Central Electricity Regulatory Commission (CERC): While determining the supplementary tariff for the Emission Control System (ECS) installed at Damodar Valley Corporation’s (DVC) Bokaro-A Thermal Power Station (BTPS-A), the Commission comprising of Jishnu Barua, Chairperson with Ramesh Babu V., Harish Dudani, and Ravinder Singh Dhillon, Members, allowed that supplementary tariff for the period 2024—2029, subject to prudence check and true-up. The Commission held that the subsequent relaxation of SO₂ emission standards for Category C thermal power plants could not, by itself, justify disallowance of the investment already undertaken and operationalised in compliance with the environmental norms prevailing at the relevant time. The Commission also examined the claimed time and cost overruns, condoned only part of the delay, and restricted certain expenditure in accordance with the applicable tariff regulations.
Background
The Ministry of Environment, Forest and Climate Change (MoEF&CC), vide Notification dated 7 December 2015, prescribed revised emission standards for thermal power plants. To comply with the prescribed standards, the petitioner, DVC, undertook the installation of a wet Flue Gas Desulphurisation (FGD) system to control SO₂ emissions and a Combustion Modification System (CMS) to control nitrogen oxide emissions at BTPS-A, a 500 MW generating station.
DVC’s Board approved the project investment on 26 February 2019. The FGD contract was awarded to Techno Electric & Engineering Co. Ltd. on 15 July 2019, while the CMS contract was awarded to BHEL on 17 July 2019. On 20 September 2021, CERC, in Petition No. 459/MP/2019, granted in-principle approval for the FGD hard cost and CMS capital cost. The CMS was completed in December 2021, and the FGD system was operationalised on 22 June 2024.
DVC filed the present petition on 11 October 2023 and subsequently amended it on 7 October 2024, seeking determination of supplementary tariff from 22 June 2024 to 31 March 2029. It claimed an ECS cost of approximately ₹472.92 crore, including hard costs, interest during construction (IDC), incidental expenditure during construction (IEDC) and other associated costs. The petitioner attributed the delay in implementation to, inter alia, site-layout changes, the COVID-19 Pandemic, restrictions affecting construction activities and delays in equipment supply. PSPCL opposed the claims, questioning the delay and the admissibility of the expenditure.
During the proceedings, the Environment (Protection) Amendment Rules, 2025, dated 11 July 2025, changed the applicability of SO₂ emission standards to Category C thermal power plants, subject to prescribed stack-height criteria. PSPCL thereafter filed the present application, relying on the subsequent regulatory change to oppose recovery of FGD-related charges.
Analysis and decision
The Commission examined the petitioner’s claims by undertaking a prudence check of the capital cost and the reasons for delay in commissioning the FGD and CMS systems. The Commission assessed the admissibility of the claimed expenditure, including IEDC, IDC and initial spares, under the applicable tariff regulations, and determined the supplementary tariff payable for the period 2024—2029. It thereafter considered the effect of the subsequent relaxation of SO₂ emission standards on the recovery of expenditure already incurred on the ECS.
Time overrun in commissioning of FGD and CMS
The Commission examined the reasons for delay in commissioning the FGD and CMS systems and assessed whether the claimed delays were attributable to circumstances beyond the petitioner’s control. Out of the total actual delay of 982 days in commissioning the FGD system, the Commission condoned the delay of 380 days, while requiring the petitioner to submit a detailed break-up of the time overrun, supporting documents and justification at the truing-up stage.
Revision of layout and redesign of chimney: The Commission observed that delays arising from site clearing attributable to the petitioner itself could not be condoned. However, it condoned 20 days taken for revision and approval of the layout, necessitated by the contractor’s site survey revealing interference with existing underground RCC Hume pipes. The claim for 223 days due to chimney redesign was not condoned, as the petitioner had not established its impact on the overall project timeline. The petitioner was, however, permitted to submit supporting details at truing-up.
COVID-19 pandemic and associated restrictions: The Commission treated COVID-19-related disruptions to the movement of materials and manpower as a force majeure event. Relying on the Ministry of Finance (MoF) circular dated 13-5-2020, which provided for a contractual extension of three to six months in eligible cases, it condoned 180 days out of the 287 days claimed for the first wave. For the second wave, although the government orders relied upon did not mandate a complete stoppage of construction, the Commission considered the Ministry of Power’s letter dated 12-6-2021, which recognised similar disruptions and allowed a three-month extension for certain transmission projects. Accordingly, it condoned 91 days out of the 183 days claimed, including delays associated with lockdown measures and restrictions on industrial oxygen usage.
Delay in supply of WFGD equipment: The petitioner sought condonation of 89 days due to price volatility and high demand for WFGD equipment. The Commission considered the Ministry of Power’s Office Memorandum dated 3-5-2022, which recognised sector-wide difficulties arising from the pandemic, supply-chain disruptions, limited domestic manufacturing capacity and the demand-supply gap, and recommended an additional two years for WFGD installation. Considering these systemic constraints and the supporting documents, the Commission condoned the claimed 89-day delay.
