Ostro Energy Eligible For Compensation Due To Change In GST Rates: CERC

Ostro Energy Eligible For Compensation Due To Change In GST Rates: CERC

The Central Electricity Regulatory Commission (CERC) in its latest judgement awarded compensation to Ostro Energy Private Limited, a renewable energy company. The compensation was awarded to it on account of surge in Goods and Services Tax (GST) after submitting its bid for a government project. 

As per the case details, Ostro Energy is a power generating company involved in development, building, owning, operating and maintaining utility-scale grid connected power projects for generation of wind power. Under the SECI’s (Solar Energy Corporation of India’s) 1200 MW ISTS-connected wind power projects, the firm bid for a 50 MW project at  a site at Bhuj in the Kutch district of Gujarat. 

It won the bid with its offered price of Rs 2.81 per unit. The original GST notification was issued on June 28, 2017. On the other hand, ots revised surged GST rate revision for renewable equipment came on September 30, 2021 which increased the GST rates from 5 percent to 12 percent. The firm submitted its bid on April 15, 2019, before the GST rate escalation notice. The firm, in its petition before the CERC said that the rise in GST rate on renewable technology produced escalated the project costs for the firm and sought for compensation.

The CERC, in its final judgment favoured the points raised by the petitioner in the case and awarded compensation to the firm, accepting the plea of categorizing the escalation of GST rates as a “change of law” event”. 

“The Petitioner is entitled to compensation on account of a Change in Law as per the terms of Article 12 of the PPA dated 25.10.2019 due to the impugned notification, viz. the 2021 GST Notification, once it establishes during reconciliation with SECI and the distribution company, one to one correlation with the projects and the invoices raised supported with an auditor certificate that the Petitioner’s project has been impacted due to the change in the rate of Goods and Services Tax from 5% to 12% w.e.f. 01.10.2021 due to the 2021 GST Notification. Accordingly, the Commission hereby directs the contracting parties to carry out the reconciliation of additional expenditure along with carrying cost by exhibiting clear and one-to-one correlation with the projects and the invoices raised supported with an auditor certificate,” the CERC judgment in the case read.

It also added, “The discount rate and annuity period as applicable (as per relevant RE Tariff order) on the date of COD shall be the appropriate methodology towards change in law compensation. 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.”