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2019 (5) TMI 707 - SC - Indian LawsCapitalization of Foreign Exchange Rate Variation (FERV) - apportionment of FERV into debt and equity after FERV has been calculated and added to capital cost - HELD THAT - Noting the premise on which the Act was enacted and the fact that the Tariff Regulations, 2001 prescribed under the aegis of this Act do not provide for apportionment of FERV in a particular debtequity ratio, this Court is not inclined to interfere in the matter. The present dispute arises with respect to tariff charged between 01.04.2001 and 31.03.2004 on account of FERV calculation and apportionment. Any variation in the apportionment of FERV now, for the abovementioned period, will consequently be passed on to the consumers. This will be unfair to the consumers who were not consumers for the abovementioned period but will eventually bear the brunt of transactions which took place 1518 years ago. This is another ground for noninterference in the present matter. Appeal dismissed.
Issues:
1. Apportionment of Foreign Exchange Rate Variation (FERV) into debt and equity after calculation and addition to capital cost. Analysis: 1. The appeal arose from decisions of the Central Electricity Regulatory Commission (CERC) regarding the capitalization of FERV, with the Appellate Tribunal for Electricity approving the methodology for calculating FERV but directing apportionment only in respect of debt liability. The key issue was the challenge to this judgment. 2. The appellant, a transmission company, sought to charge FERV as a pass-through to ensure any liability or gain due to foreign exchange rate fluctuations passes to the beneficiary in a staggered manner. 3. The limited issue was the apportionment of FERV between debt and equity post-calculation and addition to capital cost. 4. The appellant's counsel argued for apportioning FERV towards debt and equity based on a normative debt-equity ratio, emphasizing the existing practice of such apportionment. 5. The respondent's counsel disputed the practice, citing the Electricity Regulatory Commissions Act, 1998, and Tariff Regulations, 2001, to argue that FERV liability can be recovered directly without apportionment. 6. The Court noted that the question of apportionment was not a substantial legal issue, as the relevant regulations did not mandate such apportionment post-calculation of FERV. Lack of legal basis for mandatory apportionment led to the dismissal of the appeals. 7. Regulations allowed direct recovery of FERV without CERC intervention, which was not pursued in the case. The appellant's attempt to capitalize FERV based on a 50:50 debt-equity ratio lacked legal backing. 8. Considering the Act's aim to reform the power sector and absence of specific apportionment rules in Tariff Regulations, 2001, the Court declined to interfere in the absence of legal grounds. 9. Any variation in FERV apportionment for the period in question would unfairly burden consumers not involved during that time, leading to the dismissal of the appeal to prevent passing on historical costs to current consumers. 10. Another appeal related to the same issue was dismissed following the above analysis, maintaining consistency in the decisions.
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