CERC Orders Compensation To Hero Solar SPV Over Surge In GST Rates

CERC Approves Trading Margin of Rs.0.07/kWh in SECI's PSAs with Distribution Firms

The Central Electricity Regulatory Commission (CERC) in its latest judgment, ordered giving financial compensation to Clean Solar Power (Jodhpur) Private Limited on account of the escalation of Goods and Services Tax (GST) rates from five percent to 12 percent in 2021. Clean Solar Power is a Special Purpose Vehicle (SPV) of Hero Solar Energy.

The solar developer had petitioned before the CERC to declare the change in GST rates for solar cells and other solar equipment in 2021 as a ‘change of law.’ It also sought compensation from the Solar Energy Corporation of India (SECI) towards the additional amount incurred due to the change in GST rates.

The case was related to a 250 Megawatt (MW) solar power project at the Jodhpur district of Rajasthan against which the SECI had issued a Request For Proposal in 2018. Clean Solar Power had entered into a PPA with SECI (Solar Energy Corporation of India) under the ISTS Tranche-Ill scheme with effect from October 25, 2018. As a result, the firm had reached financial closure on the project within the stipulated timeline by SECI, May 25, 2019. The project, however, was hampered following the COVID-19 pandemic and associated lockdown impositions. This resulted in the shutdown of commercial operations and the extension of SCoD to January 17, 2021.

In 2022, SECI informed Clean Solar Power that the Central Transmission Utility of India (CTU) had not operationalized the LTA related to the project. Since the SCoD of the project was dependent upon the operationalization of the LTA, the delay in operationalization also caused a delay to the SCoD of the project, which was to be achieved by October 25, 2020. 

Following this, the SCoD of the project was extended by SECI upto the LTA operationalization date. It added that the expiry date of the PPA would be twenty-five (25) years from the extended SCoD date, that is, LTA operationalization date. Subsequently, the SCoD of the project was extended for a period equal to 60 days following the operationalization of LTA or the actual date of commissioning, whichever is earlier.

As noted by the CERC, as per the observations of the 21st joint Co-ordination Committee meeting for generation projects in the northern region, issued by CTU, Clean Solar was directed that SCoD of the project be extended upto the LTA operationalization date, that is October 6, 2022 and expiry date of PPA be counted as 25 Years from extended SCoD.

The CERC observed that the SCoD extension granted by SECI is well within the scheme’s provisions that grants an extension of time- force majeure events affecting respondents of PPA dated November 15, 2018. This is because the LTA became operational on October 6, 2022, while the firm achieved the COD on April 4, 2021, before its operationalization of LTA. However, the change in GST rate came into effect late in October 2021, after the PPA had already been executed and before the COD was reached. Thus, the firm is within the legal ambit of relief under the GST Laws as per the terms of Article 12 to be granted.

Addressing Clean Solar’s plea to direct SECI to pay compensation along with carrying cost towards the additional amount incurred on the increase in GST paid by Clean Solar, the CERC said that it would get compensation as sought by it.

The firm has also been granted a discount rate of 9.12% and an annuity period of 15 years. A late Payment Surcharge will be payable if the payment is not made within the due date.

Further, the Commission has also asked Jharkhand Bijli Vitran Nigam Limited (JBVNL), the state DISCOM of Jharkhand, to pay SECI all of the claims as sought by Clean Solar, that SECI has to pay the firm in turn. This, however, will not depend on the payment to be made by JBVNL to SECI.