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					</table>In a significant ruling upholding policy certainty in India’s renewable energy sector, the <a href="https://hcraj.nic.in/hcraj/" target="_blank" rel="noopener">Rajasthan High Court</a> has held that the state government cannot retrospectively withdraw electricity duty exemptions promised under its Solar Policy 2019.
The Court said that while the government has the power to change policies, such changes cannot operate retrospectively to take away accrued rights. Rejecting the Rajasthan government’s argument that the duty exemptions depend on statutory notifications, it said the policy itself represented an assurance that such benefits would be granted.
Withdrawing the duty exemptions without compelling public interest was arbitrary and violative of Article 14 of the Constitution, the Court said.
The High Court directed that captive solar projects commissioned before the May 10, 2022, amendment to the Solar Policy are entitled to the promised seven-year electricity duty exemption. The withdrawal of the duty exemption will apply prospectively to future projects, it said, directing the authorities to verify the commercial operation date of each project before granting benefits.
Background
The Rajasthan government, in its Solar Policy 2019, announced that captive solar projects would be exempt from electricity duty for seven years to promote investment in such projects.
UltraTech Cement set up solar projects to power its cement units in Rajasthan, investing about ₹890 million (~$9.61 million). In May 2022, the government amended the policy, making the duty exemptions subject to separate statutory notifications. This effectively meant the withdrawal of the duty exemptions.
After the policy change, distribution companies began raising electricity duty bills for power generated from solar projects.
UltraTech Cement petitioned the High Court, challenging the amendment as arbitrary and as a violation of its expectations. It argued that the withdrawal of the electricity duty exemption violated well-established principles of public law.
The petitioner noted that the Solar Policy 2019 made a clear and unequivocal promise of a seven-year exemption from the electricity duty from the date of commissioning. Acting on this assurance, it set up solar projects, securing a vested right in its favor that the government could not later withdraw to its detriment.
The withdrawal of the exemption disrupted the financial viability of projects that were planned based on the promised incentive in the policy.
Court’s Analysis
The High Court observed that the Solar Policy 2019 contained a clear and unequivocal representation intended to attract private investment in renewable energy. In response, UltraTech Cement and others had committed substantial capital to set up the captive solar projects.
The Court emphasized that government policies, even if executive in nature, can create binding obligations when they induce investment.
Rejecting the state government’s argument that electricity duty exemptions must be granted strictly through statutory notifications under the Rajasthan Electricity (Duty) Act, 1962, the High Court held that the policy itself represented an assurance that such powers would be exercised in favor of eligible projects.
The Court also held that the 2022 amendment to the Solar Policy 2019 cannot operate retrospectively to deprive investors of accrued benefits.
While the government had the authority to modify or withdraw fiscal incentives, the Court observed that such changes must be prospective. Vested rights arising from prior assurances cannot be arbitrarily taken away.
On the state government’s contention that evolving economic conditions and financial constraints justified the withdrawal of exemptions, the High Court said this reasoning was insufficient, and no substantive material was presented to demonstrate overriding public interest in withdrawing the electricity duty exemption.
“The material on record indicates that the objectives of the Solar Policy, including the targeted solar capacity, remain unmet. In such circumstances, withdrawal of incentives appears not only unsupported by compelling necessity but also counterproductive to the very policy objectives the State seeks to advance. The invocation of public interest must be real, demonstrable, and proportionate; it cannot be a generic or post facto justification,” the Court observed.
This March, the Supreme Court <a href="https://www.mercomindia.com/supreme-court-upholds-generation-based-incentives-for-renewable-projects" target="_blank" rel="noopener">ruled</a> that the generation-based incentive granted to wind power generators must be disbursed in addition to the tariff and cannot be adjusted in a manner that would defeat the program’s purpose. The ruling came while dismissing an appeal filed by the Andhra Pradesh distribution companies against an order of the Appellate Tribunal for Electricity.
Subscribe to Mercom’s real-time <a href="https://www.mercomindia.com/product/mercoms-renewable-energy-regulatory-updates" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.

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					</table>The <a href="https://www.sci.gov.in/" target="_blank" rel="noopener">Supreme Court</a> has upheld the Maharashtra government’s authority to withdraw or modify electricity duty exemptions granted to captive power generators, while directing that such withdrawal can take effect only after a reasonable one-year notice.
Background 
The dispute arose from a long-standing policy of the Maharashtra government to promote captive power generation by industries. Beginning in 1994, the state granted exemptions from electricity duty for power generated and consumed by industries through captive power projects.
