Madras High Court Declares INR 50 lakh/MW Resource Charges on CTU-Connected Wind Projects Unconstitutional
The Madras High Court has quashed the INR 50 lakh/MW Resource Charges imposed by Tamil Nadu Green Energy Corporation Ltd. (GECL) on wind power projects connected to the Central Transmission Utility (CTU), citing the levy as arbitrary, unconstitutional, and lacking legislative backing.
December 23, 2024. By Mrinmoy Dey
The court deemed the charges arbitrary, unconstitutional, and lacking statutory backing, providing significant relief to renewable energy producers.
The petitioners, including prominent companies such as Tata Power Renewable Energy Ltd, JSW Renew Energy Ltd, and the Wind Independent Power Producers Association, contested the levy on grounds of discrimination and violation of constitutional provisions. The respondents included GECL, Tamil Nadu Generation and Distribution Corporation (TANGEDCO), and the Union Ministries of Power and New and Renewable Energy.
The petitioners argued that the charge discriminated against CTU-connected projects while exempting those connected to the State Transmission Utility (STU). They also highlighted the lack of legislative authority to impose the charges, contending that the levy violated Article 265 of the Constitution, which prohibits taxation without legislative backing.
In its order, the court admitted the petitions, emphasising that the challenge pertained to the constitutional validity of the levy, thereby justifying judicial intervention despite the availability of alternative remedies.
In its verdict, the court ruled that GECL lacked the statutory authority to impose the charges and found that the levy violated Article 265 of the Constitution.
The court also observed that the charges were deemed discriminatory as they applied solely to CTU-connected projects, exempting STU-connected projects, thus violating the principle of equality under Article 14 of the Constitution.
While the court acknowledged the importance of balancing the interests of renewable energy producers and the state’s renewable purchase obligation (RPO), it emphasised that such measures should not include unconstitutional levies.
In its judgement, the court struck down the order imposing the Resource Charges and annulled related demand notices. However, it authorised GECL, with TANGEDCO's approval, to impose conditions on wind energy generators to ensure compliance with RPO obligations, provided such conditions are constitutionally valid.
The judgment also directed the state to pay wind energy producers for the electricity supplied at rates applicable to STU-connected projects, with payments to be settled within timelines prescribed by the Tamil Nadu Electricity Regulatory Commission (TNERC). The petitioners were granted the right to pursue legal remedies for any unpaid dues.
In a broader sense, this ruling is a significant victory for the renewable energy sector, particularly for wind power developers. It is expected to strengthen investor confidence in renewable energy projects, ensuring a more equitable regulatory environment while supporting the state's renewable energy goals.
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