NTPC Objects To Solar Cell Imports From China, Loses Case Before CERC

In a recent case before the Central Electricity Regulatory Commission (CERC), Indian power behemoth NTPC objected to the plan of a solar power developer to continue importing solar cells at higher prices. The development came to the fore when Solairepro Urja Pvt Ltd, a Pune-based solar developer, moved CERC seeking compensation. 

The firm demanded compensation due to the rise in safeguard duties against the imports of solar cells from countries like foreign countries like China. The Indian government imposed higher duties on such imports in July 2018. However, NTPC, a procurer of renewable power from Solairepro, objected to imports from China and did not take adequate measures to explore other options to mitigate the higher costs. 

“The Petitioner has failed to demonstrate any action taken to mitigate the increase in cost by continuing to procure the solar cells from China even after the safeguard duty was imposed, leading to the increase in the landed cost of the equipment. Hence, this Commission may disallow higher costs without taking mitigating measures and should not be passed on to AP Discoms or NTPC and the consumers at large,” the CERC order details read. 

What was the case all about? 

Solairepro Urja is developing a 250 MW solar project at Kadapa Ultra Solar Park in Andhra Pradesh. NTPC was the nodal agency for facilitating the purchase and sale of power through its subsidiary NTPC Vidyut Vyapar Nigam Limited (NVVN). Southern Power Distribution Company of A.P. Limited (APSPDCL) and Eastern Power Distribution Company of AP Limited (APEPDCL), are the distribution companies of Andhra Pradesh and the respondents in the case. 

The firm submitted its bid for the project on December 14, 2016. It signed the PSA on December 11, 2017, with NTPC and AP Discoms. It also signed the PPA with NTPC on February 7, 2018. Its Scheduled Commercial Operation date (SCoD) is February 9, 2019. Solairepro, however, said that the higher duties (through a 2018 notification) on the import of solar cells inflated its total costs and demanded compensations accordingly. 

“During the implementation of solar projects, the solar modules are procured at the end of the project implementation, since keeping the modules idle at the project site degrades it substantially. Therefore, even under the original scheme of the PPA, where the SCOD was 10.02.2019, the modules would have been scheduled for receipt at the project site only a few months prior to SCOD. Hence, by no stretch of the imagination, the modules could have been scheduled to be imported prior to 30.07.2018 (the date of imposition of SGD). The imposition of SGD was notified on 30.07.2018; therefore, expecting the Petitioner to mitigate its impact prior to such time is practically impossible,” the firm said. 

Final CERC order 

Under established rules, renewable firms are entitled to compensation when CERC approves such moves as “Change of Law” events. In the present case, the CERC, after hearing the arguments from NTPC and AP Discoms, declared the rise in solar cell import rates as a ‘change of law’ and awarded compensation to the company. 

“The safeguard duty was levied vide 2018 SGD Notification on 30.07.2018 i.e. after submission of the bid by the Petitioner (on 14.12.2016) and before the SCoD of the project, which is 09.02.2019. As such, in view of the principles decided in the preceding para, we hold that the protection under the clause of ‘Change in Law’ as contained in Article 12 of the PPAs is available to the Petitioner,” the CERC order said.

The CERC order also added, “The Commission is of the view that the compensation on account of imposition of ‘Safeguard Duty’ w.e.f. 30.07.2018 should be discharged by the Petitioner and the Respondents as a one-time payment in a time-bound manner within sixty days from the date of issue of this Order or from the date of submission of claims by the Petitioner, whichever is later, failing which it shall attract late payment surcharge in terms of the PPAs. Alternatively, the parties may mutually agree to a mechanism for the payment of such compensation on an annuity basis spread over such period not exceeding the duration of the PPAs as a percentage of the tariff agreed in the PPA.”