In 2000 and 2001, it issued fresh notifications that altered the regime. On April 1, 2000, the state enabled the levy of electricity duty across categories, while separately retaining a narrower exemption for certain non-conventional captive generation in the cooperative sector. On April 4, 2001, it granted only a partial exemption, limiting the benefit to units installed under the earlier policy to duty exceeding ₹0.15 (~$ 0.0016)/kWh.
Although the exemption was restored in 2005 with effect from May 1, 2005, it was not made applicable to the intervening period between April 1, 2000, and April 30, 2005. As a result, industries remained liable for the electricity duty for that period, leading to significant financial implications.
Captive power producers challenged the withdrawal before the Bombay High Court, which held that the state’s action was discriminatory, arbitrary, and lacked application of mind. It also noted that although the state had reviewed the issue in accordance with MERC, it had not consulted MERC before withdrawing the exemption and had rejected the producers’ representation without assigning reasons.
Before the Supreme Court, the state argued that the exemption was a matter of fiscal policy and not a vested legal right. It contended that the statutory power to grant an exemption inherently includes the power to withdraw or modify it, and that the decision was taken in the public interest to augment revenue and address budgetary constraints. The state also argued that the doctrines of promissory estoppel (a legal doctrine that enforces a promise even without a formal contract) and legitimate expectation were not applicable.
The captive power producers argued that they had made substantial investments based on the state’s policy assurances and that the withdrawal of exemption violated principles of fairness. They relied on promissory estoppel and legitimate expectation, asserting that the state could not arbitrarily reverse its position after inducing industrial investment.
Court’s Analysis
The Supreme Court examined the nature of exemptions granted under fiscal statutes and held that such exemptions are concessions rather than enforceable rights. It observed that beneficiaries of such concessions have only a limited right to enjoy them during the period they remain in force, and that this right is inherently subject to modification or withdrawal.
The Court held that the statutory power under which an exemption is granted also includes the authority to withdraw or modify it. It said there could be no assurance that such a concession would continue indefinitely, particularly in the context of fiscal policy.
It clarified that the government has the power to change policy in public interest. It held that public-interest considerations, such as fiscal stability, revenue augmentation, and budgetary constraints, could justify withdrawing exemptions.
In assessing whether the state’s decision was arbitrary, the Court found that the withdrawal was based on relevant considerations. It noted that electricity duty constitutes an important source of revenue and that the state must retain flexibility to recalibrate its policies to address fiscal constraints. The decision was therefore held to be neither arbitrary nor unreasonable.
At the same time, the Court held that fairness requires the withdrawal of a long-standing concession not to be abrupt, especially where industries have structured their commercial and financial affairs based on the earlier policy. Sudden withdrawal without a transition period would impose an immediate additional fiscal burden.
Balancing the state’s fiscal interests with the need for fairness, the Court ruled that a period of one year would be appropriate to allow industries to reorganize their operations and financial planning.
Accordingly, while setting aside the Bombay High Court’s judgments, the Supreme Court upheld the validity of the notifications dated April 1, 2000, and April 4, 2001. It directed that they would operate only after one year from their respective dates.
The state recently <a href="https://www.mercomindia.com/maharashtra-aims-to-meet-65-of-its-power-needs-from-renewables-by-fy-2036/?\" target="_blank" rel="noopener">announced</a> a 10-year electricity duty waiver for long-term captive green energy open-access projects supplying power within Maharashtra, integrated with energy storage, accounting for 50% of the renewable energy project’s capacity, and featuring at least 4 hours of discharge.
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Supreme Court Backs Maharashtra on Ending Power Duty Exemptions

The Chairman of the Rajasthan distribution companies (DISCOMs) and the <a href="https://energy.rajasthan.gov.in/content/raj/energy-department/jodhpur-vidyut-vitran-nigam-limited/en/jdvvnl-corner/News/urja-vikas.html" target="_blank" rel="noopener">Rajasthan Urja Vikas Nigam Limited</a> have issued an order, levying electricity duty of ₹0.60 (~$0.00081)/kWh on the consumption of power from captive solar projects, rooftop solar, and grid-connected small solar projects with the net metering facility.
According to the order, on July 10, 2019, the Rajasthan Government’s Finance Department had offered electricity duty exemption on the consumption of power from captive solar projects. The notification was in effect until March 31, 2020.
The exemption covered captive solar projects and those set up under the Rajasthan Electricity Regulatory Commission (<a href="https://rerc.rajasthan.gov.in/" target="_blank" rel="noopener">RERC</a>) Connectivity and Net-Metering for Rooftop and Small Grid-Interactive System Regulation, 2015.
