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<p>The Central Electricity Regulatory Commission (<a href="http://www.cercind.gov.in/" target="_blank" rel="noopener noreferrer">CERC</a>) has dismissed the request of Prayatna Developers Private Limited (PDPL), (a subsidiary of Adani Green Energy), to grant carrying cost on Goods and Services Tax (GST) compensation covered as “Change in Law.”</p>
<p>The respondents, in this case, are National Thermal Power Corporation (NTPC), Jaipur Vidyut Vitran Nigam Ltd., Ajmer Vidyut Vitran Nigam Ltd., Jodhpur Vidyut Vitran Nigam Ltd., and the Ministry of New and Renewable Energy (MNRE).</p>
<p>Back in 2015, NTPC had invited bids for setting up 130 MW of solar-PV power projects (10 MW x 13 projects) in the state of Rajasthan. The petitioner (Prayatna Developers) was selected for setting up two solar PV ground-mounted projects at village Kanasar in Jodhpur district of Rajasthan.</p>
<p>On July 29, 2016, NTPC issued a letter of intent (LoI) to Prayatna Developers for two solar PV projects of 10 MW capacity each. In a few months, PDPL entered into power purchase agreements (PPAs) with NTPC at a tariff of ₹4.36 ( $0.061)/kWh on a long- term basis.</p>
<p>Then in July 2017, the government introduced the GST, the most significant tax overhaul in the Indian economy.</p>
<p>The developer successfully commissioned its first 10 MW solar project on September 29, 2017, and its second 10 MW project on October 11, 2017.</p>
<p>In 2018, Prayatna developers had <a href="https://mercomindia.com/cerc-order-gst-change-in-law/" target="_blank" rel="noopener noreferrer">petitioned</a> the CERC to declare that the imposition of the GST law comes under Change in Law under Article 12 of the PPA. Prayatna developers had also requested the CERC to restore the petitioners to the same economic condition before the occurrence of the “Change in Law” by way of adjustment in tariff in terms of Article 12 of the PPA by increasing the tariff.</p>
<p>The Commission had granted the relief while noting that there was no mention of the carrying cost in the petition, and the claim of the petitioner was beyond the scope of the petition.</p>
<p>In its order dated September 19, 2018, the Commission had stated that:</p>
<p><em>“The Petitioners have submitted that they are entitled to the carrying cost for the costs incurred due to the change in law events. However, the respondents have submitted that there is no provision in the PPA regarding carrying cost or interest for the period until the determination of the relief amount on account of the change in law. We note that the petitioner has neither made any claim regarding carrying cost in its petition nor has filed any amendment application for amending the prayers of the Petition to include carrying cost. Therefore, this claim of the petitioner is beyond the scope of the petition and the prayers.” </em></p>
<p>The petitioner claimed that the mandate of change in law provisions across all PPAs is restitution (i.e., relief be granted in a manner to place an affected party in the same economic position as if the event had not occurred).  The petitioner had submitted that unless there is a provision prohibiting the grant of restitution, the affected party would be legally entitled to restoration to the same economic position before the change in law event of GST introduction.</p>
<p>The developer added that the government has specifically addressed in a previous letter the difficulties faced by the generating companies in terms of &#8216;considerable time&#8217; being consumed in the approval process resulting in severe cash flow problems, further leading to stress in the power sector. Therefore, the developer said, the Commission should consider the aggregate economic impact including carrying cost which is compensation for the time value of funds deployed on account of change in law events, the petitioner argued.</p>
<p>The petitioner added that what is to be allowed as &#8220;relief for change in law” is nothing but the impact of any change in law on its revenues and costs. In case of a delay, the impact will also include carrying cost as an integral part of the cost on account of change in law since the petitioner has to incur the financing cost to borrow the additional fund to be paid to the statutory authorities pending timely reimbursement.</p>
<p>However, the Commission noted that if there is a provision in the PPA for the restoration of the petitioner to the same economic position, the petitioner is eligible for carrying cost, but the PPA in question does not have a provision dealing with restitution principles of restoration.</p>
<p>Recently, CERC <a href="https://mercomindia.com/cerc-asks-ntpc-refund-solar-developers-liquidated-damages/" target="_blank" rel="noopener noreferrer">directed</a> NTPC to refund the performance bank guarantee of ₹10 million (~$140,800) along with interest to Prayatna Developers Private Limited within two months from the issue of the order. The amount was deducted as liquidated damages from the bills of Prayatna Developers. The company is developing 50 MW (5X10 MW) of solar projects at Mahoba in Uttar Pradesh.</p>
<p>In a similar petition several weeks ago, the CERC had <a href="https://mercomindia.com/cerc-denies-claim-carrying-costs-om-expenses-gst-law/" target="_blank" rel="noopener noreferrer">issued</a> the same ruling that the PPAs do not have a provision dealing with restoration to the same economic position. The commission noted that the claim regarding separate carrying costs is not admissible. This was against a petition filed by project developer, Parampujya Solar, a wholly-owned subsidiary of Adani Green Energy Limited.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener">More articles from Rakesh Ranjan.</a></p>
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
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Solar PPAs Without Restitution Principle Can’t Claim Carrying Cost Compensation: CERC

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