS varies between 2350 in financial year 2011-12
to 2370 in financial year 2015-16. Essentially, it is this prescription of a
more stringent SHR in the case of R-Infra's Dahanu TPS which forms
the focus of dispute in the present case.
10. In order to buttress its grievance of discrimination, the appellant
has relied upon the Multi Year Tariff regulations notified by MERC for
the previous period (2005-10) and for the subsequent period (2016-21).
The MERC (Multi Year Tariff) Regulations 20154 which govern the
Gas
of
Year
Dahanu TPS
FY 2011-12
2350
FY 2012-13
2355
FY 2013-14
2360
FY 2014-15
2365
FY 2015-16
2370
 4 Tariff Regulations 2015
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period 1 April 2016 to 31 March 2020 place the Dahanu TPS of RInfraG at par with other coal-based thermal generating stations. Regulation
44.4 is in the following terms:
"44.4 Gross Station Heat Rate for existing coal-based thermal
Generating Stations, other than those covered under Regulation
44.5 and 44.6 shall be:
Note 1
In respect of 500 MW Units, where the boiler feed pumps are
electrically operated, the Gross Station Heat Rate shall be 40 kcal/
kWh lower than the gross Station Heat Rate specified above.
Note 2
For Generating Stations having combination of 200/210/250 MW
sets and 300 MW and 500 MW sets, the normative gross Station
Heat Rate shall be weighted average Station Heat Rate."
Regulation 44.5 contains the SHR for the coal based thermal
generating stations of MSPGCL. Regulation 44.6 specifies the SHR for
TPC-G. Regulations 44.5 and 44.6 are extracted below:
"44.5 Gross Station Heat Rate for existing coal-based thermal
Generating Stations of Maharashtra State Power Generation
Company Ltd. (MSPGCL) shall be:
Provided that the Commission may revise the Gross Station Heat
Rate norms for these Generating Stations in case any Renovation
& Modernization is undertaken.
200/210/250 MW
sets
300 MW sets
500 MW sets (subcritical boilers)
2450 kcal/kWh
2400 kcal/kWh
2375 kcal/kWh
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44.6 Gross Station Heat Rate for existing thermal Generating
Stations of The Tata Power Company Ltd- Generation Business
(TPC-G) shall be:
*In case variation in Oil and Gas mix is more than +/- 5%,
the Gross Station Heat Rate for Unit 6 shall be approved
considering the actual Oil and Gas Mix."
In Regulation 44.5, Units 4 and 5 at Bhusawal and Units 6 and 7
at Parli have been excluded. Similarly, Unit 8 for TPC-G is excluded
from the SHR in Regulation 44.6.
11. In order to complete the narration, it may be noted that on 2
September 2011, MERC passed an order on a petition filed by the
appellant for deferring the implementation of the MYT regulations. On
5 May 2012, the appellant submitted a petition for approval of its business
plan for financial years 2010-11 to 2015-16. The appellant requested
that the norm should be relaxed and brought in line with the normative
SHR. On 25 October 2012, MERC passed an order on the MYT
Business Plan for RInfra-G stating that it had considered the norms for
SHR based on the MYT regulations. MERC held thus:
"Station heat rate
4.5.2
RInfra-G submitted that MYT Regulations, 2011 framed the norms
for DTPS based on the plant's historical performance. RInfra-G
submitted that it believes that all operating parameters, "norms"
including the secondary oil consumption, auxiliary energy
consumption, station heat rate and transit loss should be specified
to create a level playing field and bring discipline for regulated
entities for the benefit of beneficiaries of the state. RInfra-G
submitted that the essence of the norms should be to create
s (subilers)
kWh
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benchmarks based on industry-wide performance and let the
market to reward or penalize the performance of the utilities visà-vis those benchmarks. RInfra-G further submitted that such
mechanism will not only force underperforming utilities to perform
but also bring the competitive price of power in the market in
overall benefit of consumers.
4.5.3
In its Petition under Case No.45 of 2011, RInfra-G had raised the
issue of specifying separate norms for SHR of DTPS in the MYT
Regulations, 2011 and argued that any norm for generating stations
should be made based on performance of the industry as a whole
and should not be specific to a plant based on its historical
performance.
