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Karnataka High Court Quashes KERC’s Captive Status Verification Procedure

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					</table>Renewable energy industry associations have filed a writ petition before the <a href="https://judiciary.karnataka.gov.in/" target="_blank" rel="noopener">Karnataka High Court</a> to set aside the Ministry of New and Renewable Energy’s (<a href="https://mnre.gov.in/en/" target="_blank" rel="noopener">MNRE</a>) mandate requiring solar cells to be sourced from the Approved List of Models and Manufacturers List-II (ALMM-II) from June 1, 2026.
The petitioners sought that enforcement of the ALMM List-II be deferred until India’s installed solar cell manufacturing capacity is sufficient to meet demand for projects covered by the ALMM framework.
Pending orders on the petition, the associations have requested the Karnataka High Court to grant an interim stay on the ALMM List-II mandate.
The writ petition challenging MNRE’s ALMM List-II mandate was filed by the <a href="https://kreakarnataka.org/" target="_blank" rel="noopener">Karnataka Renewable Energy System Manufacturers Association</a>, the<a href="https://www.kreepa.org/" target="_blank" rel="noopener"> Kerala Renewable Energy Entrepreneurs and Promoters Association</a>, and the <a href="https://tnsolarassociation.in/" target="_blank" rel="noopener">Tamil Nadu Solar Energy Developers Association</a>.
The associations said that the enforcement of ALMM List-II has led to a 170% increase in solar cell prices. Solar cells sourced from ALMM-listed manufacturers cost around ₹12 (~$0.13)/W, compared to the international market price of ₹5 (~$0.05)/W.
They contended that this could increase the cost of ALMM-compliant modules to approximately ₹24 (~$0.25)/W from ₹14 (~$0.15)/W under the earlier free cell sourcing arrangement.
Of approximately 30 GW of ALMM-listed cell capacity, only 4-5.3 GW is based on TOPCon technology. This, they said, would force manufacturers to rely on older and less efficient Mono PERC cells.
According to the petitioners, a shift from TOPCon to Mono PERC would significantly increase solar project costs. A Mono PERC-based project would cost around ₹45 million (~$472,000)/MW, compared to ₹30 million (~$315,000)/MW for a TOPCon-based project, resulting in an increase of ₹15 million (~$157,000)/MW.
The higher cost of projects using Mono PERC would stem from lower yield per unit area, which would require additional land, mounting structures, and cables, the petitioners said.
They argued that the cost escalation would make a substantial portion of renewable energy developers’ project pipelines unviable and could trigger defaults under existing loan covenants.
The petitioners said that EPC contractors and project developers had entered into binding procurement contracts and signed power purchase agreements and loan agreements with lenders based on their ability to source solar cells from competitive global or domestic suppliers outside the ALMM List-II.
The imposition of the cell sourcing mandate from ALMM-listed manufacturers makes the performance of such contracts commercially impractical, causing downstream tariff disruption and exposing them to contractual liability, the petitioners said.
The associations claimed that the MNRE did not consult stakeholders before issuing the compliance deadline, rendering the order procedurally improper.
They added that any delay in commissioning solar projects due to supply chain constraints would also affect India’s ability to meet its renewable purchase obligation targets.
Recently, the MNRE <a href="https://cm.mercomindia.com/mnre-asks-solar-cell-module-manufacturers-to-submit-monthly-price-data" target="_blank" rel="noopener">asked</a> all manufacturers listed on the ALMM to submit monthly price ranges for domestically manufactured solar cells and modules to prevent opportunistic profiteering.
The MNRE also <a href="https://www.mercomindia.com/mnre-panel-will-review-almm-solar-cell-exemption-extension-requests" target="_blank" rel="noopener">constituted</a> an expert committee to examine applications from net metering and open-access renewable energy projects seeking an extension for commissioning beyond May 31, 2026, to comply with the ALMM List-II mandate.
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Industry Bodies Move Karnataka High Court to Quash ALMM-II Mandate