Non-availability of sand and other discrepancies: The Petitioner sought condonation of 203 days due to the non-availability of sand during 2021, 2022 and 2023. The Commission observed that restrictions on sand mining and lifting during the monsoon season were recurring and foreseeable and declined to condone the delay at that stage, while permitting the petitioner to submit supporting documents at truing-up. It also directed the petitioner to explain discrepancies between actual and reported delays for certain works.
Delay in commissioning of CMS: Although CMS installation was scheduled for completion by 16-10-2020, it was completed in December 2021. The Commission noted that the scheduled shutdown of BTPS-A had been deferred due to the COVID-19 Pandemic and forced outages of other DVC units, which prevented the planned overhauling. It accordingly condoned the delay attributable to the non-availability of shutdown, subject to documentary evidence at truing-up. The petitioner was permitted to submit supporting documents for the FGD and CMS delays, together with separate auditor-certified break-ups of the attributable IEDC and IDC.
Summary of Time overrun
For WFGD
|
Reason for Delay |
Nos. of days Condonation allowed |
|
Delay on account of revision of layout and plot plan due to fouling with existing underground RCC Hume pipes (182 days) and redesign of chimney (223 days) |
20 days |
|
Delay due to 1st wave of COVID-19, Delay for normalisation after 1st wave of COVID-19 |
180 days |
|
Delay due to the 2nd wave of COVID-19 lockdown, Restriction on the usage of industrial Oxygen, and delay due to the COVID-19 third wave |
91 days |
|
Delay in the supply of equipment due to volatility in price and high demand of WFGD equipment |
89 days |
For CMS
|
Reason for Delay |
Nos. of months allowed, subject to submission of necessary documentary evidence during the true-up exercise as mentioned in Para44 of this Order |
|
Delay due to the non- availability of the shutdown |
For Unit-1, 24 months (from November 2020 to November 2022) |
|
Delay due to the non- availability of the shutdown |
For Unit-2, 38 months (from February 2021 to April 2024) |
Cost Overrun
The Commission examined the capital cost claimed by petitioner for the FGD and CMS systems, including plant and equipment, Interest During Construction (IDC), Incidental Expenditure During Construction (IEDC) and initial spares. The Commission noted that the petitioner had reported a revised sanctioned cost of ₹518.84 crore against actual expenditure of ₹472.95 crore as on the date of operation of the ECS. However, it required a detailed and final cost-overrun analysis, supported by relevant documents, at the truing-up stage.
Plant and equipment costs: The Commission found that the hard cost claimed for both WFGD and CMS was within the revised cost estimate (RCE) approved by the petitioner and accordingly allowed it. However, the petitioner was directed to furnish a detailed break-up of the sub-head “Others” under plant and machinery at truing-up.
Incidental Expenditure During Construction (IEDC): The Commission noted that the claimed IEDC exceeded the amounts approved under the investment approval/RCE. Considering that only 380 days of the 982-day WFGD delay had been condoned, while the entire CMS delay was allowed, the Commission restricted admissible IEDC to ₹1294 lakh for WFGD and ₹38.39 lakh for CMS, totalling ₹1,332.39 lakh, subject to truing-up. The petitioner was also directed to substantiate the ₹167.41 lakh finance cost included in IEDC and furnish an auditor-certified expense break-up, including details and justification of employee-related expenses and any depreciation capitalised as IEDC.
Interest During Construction (IDC): The Commission found that the petitioner had not furnished an adequate project-wise break-up of normative IDC or sufficient workings to undertake a prudence check. The Commission therefore disallowed the claimed notional IDC of ₹1,193.85 lakh at this stage. Considering the total WFGD completion period of 1804 days and the 380 days of delay condoned and allowed IDC for 1202 days and restricted the actual IDC of ₹4,009.50 lakh to ₹2,671.52 lakh, subject to truing-up. The petitioner was directed to submit the appropriate IDC and notional IDC calculations based on actual loans and applicable interest rates.
Initial spares: Applying Regulation 23 of the 2024 Tariff Regulations, which prescribed a ceiling of 4 per cent of plant and machinery cost for coal-based thermal generating stations, the Commission found that the projected WFGD initial spares of ₹1030 lakh were within the permissible ceiling of ₹1,117.55 lakh. Since these related to assets within the original scope, the claim was allowed under Regulation 29(4), subject to submission of the requisite details at truing-up. For CMS, however, the claimed initial spares of ₹161.45 lakh exceeded the permissible ceiling of ₹19.94 lakh, accordingly, the Commission restricted the admissible amount to ₹19.94 lakh and disallowed the excess ₹141.51 lakh, subject to truing-up.
The Commission ultimately allowed the ECS capital cost of ₹42,774.55 lakh on a cash basis, against the claimed ₹46,196.53 lakh, disallowing ₹3,421.98 lakh. The Commission also directed the petitioner to submit complete particulars of the cost and time overruns in Forms F and G, supported by relevant documents, along with details of any liquidated damages levied or recovered from the contractors, at the truing-up stage.