4.5.4
RInfra-G submitted that specific relaxations from the norms can,
however, be provided considering the specific issues of any given
plant. In the said Petition, RInfra-G also highlighted the SHR norms
adopted by other Regulatory Commissions to bring out its point
that the SHR norms should be linked with unit size and ageing and
not driven by the performance of the generating company. RInfraG further added that the tightening of the norms for efficient
generating plant is against the principle of equality and rewarding
efficiency.
4.5.5
Accordingly, RInfra-G has requested the Commission not to tighten
the norms for DTPS and retain it at industrial normative level of
2450 kCal/kWh. RInfra-G submitted that the Commission, in its
Order in Case No.45 of 2011 dated 2 September, 2011 on the said
Petition did not provide any specific ruling on the said contention
of RInfra-G; however stated that the Commission could invoke
its powers alter the MYT norms for SHR and OEM cost, if
required.
4.5.6
The Commission is of the view that norms can be fixed station
wise based on the historical performance of the plant. The SHR
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of the plant is dependent on the age of the plant, the technology
used, the capital expenditure incurred overhauling the plant, regular
repair and maintenance expenditure incurred and various other
factors. Hence, there could be wide variations on SHR across
plants. Further, if the Commission derives the benchmark
considering only the industry-wide performance capital and
operating expenditures incurred, the generating company may not
have sufficient motivation to continue to operate as efficiently as
it had been in the past. Therefore, a balanced approach is to provide
a target which will adequately motivate the generating plant to
perform at existing levels or better and still have room for earning
incentives. Moreover, the MYT Regulations, 2011 have been
finalised after following appropriate regulatory process after
considering and deliberating on the views of all stakeholders on
various issue. Considering all the facts discussed above, the
Commission does not find any merit in altering the MYT norms
for SHR. Therefore, though RInfra-G has proposed a SHR of
2,450 kCal/kWh, the Commission has considered the SHR as per
the MYT Regulations, 2011.
4.5.7
For FY 2011-12, the Commission has considered the SHR as
approved in the ARR Order in Case No.163 of 2011. The SHR
approved by the Commission for RInfra-G for the second control
period is as below:
Table 5: Approved station heat rate for the second control
period
 "
12. On 7 December 2012, the appellant filed an appeal under
Section 111 of the Electricity Act 2003 before the Appellate Tribunal for
Electricity (APTEL) against the order dated 25 October 2012. The
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appellant submitted that the MERC ought to have exercised its power
under Regulations 99 and 100 of the Tariff Regulations 2011 to amend
and remove difficulties since the SHR which was prescribed for Dahanu
TPS was not the same as for similarly situated generating units.
13. On 3 October 2013, the appellant instituted a writ petition
under Article 226 of the Constitution before the Bombay High Court for
the purpose of challenging Regulation 44.2(d) which specifies a separate
SHR for the Dahanu TPS as compared to other generating stations in
the State of Maharashtra. The appellant disclosed the pendency of the
appeal before the Tribunal against MERC's order dated 25 October
2012 disallowing the prayer for relaxing the norms.
14. MERC opposed the writ petition. MERC submitted that the
appellant had filed a substantive petition seeking approval of its business
plan for the financial years 2010-11 to 2015-16 and an SHR of 2450
kCal/kWh for 2012-13 to 2015-16. MERC in the course of its adjudication
on the business plan had adopted the same SHR as under the tariff
regulations. MERC contended that since the appeal before the Tribunal
was pending, the appellant was not entitled to pursue a remedy under
Article 226 of the Constitution.
15. The Appellate Tribunal for Electricity disposed of the appeal
on 8 April 2015, recording that it did not survive in view of the institution
of the writ proceedings before the Bombay High Court. The appellant
asserts that it drew the attention of the High Court, when the writ petition
was being heard, to the fact that the appeal before the Tribunal was not
pending and had been disposed of.
16. The High Court by its judgment dated 18 April 2016 dismissed
the writ petition. In coming to the conclusion that the petition was lacking
in merit, the High Court came to the following conclusions:
(i) MERC in framing statutory regulations in exercise of the power
conferred by Section 181 had followed the procedure by granting an
opportunity to stake holders including the appellant to make their
suggestions on the draft approach paper which was published on the
basis of the CPRI report;
(ii) CPRI was commissioned to undertake a study in order to fix
norms for SHR for different power stations in the State of Maharashtra
and it was only after the technical material collated by CPRI was
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considered and reviewed that the tariff regulations were notified
prescribing SHR norms for various power stations;
(iii) MERC has applied the principles evolved in the tariff policy
which stipulates that the operating norms should be "efficient, relatable
to past performance, capable of achievement and progressively reflect
increased efficiencies". The past performance of the Dahanu TPS of
the appellant was also taken into consideration;
(iv) The submissions urged by the appellant was not accepted for
two reasons which were formulated by the High Court as follows:
"Firstly, if this submission is accepted then the whole exercise of
undertaking an expert analysis, the working of each of the thermal
power station to determine the SHR by studying various factors
including the past performance would be rendered nugatory.
