Two Solar Firms To Get Compensations Due to Increased GST Rates

In its order, the Central Electricity Regulatory Commission (CERC) granted compensation to two renewable energy companies. The central authority granted these compensations on account of ‘Change of Law’ events. Such events included the rise of Operations and Maintenance (O&M) costs of their projects due to the escalation of GST rates and the imposition of increased safeguard duty on importing solar modules and solar cells. 

The order came to the fore after the Appellate Tribunal for Electricity (APTEL) quashed the earlier order of the CERC. The earlier order of the CERC denied compensations for increased O&M charges due to increased GST and other charges. The APTEL order directed the CERC to conduct a fresh hearing, bearing in mind the tribunal’s ruling in the Parampujya case. 

The case pertained to two renewable companies namely Vector Green Prayagraj Solar Private Limited and Yarrow Infrastructure Private Limited. While Vector had a 50 MW solar plant at Prayagraj in Uttar Pradesh, Yarrow had a solar park in Karnataka. Both had almost the same grievances and moved a joint petition on the issue of compensation. 

In the previous order, the CERC denied compensation on increased O&M expenses to Vector because of increased GST rates and denied carrying cost plea. On the other hand, for Yarrow, the CERC had said that the firm was not eligible for compensation on account of imposition of safeguard duty, denied it compensation for increased O&M charges due to increased GST and also denied carrying cost plea. 

The CERC had argued that the firms failed to submit their land use cum implementation and support agreement for such projects. This document was, however, submitted before the APTEL by the petitioners. However, after the APTEL intervention and subsequent document submission, the CERC allowed compensation to the firms. 

“From the above, we observe that the Petitioner had to pay annual O&M charges at the rate of Rs. 75 lakhs per MW per annum, which escalated annually at the rate of 6% thereafter. We are of the view that the increase in O&M expenses is due to GST Laws and location of the Petitioner in the Solar Park. Also, APTEL vide judgment dated 15.09.2022 in A. No. 256 of 2019 & Batch titled a Parampujya Solar Energy Private Limited & Ors. vs. CERC &Ors., has already held that Change in Law compensation on account of GST laws including the period post Commercial Operation Date of the project towards O&M expenses, along with carrying costs should be allowed. Therefore, we allow the prayer of Petitioner for increased charges payable to SPIA on account of GST,” the CERC order said. 

It also added, “This Commission holds that the Petitioner shall be entitled to compensation (pre COD& post COD) towards additional expenditure on account of Change in Law event in terms of Article 12 of the PPAs. 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 until the date of issuance of this order…”