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					</table>The <a href="https://judiciary.karnataka.gov.in/" target="_blank" rel="noopener">Karnataka High Court</a> has held that solar inverters will qualify for a concessional 5% Goods and Services Tax (GST) rate as they are parts of solar power-generating systems. It quashed the order of the Karnataka Department of Commercial Tax, classifying them as general electrical devices taxable at 18%.
Background
In June 2017, the Union government prescribed a concessional GST rate of 5% for specific renewable energy devices and equipment used in their manufacturing. This included solar energy-based devices and solar generating systems.
The petitioner, ABB India, supplied solar inverters and other accessories during the tax period from July 2017 to March 2018. It treated the supplied products as parts of solar energy-generating systems, paying GST at 5%.
The Commercial Tax Department later demanded ₹368.7 million (~$3.85 million) in taxes from ABB for this period.
For the sale of solar inverters and related accessories from April 2018 to March 2019, the department claimed ₹583.9 million (~$6.1 million).
The department claimed taxes of ₹246.7 million (~$2.57 million) for sales from April 2019 to March 2020.
The tax department considered the products supplied by ABB to be general electrical devices, which would attract 18% GST and not 5%, and issued show-cause notices alleging the same.
ABB responded by claiming that the inverters were used in solar projects, industrial applications, and large residential complexes with solar grid systems. This would qualify these products for 5% GST.
The issue was taken up by the Deputy Commissioner of Commercial Taxes, the adjudicating body, who sided with the state’s tax department and rejected ABB’s claims for a 5% concessional rate.
ABB filed an appeal with the Joint Commissioner of Commercial Taxes (Appeals-6), Bengaluru, who also dismissed its claims.
After this order, ABB approached the Karnataka High Court to seek the quashing of the earlier orders of the adjudicating and appellant bodies.
ABB contended that the Karnataka Commercial Tax Department wrongly classified the products it supplied as general electrical devices. Solar inverters convert DC power generated by solar panels into AC power, enabling a solar power-generating system to operate.
ABB added that the purchase orders, invoices, and other documents proved that the inverters were supplied to renewable energy solutions companies.
It submitted that the 5% GST benefit was not restricted only to suppliers of entire solar energy generating systems. It also applied to parts used in manufacturing such systems.
High Court’s Analysis
The High Court noted that ABB’s solar inverters were used only as part of a solar energy grid system and could not be treated like ordinary household power converters.
It was observed that a solar generating system consists of multiple components, including inverters, which are necessary to convert solar DC power into usable AC power and are therefore critical to the generating system.
The High Court held that the 5% GST also applied to suppliers of parts, such as solar inverters, used in such solar energy-generating systems.
The court noted that ABB’s invoices proved that the inverters were used in solar systems.
It referred to earlier judgments that stated that where a notification refers to goods “for use,” the relevant test is intended use. Based on these decisions, the High Court held that ABB’s inverters were intended to be used as parts of solar energy-generating systems.
The High Court held that the orders from the adjudicating and appellate bodies were arbitrary and contrary to law, quashing them and allowing ABB’s claims of 5% concessional GST rate.
This April, the Karnataka High Court <a href="https://www.mercomindia.com/karnataka-high-court-stays-cercs-revised-deviation-settlement-mechanism" target="_blank" rel="noopener">issued</a> an interim stay on the enforcement of the Central Electricity Regulatory Commission’s revised deviation settlement mechanism for renewable energy project developers.
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Karnataka High Court Rules Solar Inverters Attract 5% GST and Not 18%

