Renewable Supply Chain Disruption Due to Coronavirus to Be Treated As Force Majeure
MNRE announced that it will allow time extension in scheduled commissioning of delayed renewable projects
Considering the adverse impact of the Coronavirus pandemic on the global economy, the Ministry of New and Renewable Energy (MNRE) has issued an official memorandum which states that the time extension in scheduled commissioning of renewable projects due to the disruption of supply chains will be treated as a ‘force majeure’ event.
A force majeure (FM) clause means that if there are extraordinary events like those beyond human control such as wars, riots, crimes, or natural calamities, then this clause can free both the parties from contractual liability from fulfilling their obligations under the contract.
The government of India, in its letter dated February 19, 2020, clarified that the disruption of the supply chains due to the spread of Coronavirus in China or any other country should be considered as a case of natural calamity and Force Majeure Clause (FMC) may be invoked.
The Ministry added that it had received inputs from various developers and renewable energy associations requesting that this calamity should be considered as force majeure event for the grant of appropriate time extension in scheduled commissioning date (SCoD) of renewable projects in line with the force majeure clause in concerned contractual agreements.
After examining the issue, the Ministry has decided that all renewable energy implementing agencies of the MNRE should treat delay on account of Coronavirus, as force majeure. The Ministry has also decided that the renewable energy implementing agencies can grant a suitable time extension for projects, on account of Coronavirus based on the evidence produced by developers.
Further, the Ministry decided that all project developers claiming the disruption and seeking time extensions should make a formal application to Solar Energy Corporation of India (SECI) or the National Thermal Power Corporation (NTPC) or other implementing agencies, giving documentary evidence in support of their claim.
While considering the requests for an extension, the implementing agency should ensure that the claimants were affected due to the disruption in the supply chains due to Coronavirus in the period for which the extension has been claimed.
Moreover, the state departments have also been requested by the Ministry to treat the delay on account of the disruption of the supply chains due to Coronavirus as force majeure.
In February, the Ministry of Finance had issued a clarification that Coronavirus will be covered in the force majeure clause and should be considered as a case of natural calamity. Further, the Ministry had said that this clause can be invoked wherever appropriate. However, the ministry has clarified that the clause does not excuse a party’s non-performance entirely but only suspends it for the duration of a period. One of the conditions for this clause is that during any such extraordinary event, the firm must notify force majeure as soon as it occurs and cannot be claimed ex-post facto (retrospectively).
The National Solar Energy Federation of India (NSEFI) had also written to the Ministry of New and Renewable Energy (MNRE), asking for coronavirus to be seen as force majeure. The association also pointed out that most solar projects are interstate transmission system (ISTS)-connected and delays in commissioning these projects would also result in the levy of transmission charges/point of connection charges by the Power Grid Corporation of India (PGCIL) due to the operationalization of Long Term Open Access (LTOA). Considering this, the association had also requested an extension in the date of the operationalization of LTOA.