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Showing contexts for: prudence check in Gujarat Urja Vikas Nigam Limited vs M/S Tarini Infrastructure Ltd & Ors on 11 March, 2026Matching Fragments
39. This Tribunal in its judgement dated 20.10.2011 in "Dodson-Lindblom Hydro Power Private Limited Vs MERC"; 2011 SCC OnLine APTEL 156, has held that State Commission should undertake prudence check of the cost involved, the relevant paragraph is reproduced hereinbelow:
"10. Both the Regulations and the judgement of the Tribunal would indicate that the State Commission was bound to conduct a detailed "prudence check" and prudence check is not limited to the verification of whether an expenditure has actually been incurred or not. The prudence check involves the following factors:
ISSUE F : HIGHER INTEREST RATE OF 13.2 % FOR LOAN AND WORKING CAPITAL Submissions urged on behalf of GUVNL Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
90. The State Commission has allowed an interest rate of 13.2% towards interest on loan as well as interest on working capital. The project-specific parameters of Tarini do not justify such a high interest rate, particularly when comparable renewable and hydro projects in the State have been financed at significantly lower rates, including 10.25% and 11.75% during the relevant periods. The State Commission has failed to conduct any meaningful prudence check on this aspect, even though prudence check expressly includes examination of the financing plan. Further, even in the Wind Tariff Order dated 30.01.2010 and the Generic Tariff Order dated 14.12.2016 for Small Hydro Power Projects, the interest rates considered were substantially lower, being around 10.25% to 11.8%, which fact is also noted in the Impugned Order. Accordingly, irrespective of the actual interest claimed by Tarini, for purposes of prudence, the interest rate as per the applicable Wind Tariff Order or the Generic Order dated 14.12.2016 ought to be considered.
130. We do not find fault with the observation of the State commission in the Impugned Order insofar as the disallowance of cost of steel liners is concerned, particularly in the absence of any response of M/s Tarini to the submissions made by NWR. However, in view of our decision to remand the matter for undertaking a comprehensive prudence check of the capital cost incurred by Tarini, and in the previous paragraphs we have limited the entitlement towards IDC & IEDC only up to SCOD in terms of PPA, we deem it appropriate that the expenditure incurred towards steel liners be subject to a prudence check by the State Commission. Itt has been submitted by Tarini no IDC & IEDC has been claimed beyond the year 2010. Accordingly, the issue relating to the disallowance of cost of Steel liners is remanded to the State Commission for the limited purpose of undertaking a prudence check of the cost incurred in providing the steel liners, in accordance with law.
CONCLUSION
131. In view of above deliberations, decision on all the issues is summarized as under:
Issue Issue Decision
A Capital cost of the Project Issue remanded to State
Commission to undertake
prudence check of the Cost
incurred by M/s Tarini
Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
B Higher Cost for construction of Issue remanded to State
Transmission Line; Commission to undertake
prudence check of the Cost
incurred by M/s Tarini
C &I Non consideration of IDC & IEDC : Impugned Order
implications of delay in
Interfered. M/s Tarini is not
commissioning of the units.
entitled to IDC & IEDC beyond
IDC&IEDC
scheduled date of commercial
operation as per PPA signed
with GUVNL. Issue remanded to
State Commission to ascertain
IDC & IEDC up to SCOD as per
PPA
Liquidated Damages Liquidated Damages :
Impugned Order upheld
D&J Capacity Utilisation Factor Impugned Order Interfered.
(CUF) Capacity Utilisation factor of 70
% to be considered as agreed in
the PPA between GUVNL & M/s
Tarini
E Consideration of Impugned Order upheld
premium/licence fee of Rs. 0.23
per unit;
F Allowance of interest rate for Impugned Order upheld
loan at 13.2%;
Interest rate on working capital
Allowance of interest rate for on normative basis in terms of
working capital loan at 13.2%; GERC MYT Regulation 2011.
Judgement in Appeal Nos. 221 of 2018 & 298 of 2018
Issue remanded to State
Commission to work out the
same
G Allowance of the tariff Impugned Order upheld
&K retrospectively instead of
prospectively
Carrying Cost for the period Tarini is entitled for carrying
prior to tariff determination
Cost. Issue remanded to State
Commission to decide rate of
interest for carrying cost as well
as whether it should be simple or
Compound
H Disallowance of additional cost Impugned order interfered. Issue
of Rs 3 Crores in regard to remanded to State Commission
Steel liners;
to undertake prudence check of
the Cost incurred by Tarini