Supreme Court Verdict: Deemed Export Benefits under Foreign Trade Policy not available to Immoveable Assets, in particular, Thermal Power Plants

Supreme Court Upholds PSPCL’s Stand that Deemed Export benefits under the Foreign Trade Policy, 2004-09 and 2009-14 are only available to movable goods, and not to immovable assets such as coal-based thermal power plants and thereby, rejected the claim of Talwandi Sabo Power Limited and Nabha Power Limited contending withdrawal of Deemed Exports Benefits as Change in Law under the Power Purchase Agreement.

The Hon’ble Supreme Court of India, in its judgment dated 19 August 2025 in Nabha Power Limited v. Punjab State Power Corporation Limited & Ors. (Civil Appeal Nos. 8694 & 8739 of 2017), has delivered a landmark ruling upholding the position consistently taken by PSPCL before the State Commission, Appellate Tribunal, and the Apex Court.

PSPCL’s Contentions Before the Courts

Throughout the proceedings, PSPCL consistently advanced the following positions:

1. Inapplicability of Deemed Export Benefits to Thermal Power Plants which do not manufacture goods in India

o PSPCL argued that the Foreign Trade Policy (FTP) 2009-2014 extended deemed export benefits only to movable goods, and not to immovable assets such as coal-based thermal power plants assembled on-site.

o It was submitted that the legislative framework under the FTP and the Central Excise Act clearly distinguished between movable “goods” and immovable infrastructure. A generating station, embedded to the earth, could not be treated as “manufactured goods.”

2. FTP Benefits were Never Available to NPL/TSPL

o PSPCL highlighted that at the time of bid submission and execution of the Power Purchase Agreement (PPA), no deemed export benefits under Para 8.3 of the FTP were available to the project of Nabha Power Limited (NPL) or Talwandi Sabo Power Limited (TSPL).

3. Withdrawal of Benefits Not a “Change in Law”

o PSPCL had submitted that only statutory enactments or duly notified delegated legislation constitute “Change in Law” under Article 13 of the PPA.

o Administrative circulars, public notices, or press releases, lacking statutory force, could not trigger contractual relief. PSPCL stressed that DGFT’s policy notices were administrative/clarificatory in nature and did not qualify as “law.”

Hon’ble Supreme Court’s Findings

The Hon’ble Supreme Court upheld PSPCL’s contentions and the Appellate Tribunal’s Order, holding that:

• Press Releases or Cabinet communications do not constitute “law” under the Power Purchase Agreement (PPA). Only duly notified statutory instruments published in the Official Gazette qualify for consideration as “Change in Law.” The Hon’ble Court has reiterated the stance taken by the 3 Judge Bench in CA 8694 of 2017.
• Deemed export benefits of the Foreign Trade Policy (2009-2014) were never available to coal-based thermal power projects constructed in-situ, as such projects constitute immovable property and not “goods” as envisaged under the FTP.
• Withdrawal of such benefits by DGFT through policy circulars or notices cannot be construed as a “Change in Law” event under Article 13 of the PPA.

This judgment marks a significant affirmation of PSPCL’s consistent stand before the Punjab State Electricity Regulatory Commission (PSERC), the Appellate Tribunal for Electricity (APTEL), and the Hon’ble Supreme Court.

The ruling safeguards the interests of electricity consumers in Punjab by ensuring that the benefits accruing to the Thermal Power plants on account of grant of Mega Power status shall be fully passed on to the consumers of Punjab. This decision is a significant victory for PSPCL and the electricity consumers of Punjab, ensuring that the sanctity of competitive bidding including the Change in law provisions can accrue in favour of the Procurers as well when there is a negative change in law (reduction in cost after bidding) and tariff discipline is preserved.

PSPCL Secures Strategic Relief from APTEL in Tariff Adjustment on account of availment of Accelerated Depreciation

The Appellate Tribunal for Electricity (‘APTEL’) has granted interim relief to Punjab State Power Corporation Limited (‘PSPCL’) in Appeal No. 20 of 2025 vide its Order dated 22.07.2025, effectively staying the operation of the Punjab State Electricity Regulatory Commission’s (‘PSERC’) Order dated 05.12.2024 involving tariff adjustments linked to Accelerated Depreciation claims.

The appeal, filed by PSPCL, challenges PSERC’s interpretation and implementation of APTEL’s earlier remand directions issued in Appeal No. 60 of 2024. Despite clear instructions from APTEL to examine whether the Respondent Generator – a Co-gen Plant had availed the benefit of accelerated depreciation under Clause 2.1.1(ii) of the Power Purchase Agreement (PPA), the PSERC failed to conduct this mandated inquiry.

It was also brought to the APTEL’s attention material from the Generators own Income Tax Returns demonstrating that depreciation had, in fact, been claimed @ 80% —an indicator of Accelerated Depreciation benefits. These facts, though undisputed, had not been considered by the PSERC.

APTEL has held that PSPCL had established a prima facie case and that the balance of convenience weighed in its favour. Noting that requiring PSPCL to refund adjusted amounts would be unjust, APTEL ordered an interim stay on the PSERC order pending final adjudication of the appeal.

Read Order

PSERC affirms the stand taken by PSPCL and denies in-principle approval to TSPL for expenditure ‘yet to be incurred’.

In the dynamic landscape of the energy sector, the recent PPA dispute between TSPL and Punjab State Load Dispatch Centre stands out as a testament to the challenges of intertwining legal frameworks, contractual obligations, and public interest. Delve into this case to understand the intricate balance between sector-specific agreements and the broader societal implications they carry.