In a decisive ruling, the Supreme Court of India has ordered Essar Power Limited to refund fixed charges to Gujarat Urja Vikas Nigam Limited (GUVNL) for electricity that was never supplied. The judgment, delivered on 25 September 2025 by Justices Sanjay Kumar and Alok Aradhe, brings to an end a battle that began two decades ago over the diversion of power from a joint supply agreement.
Background
The case traces back to a 1996 power purchase agreement (PPA) under which Essar Power was to supply 300 MW of electricity to the Gujarat Electricity Board=later succeeded by GUVNL-and 215 MW to its sister firm, Essar Steel. GUVNL accused Essar Power of quietly sending more electricity to Essar Steel, breaching the agreed 58:42 ratio.
Letters exchanged in the early 2000s show Essar Power admitting some excess supply and even accepting an initial claim of ₹64 crore. However, disputes over compensation, fixed charges, and the exact calculation method simmered for years, winding through the state regulator, the Appellate Tribunal for Electricity (APTEL), and finally the Supreme Court.
Court’s Observations
The bench observed, “Essar Power cannot claim fixed charges twice over, once from GUVNL for unsupplied power and again from Essar Steel for excess supply.”
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It held that the 1996 PPA clearly required proportionate allocation of the entire 515 MW plant output and mandated reimbursement of fixed charges if GUVNL did not receive its full share. The judges also clarified that compensation for diverted electricity must be calculated using the half-hourly method recommended by the Central Electricity Authority in 2005, rejecting the tribunal’s insistence on hourly computation.
Importantly, the Court separated “compensation” for diverted power-calculated at HTP-1 tariff rates-from “reimbursement,” which covers fixed charges GUVNL paid for electricity never delivered.
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Decision
Setting aside contrary findings of the Gujarat Electricity Regulatory Commission (GERC) and the APTEL on fixed charges, the Supreme Court directed Essar Power to reimburse GUVNL for all fixed charges corresponding to the diverted electricity, in addition to compensation already determined for excess supply. The matter now returns to GERC for precise calculations in line with the Court’s instructions.
Case Title: Gujarat Urja Vikas Nigam Ltd. vs. Essar Power Ltd. – Supreme Court Fixed-Charge Refund
Date of Judgment: 25 September 2025
