Supreme Court rules GBI must be paid over and above tariff

The Supreme Court of India has held that the Generation Based Incentive (GBI) scheme introduced by the Ministry of New and Renewable Energy (MNRE) is to be paid to renewable energy generators over and above the tariff determined by state electricity regulatory commissions.

A bench of J.S. Narasimha and Jatul S. Chandurkar dismissed an appeal filed by Southern Power Distribution Company of Andhra Pradesh Limited and another, upholding the judgment of the Appellate Tribunal for Electricity dated December 19, 2024.

Tariff powers and policy alignment

The court examined the scope of tariff-setting powers of state electricity regulatory commissions (SERCs) and held that while these bodies have plenary authority under the Electricity Act, 2003, such powers are to be exercised in alignment with the purpose of policies and grants issued by other stakeholders.

The dispute arose from tariff orders issued by the Andhra Pradesh Electricity Regulatory Commission (APERC) for wind power projects. In its 2015 tariff regulations, APERC had included Regulation 20 requiring consideration of government incentives. However, in 2015 and 2016 tariff orders, the commission did not account for GBI. In July 2018, it allowed deduction of GBI from payments to generators, following requests from distribution companies.

APTEL set aside this decision in December 2024, ruling that “consideration” of incentives did not permit automatic deduction, and directed refund of deducted amounts with 12% interest.

GBI intent upheld

The Supreme Court held that the Electricity Act, 2003 constitutes a complete legal framework for tariff determination, with commissions retaining exclusive jurisdiction. It rejected the argument that SERCs cannot consider grants made by the central government under Article 282 of the Constitution.

At the same time, the court emphasised that regulatory authority is to be exercised in coordination with other institutions, including central and state governments, the Central Electricity Authority, MNRE, and utilities.

The bench noted that the GBI scheme was designed to promote investment in wind energy and explicitly provided that the incentive is “over and above the tariff” approved by SERCs. It also referred to India’s climate commitments under the United Nations Framework Convention on Climate Change and the national renewable energy capacity target.

The court concluded that APERC was required to apply the GBI in line with its intended purpose. It affirmed that the incentive remains payable to generators in addition to tariff and cannot be adjusted or deducted by distribution companies.

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