SC holds Essar Power liable to pay reimbursement, compensation to GUVNL for ‘wrongful diversion’ of power

In a recent judgment, the Supreme Court has given clarity on a 20-year-old power supply dispute between Essar Power and the state discom Gujarat Urja Vikas Nigam. The Supreme Court has held that state-owned GUVNL is entitled to claim reimbursement and compensation from Essar Power for power that was wrongfully diverted from GUVNL to Essar Steel.

The issues stretch across nearly 30 years. GUVNL (Previously Gujarat Electricity Board) signed a Power Purchase Agreement with Essar Power in 1996. Under the PPA, Essar’s Hazira plant, with a capacity of 515MW, was required to supply 300MW to the state discom and the remaining 215MW to sister company Essar Steel. The issue arose with the state discom claiming that Essar Power was diverting power away from its quota of 300MW and was being supplied to sister companies.

The Apex Court, while confirming the wrongful diversion of power, has held that GUVNL is entitled to claim reimbursement of fixed charges for electricity diverted away. The SC noted that the GERC and APTEL orders, which had rejected the reimbursement of fixed charges, are unsustainable.

SC further noted that GUVNL is also eligible to claim compensation from Essar Power for wrongful diversion of power.

But the dispute may not yet be over. The Supreme Court has not finalised the amount payable by Essar Power. Under the SC order, the computation of reimbursement and compensation has been remanded back to the Gujarat Electricity Regulatory Commission (GERC). Essar claims that no dues are payable.

In response to a query by CNBC TV18, an Essar spokesperson stated, "The Hon’ble Supreme Court’s order provides an interpretation of its earlier ruling, pursuant to which GERC will determine if any amount is payable. Based on our records and assessment, we are confident that no such amount will arise. The matter remains sub judice."

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