The state’s Electricity Department scrutinized the policy and, on April 27, 2021, issued the order levying electricity duty on captive solar projects and those set up under the RERC 2015 regulations. The order is effective from April 1, 2021.
The order further states that the amount outstanding for the period from April 1, 2021, to June 30, 2021 (billing month of May 2021 to July 2021), if any, can be recovered in three monthly installments from the billing month of August 2021 onwards.
Meanwhile, the Renewable Energy Association of Rajasthan (<a href="https://www.rear.org.in/" target="_blank" rel="noopener">REAR</a>) has written to the Rajasthan Chief Minister, Ashok Gehlot, requesting the state government to implement the incentives available to solar projects under clause 16 of the Rajasthan Solar Policy, 2019.
In December 2019, the Rajasthan government <a href="https://mercomindia.com/rajasthan-solar-2025-policy/" target="_blank" rel="noopener">issued</a> its Solar Energy Policy, 2019, which aims to target 30 GW of solar power by financial year (FY) 2024-25. Utility or grid-scale solar parks will account for 24 GW, distributed generation is expected to account for 4 GW, the solar rooftop will total 1 GW, and solar pumps will make up the remaining 1 GW.
The policy also talks about encouraging solar projects for captive use under various scenarios and the exemption of transmission and wheeling charges and electricity duty.
However, according to REAR, over 20 months have passed since the government approved the policy, yet the policy has not been fully implemented in the state. In several cases, government departments and the RERC do not refer to the new policy.
The REAR has claimed that the stakeholders are deprived of the incentives available to solar projects under the policy, particularly clause 16 of the policy, which covers various facilities, incentives, and relaxations related to banking, transmission, and wheeling charges, and electricity duty, among others.
In their letter to the Chief Minister, the association highlighted the letter issued by the Energy Department of Rajasthan, levying an electricity duty of ₹0.6 (~$0.00081)/kWh.
The letter further states that according to clause 16.4 of the Rajasthan Solar Policy 2019, the following are exempted from payment of electricity duty for seven years from commercial operation date –  rooftop photovoltaic solar projects with net metering; solar projects within the premises of consumers in Rajasthan; solar projects outside the premises of consumer in Rajasthan; solar projects with a storage system for captive use; and charging station service providers who set up renewable energy generation projects within their premises for captive use.
Last month, The Maharashtra Electricity Regulatory Commission (<a href="https://www.merc.gov.in/" target="_blank" rel="noopener">MERC</a>) had <a href="https://mercomindia.com/discom-refund-open-access-consumer/" target="_blank" rel="noopener">directed</a> the Maharashtra State Electricity Distribution Company (<a href="https://wss.mahadiscom.in/wss/wss?uiActionName=getHome" target="_blank" rel="noopener">MSEDCL</a>) to provide the credit adjustment for the wrongful levy of electric duty to open access power consumer Mahindra Sanyo Special Steel Limited (<a href="http://mahindrasanyo.com/" target="_blank" rel="noopener">MSSSL</a>).
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Rajasthan Flouts Policy, Levies ₹0.60/kWh Electricity Duty on Captive Solar Projects

The National Solar Energy Federation of India (<a href="https://www.nsefi.in/" target="_blank" rel="noopener noreferrer">NSEFI</a>) has written a letter to the Principal Secretary (Energy), Government of Maharashtra, listing its suggestion for the &#8216;Unconventional Energy Generation Policy&#8217; of the state.
The Maharashtra government has recently <a href="https://mercomindia.com/maharashtra-renewable-policy-solar-projects/" target="_blank" rel="noopener noreferrer">released</a> the policy to promote non-conventional source-based energy generation.
The <a href="https://mercomindia.com/maharashtra-renewable-policy-solar-projects/" target="_blank" rel="noopener noreferrer">policy</a> is divided into two parts. In the first part of the policy, the state aims to implement 17,360 MW of transmission system-connected renewable power projects by 2025. This includes 12,930 MW of solar power projects, 2,500 MW of wind energy projects, 1,350 MW of co-generation projects, 380 MW of small hydro projects, and 200 MW of urban solid waste-based projects.
<a href="https://www.nsefi.in/" target="_blank" rel="noopener noreferrer">NSEFI</a> in its letter has stated that its members, who are independent power producers (IPPs), would like the state government to consider their inputs with regards to the deployment of hybrid projects in the state before finalizing the RE Policy.
A waiver on &#8216;electricity duty&#8217; for hybrid energy
According to NSEFI, electricity duty has been waived off for ten years for solar and wind projects in Maharashtra.
