The Central Electricity Regulatory Commission (CERC) has allowed Damodar Valley Corporation (DVC) to recover supplementary tariff from power distribution companies for installing emission control systems at its 500 MW Bokaro-A Thermal Power Station, holding that the subsequent relaxation of emission norms does not invalidate investments already made and operationalised.
In an order dated July 21, 2026, the Commission approved supplementary tariff of INR 67.23 crore for the period from June 22, 2024, to March 31, 2025, and annual supplementary tariff of INR 89.43 crore for 2025-26, INR 89.27 crore for 2026-27, INR 87.26 crore for 2027-28 and INR 84.33 crore for 2028-29.
The order was passed by a four-member bench comprising Chairperson Jishnu Barua and members Ramesh Babu V., Harish Dudani and Ravinder Singh Dhillon.
The Commission also rejected a challenge by Punjab State Power Corporation Limited (PSPCL) seeking to prevent recovery of the flue gas desulphurisation (FGD)-related expenditure following the Ministry of Environment, Forest and Climate Change’s July 11, 2025 amendment to the Environment (Protection) Rules.
CERC held that the investment in the emission control systems had already crystallised before the amendment, as the contracts were awarded in July 2019 and the systems were operationalised on June 22, 2024. The expenditure, therefore, could not be rendered infructuous or disallowed merely because of the subsequent regulatory relaxation.
The Commission directed that the supplementary tariff would remain payable by the respondents until the stakeholders reach a mutually agreed decision under the Ministry of Power’s December 19, 2025 office memorandum, or until further directions are issued by the appropriate authority. The parties have been given liberty to approach the Commission if a dispute arises.
DVC had approached the Commission seeking determination of supplementary tariff for the installation of emission control systems at Bokaro-A to comply with revised emission standards notified in December 2015.
The project involved a wet limestone-based FGD system to control sulphur dioxide emissions and a combustion modification system (CMS) to control nitrogen oxide emissions. DVC awarded the FGD contract to Techno Electric & Engineering Company Limited on July 15, 2019, for INR 368.5 crore, including GST, and the CMS contract to Bharat Heavy Electricals Limited on July 17, 2019, for approximately INR 9.23 crore, including GST.
While the CMS was operationalised in December 2021, the FGD system became operational on June 22, 2024. DVC claimed a total gross capital cost of approximately INR 472.92 crore, including interest during construction, incidental expenditure during construction, taxes and duties.
DVC sought approval to recover the resulting fixed charges and reagent-related supplementary energy charges from the beneficiaries of the generating station. It also sought permission to recover the filing fee and requested that the supplementary energy charge not be considered for merit order dispatch.
PSPCL opposed the claims, arguing that the delay in implementation and the increase in project costs required detailed scrutiny. It contended that the costs arising from delays should not automatically be passed on to electricity consumers.
Regulatory relaxation does not invalidate existing investment
PSPCL had filed an interlocutory application seeking a declaration that FGD-related capitalisation at Bokaro-A, categorised as a Category-C thermal power plant, should not automatically be passed through to beneficiaries after the July 11, 2025 amendment to the Environment (Protection) Rules.
It also sought to restrain DVC from recovering provisional supplementary fixed and energy charges towards FGD expenditure and sought a refund, with interest, of amounts recovered after the amendment.
Rejecting the challenge, CERC observed that the FGD contracts had been awarded in 2019 and the emission control systems had become operational in June 2024, before the 2025 amendment and before PSPCL filed its application.
The Commission held that the investment had crystallised when undertaken in compliance with the environmental norms and regulatory directions prevailing at the time. It also noted that the Ministry of Power’s December 19, 2025 office memorandum contemplated that stakeholders could mutually decide the future course of action for Category-C thermal power plants.
Accordingly, CERC held that the supplementary tariff for installing the emission control systems would remain payable until a mutually agreed decision was reached under the memorandum or further directions were issued by the appropriate authority.
The Commission disposed of the petition and PSPCL’s interlocutory application, while permitting the parties to approach it in the event of a dispute. It also allowed DVC to recover the petition filing fee from the beneficiaries on a pro-rata basis.
SKV Law Offices represented DVC through founding partner Shri Venkatesh, counsel Nihal Bharadwaj, and senior associate Aashwyn Singh.