Secondly the tariff standards are required to be fixed on realistic
data and its consideration, as public interest is directly involved in
fixation of the electricity tariff. The contention of the petitioner if
accepted it would also result in a situation that the realistic standards
are deviated to fix unrealistic or a camouflage norms. This is surely
not permissible and is fundamentally against public interest being
against the interest of the consumers of electricity. The submission
of the petitioner is only from the sole consideration of profits of
the petitioner, while disregarding the norms and standards required
to be followed by the 2nd Respondent in determination of the
electricity tariff."
(v) In the exercise of its jurisdiction under Article 226 of the
Constitution, the High Court cannot decide on technical parameters or
come to the conclusion that the norms fixed by MERC are inappropriate;
(vi) The power to frame tariff regulations under Section 181 of
the Electricity Act 2003 is of a legislative character. The regulations
constitute subordinate legislation. Once MERC has followed appropriate
procedures mandated by the Electricity Act, the Court will not interfere
with the regulations merely on the ground that the SHR prescribed for
the power station of the appellant was fixed at a rate below its peers;
(vii) Profitability of the producer is not the only consideration in
determining the SHR. The regulations are also framed in the interest of
the consumers of electricity; and
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(viii) Having approached the Appellate Tribunal for Electricity,
the appellant was not justified in moving the High Court under Article
226 "on the same issue" when the Tribunal was in a position to provide
adequate relief. Entertaining a writ petition of this nature, when an
alternate remedy is provided by the statute would render the statutory
machinery under the Electricity Act nugatory. The petition under Article
226 was held to be an abuse of process.
While dismissing the petition, the High Court imposed costs of
Rs 1 lakh on the appellant.
17. While assailing the decision of the High Court,
Mr P Chidambaram, learned Senior Counsel, urged that the High Court
was not justified in coming to the conclusion that in view of the pendency
of the appeal before APTEL, recourse to the jurisdiction under Article
226 constituted an abuse of process. Learned Senior Counsel submits
that the pendency of the appeal before APTEL was disclosed in paragraph
27 of the writ petition before the High Court:
"27. As stated hereinabove, the Petitioners have preferred Appeal
No.4 of 2013 before the Appellate Tribunal for Electricity
challenging the Order dated 25th October 2012 insofar as
Respondent No.1 disallows the Petitioners prayer for relaxation
of the norms under Regulations 99 and 100 of the MYT
Regulations. The present Petition challenges the vires, legality
and validity of Regulation 44.2 (d) of the MYT Regulations that
fixes SHR norms for the 1st Petitioners. Save as aforesaid, the
Petitioners have not filed any other Petition in respect of the subject
matter of the present Petition either before this Hon'ble Court or
any other High Court or the Supreme Court of India."
In response to the objection raised by MERC, the following assertion
was contained in the rejoinder filed by the appellant before the High
Court:
"2.3. The Petitioners in the Petition have, inter alia, in paragraph
27 thereof disclosed to this Hon'ble Court that they have preferred
Appeal No. 4 of 2013 before the Appellate Tribunal for Electricity
challenging the order dated 25th October 2012 passed in Case
No. 156 of 2011 which disallowed the Petitioners' prayer for
relaxation of the norms under Regulations 99 and 100 of the MYT
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Regulations. It is settled law of the Hon'ble Supreme Court of
India that the Appellate Tribunal for Electricity has no power,
authority or jurisdiction to go into validity or legality of Regulations
framed by a Regulatory Commission. Regulation 44.2 (d) has been
challenged in the present Writ Petition and is not the subject matter
of any other Petition or Appeal in any other Court as stated, inter
alia, in paragraph 27 of the Petition. In fact, the Petitioners have
enclosed at Exhibit-K to the Petition a copy of the Memorandum
of Appeal without annexures. It is denied that there is any forum
shopping. The said Appeal has since been heard by the Appellate
Tribunal, in any event, was not pressed by the Petitioners at the
final hearing of the Appeal. The grievance of Respondent No.