NSEFI has suggested that electricity duty should be waived off for a minimum of 15 years for hybrid projects considering they are capital intensive compared to pure solar or wind. Furthermore, hybrid projects provide better utilization of natural resources and evacuation infrastructure while minimizing renewable energy-based power&#8217;s intermittency.
Wind-solar hybrid projects involve complexities in design, project execution, operations, and maintenance compared to pure-play solar or wind projects.  It is generally difficult for a consumer to invest and maintain hybrid projects independently. Instead, it makes sense to rely on established renewable energy developers to provide clean energy to Maharashtra consumers under third-party/captive sale mode hybrid projects.
Levy of transmission charges on a ₹/kWh basis
According to NSEFI, solar-wind hybrid projects could also be encouraged by discontinuing the levy of transmission charges on a per unit basis and instead levy transmission charges on the full capacity. This will encourage developers to optimize their hybrid projects so that transmission charges are minimized against the present mechanism wherein transmission charges are applicable at twice the rate applicable on conventional energy on renewable transactions.
For the project to get recognized as a solar-wind hybrid project, secondary renewable sources&#8217; capacity should not be linked with the primary renewable source&#8217;s rated power capacity. NSEFI also suggested that there should not be any minimum storage capacity restriction for an energy storage project with an energy generation source.
The NSEFI had also <a href="https://mercomindia.com/industry-fears-rooftop-market-will-collapse/" target="_blank" rel="noopener noreferrer">appealed</a> to the Ministry of New and Renewable Energy (MNRE) to rescind the net metering clause, saying that MSMEs (Micro, Small and Medium Enterprises) in the segment will be adversely affected.

Electricity Duty Waiver for 15 Years Sought for Solar-Wind Hybrid Projects in Maharashtra

The State Government of Mizoram has issued the Mizoram Solar Power Policy 2017. The policy is aimed at ensuring reliable power supply and a sustainable energy mix for the state. As per the policy, the state will develop 80 MW of solar projects (rooftop + ground mounted) to meet 10.5 percent renewable purchase obligation by FY 2021-22.
The policy has been released with immediate effect, according to a <a href="https://power.mizoram.gov.in/uploads/files/solar-power-policy-2017.pdf" target="_blank" rel="noopener noreferrer">government release</a>.
The policy encourages the use of solar power among consumers and flow of investment in to the solar sector in Mizoram.
Key points:
<ul>
<li>For grid-connected solar projects the individual owner or group can make third-party sale of power, sell it to distribution utilities, or utilize it for captive consumption.</li>
<li>All buildings in the state are eligible to set up grid-connected rooftop solar projects within the specified capacity (1 kW and above) for rooftop solar projects.</li>
<li>Net-meters will be installed so that consumers can avail direct benefits.</li>
<li>The state has incentivized off-grid solar and decentralized distributed generation systems.</li>
<li>Banking of 100 percent energy produced is allowed for captive and open access consumers.</li>
<li>All solar power projects in the state are exempt from Electricity Duty. The Electricity Duty has also been waived for manufacturing facilities and ancillary units of the solar power projects.</li>
<li>If a solar project is not utilizing the evacuation system of a distribution utility, a reduction in contract demand of up to 50 percent of installed project capacity is permissible by the distribution utility.</li>
<li>The minimum duration of power purchase agreements (PPAs) will be 10 years.</li>
<li>It has been mandated, the distribution utility that has entered into PPA with a project developer will provide letter of credit equivalent to two months’ expected payment as security.</li>
<li>The government will provide 100 percent refund of stamp duty paid upon purchase of land for solar project.</li>
</ul>
The Mizoram government has provided a host of incentives to drive solar development in the state. There are incentives and subsidies for off-grid solar components as well as grid-connected systems so the state government can leverage benefits from the National Solar Mission (NSM) and Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) to deliver on its over 9 GW solar generation potential.
To set up a microgrid of up to 10 kW an incentive of Rs.115/W is available. For a mini grid of 10 kW to 500 kW there’s an incentive of Rs.99/W, and a rooftop solar developer can receive 70 percent of the benchmark cost as incentive to develop a 1 kW to 500 kW.
To set up project in a solar park, a developer can receive an incentive of Rs.20lakh/MW and any unemployed person or farmer in Mizoram can receive an incentive of Rs.50lakh/MW.
The Mizoram Solar Power Policy 2017 is inclusive in its approach to attain the set solar target. By providing such large incentives to unemployed youth and farmers the government has taken a unique approach to solar development.

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