CERC Grants Compensation To Azure Power Over ‘Change of Law’ Events

CERC Orders Compensation To NTPC Over 'Change Of Law' Event

In its latest judgment, the Central Electricity Regulatory Commission (CERC) allowed Azure Power compensation for ‘change of law’ events. These events were related to the Goods and Service Tax (GST) surge on solar products. 

The detailed order said that the case was related to three projects of Azure. This includes two 300 MW solar plants, each situated in three different areas of Jodhpur, and one 600 MW solar project in the Bikaner district of Rajasthan. The Request For Proposal (RfS) for these projects was floated in January 2019, whereas the RfS for the Bikaner project was released on January 30, 2018. 

The firm signed the PPA for the Bap tehsil project on September 17, 2019. It signed the PPA for its Bikaner project on October 31, 2018, and signed another PPA for its other project in the Jodhpur district on November 27, 2019. The firm said that the GST notification came in 2021, increasing the costs for renewable firms. The company said that the notification increased the GST rates from 5% to 12% for renewable energy devices, which inflated its project cost. Azure said that as the 2021 GST notification came into effect after submitting its bids, it qualified for change of law benefits. 

After hearing the petitioner’s argument, the CERC, respondents, and others ruled in favor of the renewable firm. CERC accepted Azure’s pleas, termed the changes as a ‘change in law’, and awarded compensation to the firm. 

“2021 GST Notification is the Change in Law events as per Article 12 of the PPAs. The Petitioner is entitled to compensation (pre-COD & post-COD) on account of a Change in Law as per the terms of Article 12 of the PPAs due to the 2021 GST Notification.,” the order said.

The CERC order also allowed compensation to the firm at a discount rate of 9 percent and an annuity period of 15 years. “The liability of SECI/ Discoms for ‘Monthly Annuity Payment’ shall start from the 60th (sixtieth) day from the date of this order or from the date of submission of claims by the Petitioner, whichever is later. Late payment surcharge shall be payable for the delayed period corresponding to each such delayed Monthly Annuity Payment(s), as per respective PPAs/PSAs,” the order said.

The CERC order also added, “The Petitioners shall also be eligible for carrying cost starting from the date when the actual payments were made to the Authorities till the date of issuance of this order, at the actual rate of interest paid by the Petitioners for arranging funds (supported by Auditor’s Certificate) or the rate of interest on working capital as per applicable RE Tariff Regulations prevailing at that time or the late payment surcharge rate as per the PPA, whichever is the lowest. Once a supplementary bill is raised by the Petitioners in terms of this order, the provision of Late Payment Surcharge in the PPA would kick in if the payment is not made by the Respondents within the due date.”