Section 12. Powers of the State Government

(1) The State Government may, from time to time, issue directions not inconsistent with this Act, on a policy matter in regard to electricity and if any dispute arises between the Commission and the State Government as to whether a question is or is not a policy matter, it shall be referred to the Central Electricity Regulatory Commission whose decision thereon shall be final and binding. (2) (a) The State Government shall be entitled to issue policy directions with respect to the subsidies to be granted for supply of electricity to any class or classes or persons or in respect of any area 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 licensee or person affected by the grant of the subsidies to the extent of the subsidies granted. (b) The amount of the subsidy to be paid under clause (a) and the method and manner of payment and the time within which such amount is to be paid by the State Government shall be determined by the Commission and the Commission will calculate such amount in accordance with the procedure provided in the regulations.