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"Whether the Central Commission has dealt with appropriately the tariff adjustments for repayment of the common loan taken by NTPC on its balance-sheet for two or more generating stations in regard to interest during construction which should form part of the capital cost."

3.11 According to Mr. M.G.Ramachandran, the Learned Counsel for NTPC, the Appellant that this point has also been decided in the earlier Judgments in Appeal No. 151/07 dated 10/12/08. In those Judgments, though the Tribunal rejected the contention urged by the Learned Counsel for the NTPC with reference to the Appeals No. 133/08, 135/08, 136/08 & 148/08 principle 'First in First out' (FIFO) method. It however, held that repayment assumed for generating stations during the construction period prior to the date of commercial operation be deemed as a loan from NTPC and interest during construction be allowed on such loans. On the basis of this finding, the Learned Counsel for the Appellant prays that this Hon'ble Court may give a similar finding with reference to the point relating to the repayment of loan and interest during construction.

Therefore, it has to be held that the NTPC should be entitled to claim notional interest on such loans as interest during construction. Even if NTPC employs its own funds over and above the equity, the NTPC should be allowed to earn interest thereon. Therefore, the repayment assumed for generating stations during the period prior to the date of commercial operation shall be deemed as loan from the NTPC and NTPC is entitled to the interest during construction of such loans."

3.13 The above finding rendered by the Tribunal would support the plea made by the Learned Counsel for the Appellant on this point. It is not disputed that NTPC enters into loan agreements with the lenders at different times with varying interest rates. Some of the loan agreements are based on fixed interest rates while some of the loans carry floating rate of interest. Further, NTPC borrows loans based on its corporate balance sheet which are for more than one generating station. Even if the 'First in First out' method is not adopted, the deployment of internal sources of NTPC which is in addition to the equity contribution should be considered as a deemed loan from the NTPC to the project. Accordingly, NTPC is Appeals No. 133/08, 135/08, 136/08 & 148/08 entitled to claim deemed interest on such loans during construction.

Appeals No. 133/08, 135/08, 136/08 & 148/08 c. The 'First in First out' method cannot be adopted. However, the deployment of internal resources of NTPC which is in addition to the equity contribution should be considered as a deemed loan from the NTPC to the project. NTPC is entitled to claim deemed interest on such loans during construction.

d. The cost incurred on Renovation and Modernization and Life Extension could only be allowed to be capitalized after decapitalization of the replaced assets. Mere completion of the Residual Life Assessment Studies without the timely implementation of its recommendations does not add any benefit to the plant. Any expenditure admitted by the Commission for determination of tariff on Renovation and Modernization and Life Extension shall be serviced on normative debt equity ratio after writing off the original amount of the replacement assets from the original project cost. So, the finding given by the Central Commission that the expenditure on the completed RLA Study may only be considered along with the cost incurred on R&M works after completion of the said works is perfectly justified.