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					</table>The <a href="https://judiciary.karnataka.gov.in/" target="_blank" rel="noopener">Karnataka High Court</a> has issued an interim stay on the enforcement of the Central Electricity Regulatory Commission’s (CERC) revised deviation settlement mechanism (DSM) for renewable energy project developers.
The stay will be in force until the next hearing on June 10, 2026.
The revised mechanism proposed changes to the deviation calculation formula, tighter deviation bands, and higher penalties, effective April 1, 2026.
The High Court said that since the petitioners are willing to continue under the earlier DSM regime and comply with the existing deviation norms, the revised norms cannot be enforced.  The petitioners can continue under the earlier DSM regime; deviations of up to 15% will be governed by that framework, and the petitioners will pay deviation charges accordingly.
The petition was filed by the National Solar Energy Federation of India (NSEFI), challenging the new DSM mechanism on the grounds that renewable energy generation is inherently weather-dependent and uncontrollable, unlike conventional sources.
Since the CERC failed to consider the objections/suggestions of the stakeholders before the issuance of the final notification, the High Court said that CERC defeated the purpose of the publication of the regulation, rendering the impugned provision arbitrary and violative of the principles of natural justice.
NSEFI argued that the revised DSM mechanisms were notified without complying with the mandatory requirement of prior publication under the Electricity Act, 2003.
It contended that the draft notification did not contain the revised deviation formula as ultimately notified, thereby denying stakeholders a meaningful opportunity to object to the substantive change.
In September 2025, CERC <a href="https://www.mercomindia.com/deviation-settlement-higher-tariffs" target="_blank" rel="noopener">proposed</a> changing the calculation of deviation settlement to use the project’s scheduled generation instead of available capacity. The move also reduces the DSM tolerance band for wind from ±15% to ±10% and for solar from ±10% to ±5%. Developers had expressed concerns that implementing this DSM regime would lead to significant revenue losses due to the intermittency of renewables.
The DSM framework was <a href="https://www.mercomindia.com/cerc-notifies-phased-move-to-schedule-based-deviation-for-wind-solar-under-dsm" target="_blank" rel="noopener">notified</a> on April 1, 2,026, indicating a phased shift to the new DSM regime. Regarding the implementation of the order, CERC said that it will be subject to the outcome of writ petitions against the regulations pending before the Delhi High Court.
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Karnataka High Court Stays CERC’s Revised Deviation Settlement Mechanism

A vacation bench of the Karnataka High Court has imposed an indefinite stay on the Karnataka Electricity Regulatory Commission’s (<a href="http://www.karnataka.gov.in/kerc/Pages/home.aspx" target="_blank" rel="noopener">KERC</a>) recent order that levied 25 percent of the normal transmission charges as wheeling charges for open access consumers in the state.
The order was passed by the bench in response to writ petitions filed by domestic renewable energy project developers, namely, <a href="http://www.avaadaenergy.com/" target="_blank" rel="noopener">Avaada Energy</a>, Prestige Group, and Embassy Group.
When contacted, Mercom’s source working with one of the petitioners, Avaada Energy, confirmed the stay imposed by the Karnataka High Court.
The source added, “So far, the Karnataka High Court has not fixed the next hearing date. As it was a vacation bench that heard our writ petition, the case will be again heard by a bench when the court resumes after vacation.”
Justice A S Bopanna passed the stay order, the source further informed.
When asked about the order passed by the court, a KERC official told Mercom, “We have not yet received any communication from the Karnataka High Court or the petitioners. We will respond accordingly when we are communicated to by the High Court.”
The current <a href="https://mercomindia.com/wheeling-charges-karnataka-five-fold/" target="_blank" rel="noopener">wheeling charges</a> being levied in Karnataka are five times more than the charges imposed in the state earlier. According to the KERC order passed in 2014, just five percent of the transmission charges were levied as wheeling charges in the state of Karnataka.
This decision to increase the wheeling charges in the state comes at a time when various states in the country are either reducing or nullifying it.
KERC’s move follows a similar announcement made in December by regulators in Madhya Pradesh. In <a href="https://mercomindia.com/madhya-pradesh-must-run-status-solar-wind/" target="_blank" rel="noopener">December 2017</a>, the Madhya Pradesh Electricity Regulatory Commission (MPERC) had announced that wheeling charges, a cross subsidy surcharge, and an additional surcharge on the wheeling charges as decided by MPERC would be applicable to renewable energy generation from time to time.

