CERC Awards Compensation To Torrent Power Over Surged GST Rates

CERC Awards Compensation To Torrent Power Over Surged GST Rates

The Central Electricity Regulatory Commission (CERC), in its latest judgment, awarded compensation to a subsidiary of Torrent Power against the rise of Goods and Services Tax (GST). Its subsidiary– Torrent Solargen Limited (TSL), is a generating company. It had set up its 115 MW ISTS-connected wind power project in the Kutch district of Gujarat.

The company said that it bid on the government’s wind power project. The tender was floated by the Solar Energy Corporation of India (SECI). It was part of its 2500 MW ISTS-connected wind power projects (Tranche VI). The Petitioner, in the case of Torrent, had won the bid with its offered price of Rs 2.76/unit. It received an order for 115 MW of wind power under the tender. 

SECI issued the Request for Selection (RfS) on August 3, 2018. The LOA was issued on October 24, 2018, and the Power Purchase Agreement (PPA) was signed on May 3, 2019. The Scheduled Commercial Operation Date (SCOD) was July 22, 2020. However, the Ministry of Finance, on June 28, 2017, brought its first GST notification. It was revised on September 30, 2021. 

Torrent Solargen, in its petition before the CERC, said that the September 30, 2021, notification of the Finance Ministry increased the GST rates on the supply of equipment from 5% to 12%. This, the Petitioner said, led to an additional impact of around Rs 37 crore for the setting up of the project. 

In its petition before the CERC, the company appealed to consider this as a “change of law” event and award compensation accordingly. The Central Commission, after hearing the Petitioner and respondents– SECI and the Haryana Power Purchase Centre (HPCC) considered the plea of Torrent and ordered compensation to the firm, admitting its plea of considering the surged GST rates as a change of law event. 

“… we find that the Petitioner’s project was affected by the impugned notification. Therefore, TSL is entitled to compensation on account of a Change in Law as per the terms of Article 12 of the PPA due to impugned notification i.e. 2021 GST Notification. It is pertinent to mention here that during the course of the hearing held on 23.08.2023, the Petitioner clarified that the Change in Law claims are for the period prior to the Commercial Operation Date only,” the CERC order read.

The Commission also also held that the Petitioner was liable for caring costs. It added, “The Commission further directs that the responding HPPC is liable to pay to SECI all the above-reconciled claims that SECI has to pay to the Petitioner. However, payment to the Petitioner by SECI is not conditional upon the payment to be made by the responding HPPC to SECI,” it said.