Solar Safeguard Duty Notification Should be Treated as Change in Law: MERC
However, it noted that the exact impact of Change in Law cannot be quantified
The Ministry of Finance’s notification that imposed the 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, the Maharashtra Electricity Regulatory Commission (MERC) has said in its latest order.
The commission was responding to petitions filed by Tata Power Renewable Energy Ltd, Adani Renewable, and ACME Solar on account of Change in Law due to the promulgation of levy of safeguard duty of 25 percent on solar modules and cells imported from China and Malaysia.
Earlier, Tata Renewables, Adani Renewables, and ACME Solar had placed their bids for the Maharashtra State Electricity Distribution Company Limited (MSEDCL) 1,000 MW solar power tender and won 150 MW, 200 MW, and 250 MW respectively. In the auction, Adani Renewables and ACME had quoted a tariff of ₹2.71 (~$0.0401)/kWh, whereas Tata Renewables quoted a tariff of ₹2.72 (~$0.0402)/kWh.
The commission notes that the MSEDCL has not denied that the notification of Safeguard Duty is a Change in Law event under the Power Purchase Agreement (PPA) but has only opposed the methodology of calculating the compensation without having any details of actual impact of such Change in Law.
It further said that the impact of the Safeguard Duty can be determined during the period in which solar modules are imported from China or Malaysia. However, it is noticed that the petitioners are in the process of importing the solar modules and therefore the exact impact of Change in Law cannot be quantified.
In its order, the MERC has asked the developers to approach the commission at a later date for the determination of increase in cost due to the imposition of safeguard duty. It says:
Power Producers will commission their respective projects and approach the Commission for determination of the increase in cost or/and revenue expenditure on account of implementation of such Change in Law. At that stage, the Commission will determine the mode of recovery of the cost or/and expenditure for the Power Producers due to Safeguard Duty on import of Solar panel / modules.
However, the commission rejected ACME’s plea to extend the date of financial closure and schedule commissioning date.
Recently, Mercom reported when the Gujarat High Court provided temporary relief to project developer Azure Power in the matter of levy of safeguard duty on solar cells and modules imported by the company.
Nitin is a staff reporter at Mercomindia.com and writes on renewable energy and related sectors. Prior to Mercom, Nitin has worked for CNN IBN, India News, Agricultural Spectrum and Bureaucracy Today. He received his bachelor’s degree in Journalism & Communication from Manipal Institute of Communication at Manipal University and Master’s degree in International Relations from Jindal School of International Affairs. More articles from Nitin Kabeer