On 25.03.2026, the Supreme Court of India dismissed a Civil Appeal filed by distribution licensees in Andhra Pradesh while holding that generation based incentive (“GBI”) granted by a Central Government Policy to Wind Power Generators cannot be clawed back by a state regulator and re-distributed to distribution licensee’s consumers by factoring the grant into generation tariff.
Supreme Court, inter alia, held that:
- Although the Regulatory Commissions have plenary powers over tariff determination and are also empowered to take into account a grant made by the Central Government, such powers cannot be exercised in a manner that nullifies the policy intent. It must be exercised keeping in mind the purpose and objective of a policy or grant.
- Andhra Pradesh Electricity Regulatory Commission (APERC) was obliged to provide the benefit of GBI in terms of the purpose and object of the GBI Policy i.e., to incentivise renewable energy generators.
- Policy decisions taken based on national and international de-carbonisation targets must be appropriately factored at various stages to ensure that investment in renewable energy is adequately promoted.
- Regulators must not act in silos and must take a holistic approach while exercising tariff determination functions.
- The electricity sector functions through the coordinated action of the Union Government, State Governments and independent Regulatory Commissions. Their powers must be read harmoniously so that each operates within their spheres, without rendering the other irrelevant.
- A “generator-based incentive” cannot be converted into a “consumer subsidy”, which is contrary to the policy under which the incentive was granted.
Supreme Court’s progressive Judgment marks a significant win for renewable energy generators in the State of Andhra Pradesh, bringing an end to over 8 years of arbitrary tariff deductions by distribution licensees in Andhra Pradesh on account of GBI which were being illegally retained by the distribution licensees in Andhra Pradesh.
The JSA Disputes team comprised Abhishek Munot, Lead Partner, along with Tushar Nagar, Partner.
Abhishek is a part of Disputes group of JSA and anchors the Regulatory Practice of JSA in Western India. Abhishek handles sector specific commercial litigation, arbitration constitutional & administrative law litigation and regulatory proceedings before statutory authorities, tribunals and courts.