Reduce ₹0.18/kWh from Solar Tariff in Case of Non-Payment of Safeguard Duty: MERC

MSEDCL had argued that this is an additional condition imposed above the terms of the RfS and it changes the conditions related to bidding


The Maharashtra Electricity Regulatory Commission (MERC) has reiterated its decision that the Maharashtra State Electricity Distribution Co. Ltd (MSEDCL) should reduce ₹0.18 (0.0025/kWh) from the discovered tariff if the bidders have not paid safeguard duty.

However, the commission clarified that the condition for the deduction of ₹0.18 (0.0025/kWh) is applicable only when the bidder imports solar panels or modules from the countries on which safeguard duty has been imposed. It will not be applicable for import from other countries or sourcing it from domestic manufacturers.

The state body was responding to a review petition filed by MSEDCL seeking review of the commission’s earlier order dated February 15, 2019, which related to the adoption of tariff discovered for long-term procurement of 180 MW of solar power.

MSEDCL has now requested the commission to review the reduction in tariff by ₹0.18 (0.0025/kWh on account of safeguard duty.

As earlier reported by Mercom, MSEDCL had revised the ceiling rate from ₹3.10 (~$0.044)/kWh to ₹3.30 (~$0. 0.046)/kWh considering the impact of safeguard duty, distribution losses, and transmission wheeling charges. Prospective bidders had also requested MSEDCL to increase the ceiling tariff considering the impact of safeguard duty.

MSEDCL has argued that the commission has imposed the condition of reducing ₹0.18 (0.0025/kWh in case safeguard duty is not paid by the successful bidder. However, this is an additional condition imposed above the terms of the RfS documents retrospectively, which changes the conditions related to bidding and is erroneous on the part of the commission.

It further argued that AEPL had participated in the bidding process based on the RfS documents and proposed a tariff of ₹3.30 (~$0. 0.046)/kWh in its financial bid keeping in view certain commercials, terms, and conditions, which included non-payment of safeguard duty.

To this, the commission has suggested that to maintain the fairness of the competitive bidding process, MSEDCL should allow the bidders to withdraw its bid if condition imposed by the commission in the previous order is not acceptable to the bidder. MSEDCL may conduct a fresh competitive bidding process for such capacity.

The commission noted that when any tariff is discovered through a transparent bidding process, the commission adopts it if the discovered tariff is comparable with the current market rates. For example, the rate proposed by the MSEDCL for 180 MW of solar projects under Mukhyamantri Saur Krishi Vahini Yojana was ₹3.30 (~$0. 0.046)/kWh, which was higher than the rate discovered in MSEDCL’s  235 MW bidding of ₹3.09 (~$0. 0.044)/kWh to ₹3.15 (~$0. 0.045)/kWh. The difference in rate could have only been because of safeguard duty, with the other factors such as the cost of land, transmission charges, and losses, distribution losses being the same as both the bidding process were conducted within a span of few months.

The commission has adopted the tariff of ₹3.30 (~$0. 0.046)/kWh as it felt that a bidder should not get the undue benefit of increased tariff in the absence of payment of safeguard duty.

Keeping these observations in mind, the commission did not find any merit in the review petition and rejected it.

Recently, the MERC also ruled that the Ministry of Finance’s notification that imposed safeguard duty is an event of Change in Law, and therefore the additional expenditure and other impacts will be considered for reimbursement under Change in Law.