CERC Orders Compensation for Adani Subsidiary Over ‘Change of Law’ Events

The Central Electricity Regulatory Commission (CERC), in its latest order, directed the Solar Energy Corporation of India (SECI) and other related entities concerned to compensate Adani Solar Energy Jodhpur Four Private Limited, a Special Purpose Vehicle (SPV) of Adani Green Energy. 

The order came to the fore after the SPV moved a petition before the CERC citing increased project costs due to a hike in the Goods and Services Tax (GST) and increased import duties for the solar cells. SBC Cleantech Three Limited formed the SPV to set up solar power projects. SECI is offtaking the entire 100 MW of solar energy generated by the SPV for sale to bulk utilities. The solar energy, meanwhile, is generated from the Bhadla Solar Park in Rajasthan.

According to the details furnished by the Petitioner in the case, the Request for Selection (RfS) for the project was issued on November 8, 2016, while the power sale agreement after the tender was signed between SECI and Rajasthan Urja Vikas Nigam Limited (RUVNL) was signed on May 5, 2017. On the other side, the GST laws came on July 1, 2017. The Letter of Intent (LOI) for the project was issued on August 3, 2017, while the PPA was signed on October 6, 2017, at a tariff of Rs 2.63/Kwh. On the other hand, the Safe Guard Duty (SDG) on solar cells was notified on July 30, 2018. The project’s Scheduled Commercial Operations date was September 16, 2018. 

The Petitioner claimed that for Project I, due to the hiked GST rates, its revised taxation rules laid to additional increased payment of an additional Rs 10.30 crore, whereas for its second project, the additional GST burden was around Rs 10.30 crore too. It also said that its Operations and Maintenance (O&M) cost also increased due to increased GST rates.

It also said that due to the imposition of SDG, its total additional cost increased up to Rs 42 crore in each of the two projects. The Petitioner in the case pleaded with the CERC to approve these changes as a “change of law” and award compensation to it accordingly. However, RUVNL submitted that the effective date of the PPA was September 16, 2017, and any law coming after PPA could not be considered a change of law. The CERC, however, cited Article 12.1.1 of the PPA, which claimed that as long as the enactment of the law event occurs after the bidding submission date, the effective date on such a scenario would be the date on which such came into existence.

“Moreover, we are of the view that the Petitioner could not have factored at the time of the submission of bids that any change in tax structure would be introduced subsequently by the legislature. Accordingly, 

we hold that the GST laws and the SGD Notification, 2018 are Change in Law events in terms of the PPAs, and the Petitioner is entitled to relief under the said laws,” the CERC written order read. It also said with the facts mentioned in the Petitioner and the detailed discussion; the Commission found the SPV eligible for compensation. 

“The Petitioner, in the instant petitions, shall be eligible for carrying costs 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 Petitioner for arranging funds (supported by Auditor’s Certificate) or the rate of interest on working capital as per the 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 Petitioner 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,” the order said.