CERC Awards Compensation to Avaada

Avaada Clean Energy had petitioned to consider implementation of safeguard duty as change in law

The Central Electricity Regulatory Commission (CERC) has ruled in favor of Avaada Clean Energy Private Limited in a case regarding a 5 MW solar PV project executed under Solar Energy Corporation of India (SECI)’s Defense program.

Avaada Clean Energy had entered power purchase agreement (PPA) at a tariff of Rs.4.18/kWh with Ordnance Factory Board, Kanpur to supply power. Due to imposition of safeguard duty there was delay in project execution. Instead of scheduled commissioning date of August 18, 2018; the project was commissioned on September 14, 2018. As a result, Avaada Clean Energy incurred extra costs.

On the other hand, due to delay, Ordnance Factory Board, Kanpur slapped fines totaling Rs.27,00,000 due to delay in project commissioning.

Avaada Clean Energy approached the CERC asking it to declare the imposition of safeguard duty on solar cells and modules imported from China PR, Malaysia as change in law. The company also requested the commission that it restore the firm to the same economic condition prior to occurrence of the Change in Law by way of adjustment in tariff.

In its petition, Avaada Clean Energy had also submitted that in case the first two requests are not viable the CERC direct Ordnance Factory Board, Kanpur to pay a lump sum compensation of Rs.3,60,11,266 in lieu of the additional levy of safeguard duty and IGST on importing solar cells plus interest/carrying cost at the rate of 15% per annum from the date of impact till reimbursement.

After going through submissions made by all parties, CERC observed that sudden imposition of safeguard duty was indeed an occurrence to merit exercise of change in law clause. CERC directed Avaada Clean Energy to submit to Ordnance Factory Board, Kanpur, all relevant documents exhibiting clear and one to one correlation between the project and the supply of imported goods, duly supported by relevant invoices and Auditor’s Certificate.

CERC ordered that Ordnance Factory Board, Kanpur will within 60 days of this order or from the date of submission of claims by the Avaada (whichever is later) pay the claim raised by Avaada Clean Energy. If there is delay in payment of claim, late payment surcharge will apply.

The CERC also specified that Avaada’s claim regarding restoration to same economic condition prior to occurrence of change in law and grant of separate ‘carrying cost’ was not admissible.