General powers of the State Government

12. (1) The State Government shall have the power to issue policy directions on matters concerning electricity in the State including the overall planning and coordination. All policy directions shall be issued by the State Government consistent with the objects sought to be achieved by this Act and accordingly shall not adversely affect or interfere with the functions and powers of the Commission including but not limited to determination of the structure of tariffs for supply of electricity to various classes of consumers.

(2) If any dispute arises between the Commission and the State Government as to whether or not a question is a matter of policy or whether a policy direction issued by the State Government adversely affects or interferes with the exercise of the functions of the Commission, the same shall be referred to the Central Electric Authority and the decision given by the Central Electric Authority shall be final and binding. The Central Electricity Authority may appoint one or more members of the Authority to act on behalf of the Authority in relation to any matter referred to under this subsection.

(3) The State Government shall be entitled to issue policy directions concerning the subsidies to be allowed for supply of electricity to any class or classes of persons in addition to the subsidies adjusted by the Commission while regulating and approving the tariff structure provided that the State Government shall contribute the amount to compensate such concerned body or unit affected by the grant of the subsidies by the State Government to the extent of the subsidies granted. The Commission shall determine the amounts and the term and conditions on which such amounts are to be paid by the State Government.

(4) The State Government shall consult the Commission in relation to any proposed legislation or rules concerning any policy direction and shall duly take into account the recommendation by the Commission on all such matters.