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Issues involved: Determination of tariff for electricity generated and sold by a government company u/s Companies Act, 1956.
The main issue in the appeals was the determination of tariff for electricity generated and sold by the respondent, a government company incorporated under the Companies Act, 1956. The generation and sale of electricity by the respondent were regulated under the Electricity Act, 2003, and prior to that, by the Central Commission under the Electricity Regulatory Commissions Act, 1998. The Central Government used to issue tariff notifications to determine the rate at which electricity generated by the respondent was to be sold to State Electricity Boards (SEBs) (para 3-4). The tariff determination for the period in question was challenged before the Central Commission and the Tribunal. The issues revolved around factors such as the calculation of interest on loan capital, loan capital, and the non-inclusion of fuel value while determining working capital. The Tribunal considered various factual aspects, including equity capital, borrowed capital, and revenue expenditure, to decide on the tariff (para 6-7). The appeals also focused on the necessary ingredients of cost for determining the tariff to be charged by the power plants of the respondent to different SEBs. The calculation of interest forming part of the tariff was a key issue discussed during the proceedings (para 8). Regarding the determination of tariff for electricity generation, the cost was categorized into fixed charges and energy charges, with a significant portion attributed to interest paid on the capital employed. The Tribunal addressed crucial issues related to the determination of interest and capital in this context (para 9). The appeals involved factual issues concerning the calculation of capital employed, interest, and energy charges, which required consideration of technical and factual aspects (para 10). In the judgment, reference was made to a previous case highlighting the technical expertise required in determining tariffs related to electricity generation. The Court emphasized the need for expert bodies like the Central Commission to handle such matters due to the technical nature of tariff determination involving knowledge of law, engineering, finance, commerce, economics, and management. Based on this, the Court concluded that interference by higher courts in tariff determination matters should be minimal (para 11-12). Considering the technical complexity involved in determining the tariff and finding the Tribunal's decision to be just and proper, the Court held that the impugned orders did not warrant interference. Therefore, all appeals were dismissed with no order as to costs (para 13).
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