Petition No. 18/2005. Case: Power Grid Corporation of India Ltd. Vs Madhya Pradesh State Electricity Board and Ors.. Central Electricity Regulatory Commission

Case NumberPetition No. 18/2005
JudgesAshok Basu, Chairman, K.N. Sinha, Bhanu Bhushan and A.H. Jung, Members
IssueElectricity Act, 2003 - Sections 2(36), 14, 15(1), 15(4), 38 and 38(2)
Judgement DateAugust 02, 2005
CourtCentral Electricity Regulatory Commission


1. The petitioner has sought to be allowed to execute 400 kV D/C Bina-Nagda- Dehgam Transmission Lines (the transmission lines) on the basis of established process of approved cost estimate as applied to other transmission lines constructed by it. Prima facie, there ought not be any objection to grant the prayer made.

The prayer made is, however, beset with implications on an earlier order of the Commission. Therefore, we are considering the matter in detail in the light of background facts.

Background Facts

2. An application was made by the Consortium of Tenega Nasionale Barhad, Malaysia and Kalpataru Power Transmission Limited (the Consortium) for grant of transmission licence for the transmission lines on built-own-operate-transfer basis under sub-section (1) of Section 15 of the Electricity Act, 2003 (the Act). The Consortium had initially indicated the estimated completion cost of Rs. 675.87 crore and the levelised tariff of Rs. 99.47 crore per year applicable for a period of 30 years. The petitioner in its capacity as the Central Transmission Utility (CTU), in its recommendations under sub-section (4) of Section 15 of the Act, pointed out that the levelised tariff of Consortium was higher by 12.34% to 24.33% than that calculated by the petitioner by applying different factors. The petitioner indicated the levelised tariff of Rs. 73 crore per year.

3. In accordance with the terms and conditions of tariff notified by the Commission, the primary criteria of determination of tariff is the completion cost. Therefore, the Commission was to be satisfied on the question of estimated completion cost of the transmission lines before granting the Consortium's application for licence. Accordingly, under directions of the Commission a revised affidavit was filed by the Consortium wherein the estimated completion cost of the transmission lines was scaled down to Rs. 657 crore. The revised cost indicated by the Consortium was the firm completion cost. The petitioner in its advice, however, indicated the benchmark completion cost of Rs. 557.80 crore (October 2004 price level). It also indicated another estimated completion cost to Rs. 617 crore. It was explained on behalf of the petitioner that the estimated completion cost of Rs. 617 crore was worked out in keeping with the methodology adopted by the applicant for computation of the estimated completion cost of Rs. 675.87 crore. It was further explained that the benchmark price of Rs. 557.80 crore had been arrived at by applying the methodology prescribed by the Central Government in Ministry of Finance for computation of estimated completion cost for the central projects. On consideration of the facts placed on record by the Consortium and the petitioner, the Commission found that grant of licence to the Consortium for execution of the transmission lines could prove prejudicial to the interests of the end consumer since it would result in higher tariff and the Commission rejected the application for grant of licence. In this regard, the Commission's observations as contained in the order dated 27.4.2004 are reproduced below:

26. The Commission's objective is two-fold namely, (i) to promote investment in the...

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