Karnataka High Court Stays KERC Order to Increase Wheeling Charges for Open Access

The deadline for signing the Power Purchase Agreements (PPAs) for 655 MW of grid-connected solar photovoltaic (PV) projects in the state of Karnataka has been extended to March 28, 2018.
The projects had been auctioned by Karnataka Renewable Energy Development Limited (<a href="http://kredlinfo.in/" target="_blank" rel="noopener">KREDL</a>).
In the KREDL order, the capacity mentioned for the extension of PPA is 655 MW. However, in the auction, a total of 760 MW of solar PV projects had been auctioned. When contacted for clarification, a KREDL official told Mercom, “100 MW bids were not received, and another 100 MW was under Domestic Content Requirement (DCR) category. So that had to be cancelled keeping in mind the compliance with World Trade Organization (WTO) norms.”
KREDL had <a href="https://mercomindia.com/kredl-tenders-large-scale-solar-projects/" target="_blank" rel="noopener">tendered</a> 860 MW of grid-connected solar PV to be developed across 43 taluks in Karnataka in December 2017 and the auction for <a href="https://mercomindia.com/kredl-750-mw-auction-solar/" target="_blank" rel="noopener">760 MW</a> had concluded in the first week of February 2018.
After the auction, Grasim Industries Limited had filed a writ petition with the Karnataka High Court, stalling the process. Grasim Industries’ petition was based on the fact that the initial deposit of ₹1 million (~$15,414) paid by them had not been uploaded in the e-tendering portal due to a technical glitch, rendering them unable to participate.
The Karnataka High Court then put a <a href="https://mercomindia.com/karnataka-hc-stays-kredl-auction/" target="_blank" rel="noopener">stay</a> on the auction, asking the respondents to appear before it on February 17, 2018.
On February 17, 2018, the court had adjourned the matter until further proceedings. On February 27, 2018, the writ petition filed by Grasim Industries Limited was <a href="http://kredlinfo.in/solargrid/860MW%20grid%20connected%20solar%20power%20projects/extension%20of%20time%20%20860MW.pdf" target="_blank" rel="noopener">dismissed</a> by the Karnataka High Court.
After the removal of the stay order, the winners of the auction had sought extension of time from KREDL to sign PPAs. KREDL has now allowed the winning bidders to enter their PPAs with the distribution companies (DISCOMs) up to March 28, 2018.

PPAs for 655 MW Solar Projects in Karnataka to be Signed by March 28, 2018

The Karnataka High Court has put a stay on the 860 MW grid-connected solar photovoltaic (PV) project tender auctioned by Karnataka Renewable Energy Development Limited (<a href="http://kredlinfo.in/" target="_blank" rel="noopener">KREDL</a>).
The High Court’s order came in response to a writ petition filed by Grasim Industries Limited.
On February 8, 2018, the Karnataka High Court put a stay on the auction, asking the respondents to come to the court on February 17, 2018. On February 17, 2018, the court adjourned the matter until further proceedings.
A source at Grasim Industries commented on the development saying, “We have just raised a technical question and the High Court has asked KREDL not to move forward with the closure of the tender until the High Court completes its proceedings and has its final findings.”
When asked how much time it might take to resolve the case, the source replied, “The court has met twice on this issue and I cannot comment on this as this is a matter of the judiciary. It is up to them.”
Grasim Industries’ petition is based on the fact that the initial deposit of ₹1 million (~$15,414) paid by them had not been uploaded in the e-tendering portal due to a technical glitch, rendering them unable to participate.
A KREDL official told Mercom, “Yes, a stay has been put and as asked by the Honorable Karnataka High Court, we will maintain the status quo, until further orders.”
When asked if there are chances of a retender, the KREDL official said, “I cannot comment on that, whatever the High Court decides will be the last word.”
Of the 860 MW that were <a href="https://mercomindia.com/kredl-tenders-large-scale-solar-projects/" target="_blank" rel="noopener">tendered</a> in the month of December 2017, KREDL auctioned <a href="https://mercomindia.com/kredl-750-mw-auction-solar/" target="_blank" rel="noopener">760 MW</a> of grid-connected solar PV projects to be developed across 38 taluks in the state on February 1, 2018.
Image credit: By Polytropos-Commons (Own Work) via Wikimedia Commons

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