Additional Capital Expenditure (ACE)
The Commission examined the petitioner’s claim for additional capital expenditure of ₹5,043.38 lakh towards the WFGD system for 2024—2027, comprising ₹2,006.69 lakh each for 2024—2025 and 2025—2026, and ₹1030 lakh for 2026—2027. The petitioner attributed the expenditure to residual work and initial spares. The Commission observed that the petitioner had not furnished a detailed break-up and had claimed expenditure for 2024—2025 and 2025—2026 under Regulation 24(1)(b) of the 2024 Tariff Regulations, whereas Regulation 29 was applicable to additional capitalisation for the ECS. The Commission also noted that the cumulative claim, including the proposed additional expenditure up to 31-3-2027, exceeded the revised project cost of ₹51,883.97 lakh. Nevertheless, it allowed the ACE under Regulation 29(4), subject to prudence check, and directed the petitioner to furnish a detailed break-up at truing-up.
The Commission separately allowed the projected ₹1,030 lakh for initial spares in 2026—2027, as the amount was within the prescribed regulatory ceiling. The petitioner was directed to submit an item-wise break-up of the ACE, reconciled with Form B, including the details of initial spares, at truing-up.
Discharge of liabilities: The Commission allowed the petitioner’s claim of ₹1,075.50 lakh towards WFGD and ₹20.22 lakh towards CMS for 2024—2025, as these liabilities related to capital costs already allowed as on the date of operation of the ECS, subject to truing-up. The net ACE allowed for 2024—2029 was ₹3,102.41 lakh for 2024—2025, ₹2,006.69 lakh for 2025—2026 and ₹1,030 lakh for 2026—2027, with no additional expenditure allowed for 2027—2028 and 2028—2029.
Determination of Supplementary Tariff
The Commission determined the supplementary tariff for 2024—2029 on the basis of the capital cost admitted after prudence check and the applicable provisions of the 2024 Tariff Regulations. The Commission allowed the FGD operation and maintenance expenses based on the prescribed percentage of the admitted capital cost, subject to adjustment for revenue from gypsum. However, the Commission did not allow CMS operation and maintenance expenses at that stage, as the petitioner had not furnished adequate justification and component-wise details.
The Commission allowed the claimed operational norms, including NAPAF of 85 per cent, gross station heat rate of 2,362.795 kcal/kWh, specific reagent consumption of 9.730 g/kWh and additional auxiliary power consumption of 1 per cent. The Commission also allowed the landed limestone price of ₹4000 per MT and a supplementary energy charge rate of ₹0.0703/kWh, subject to supporting documents and verification at truing-up. Working capital was allowed on the basis of receivables equivalent to 45 days of supplementary capacity and energy charges.
After examining the admissible capital cost and tariff components, the Commission allowed the following supplementary tariff, subject to truing-up:
| Tariff period tariff allowed (₹ lakh) | Supplementary |
|---|---|
| 2024—2025 | 6,723.33 |
| 2025—2026 | 8,942.91 |
| 2026—2027 | 8,927.27 |
| 2027—2028 | 8,725.71 |
| 2028—2029 | 8,432.75 |
Effect of Subsequent Relaxation of SO₂ Emission Standards
The Commission rejected the contention that the subsequent relaxation of SO₂ emission standards disentitled the petitioner from recovering the cost of the FGD system. The Commission noted that the FGD contracts had been awarded on 15-7-2019 and the emission control systems had been operationalised on 22-6-2024, before the Environment (Protection) Amendment Rules dated 11-7-2025 and the subsequent Ministry of Power Office Memorandum dated 19-12-2025. The investment had, therefore, been undertaken when the prevailing emission norms required compliance, and their subsequent relaxation did not, by itself, render the expenditure infructuous or justify denying the supplementary tariff.
The Commission further observed that the Ministry of Power’s Office Memorandum contemplated that the future course for Category C plants could be mutually decided by the stakeholders. The Commission held that the Office Memorandum did not invalidate investments already made under the earlier regulatory framework. Accordingly, the Commission held that the supplementary tariff for the ECS/FGD system shall be payable by the Respondents to the Petitioner, subject to the applicable tariff regulations and truing-up. The payment will continue until the stakeholders reach a mutually agreed decision in terms of the Ministry of Power’s Office Memorandum dated 19 December 2025, or until further directions are issued by the appropriate authority. Disposing of the petition, the Commission the petitioner entitled to reimbursement of the filing fee from the beneficiaries on a pro-rata basis under Regulation 94(1) of the 2024 Tariff Regulations, and granted the parties liberty to approach it in the event of any dispute.
[Damodar Valley Corpn. v. Jharkhand Bijlee Vitaran Nigam Ltd., 361/MP/2023, decided on 21-7-2026]
Advocates who appeared in this case:
For the petitioner: Venkatesh, Nihal Bhardwaj, Advocates
For the respondent no. 2: Suparna Srivastava and Arshiya Sharma, Advocates
