In a setback to Essar Steel, the Supreme Court on Tuesday upheld the Gujarat government’s stand asking the company to pay Rs 1,038.27 crore, including interest, towards electricity duty for the period 2000-2009. A bench headed by Justice AK Sikri upheld a Gujarat High Court judgment that dismissed Essar Steel and its arm Essar Power’s plea seeking electricity duty exemption for its Hazira power plant for over two decades. Essar has already paid Rs 500 crore towards the electricity duty so far.
The firm pleaded that Gujarat Electricity Board (GEB) had in mid-90s certified that the power plant set up by it is a captive power plant and the energy generated by Essar Power to the extent of 215 MW will be for Essar Steel’s use.
“These permissions were granted to Essar Power as a special case and while granting such permissions, Essar Power was permitted to supply the surplus energy generated ie 58% of its capacity to GEB and no third party. Thus, to the extent of 42% of its capacity, Essar Power is a captive generating plant of Essar Steel,” the appeal stated.
The Gujarat government had rejected the firm’s plea, saying that Essar Steel sold power to other entities and the duty exemption was available only to captive power plants, thus asking it to pay more than Rs 1,000 crore in dues.
Essar Steel had sought permission to set up a 20-MW captive power plant at Hazira in 1990, and later upgraded its capacity to 30 MW. This captive plant was granted electricity duty exemption by the state government as per its policy on both the occasions.
You might also want to see this:
The company later wanted to set up another captive power plant of 300 MW in combined cycle mode and obtained due permission from the state government as well as the Centre. But with changes in electricity policy that allowed private participation in power generation, the group founded Essar Power to sell electricity to other entities.
The firm, however, continued to seek duty exemption from the state government according to its scheme prevailing in the early 1990s. The latter rejected Essar’s claims in 2003 with the state energy department stating that the firm has been selling power to GEB, and therefore, the benefit of a captive power company cannot be given to Essar.