The Central Electricity Regulatory Commission (CERC) passed an order declaring that the PPA and PSA (Power Purchase Agreement and Power Sale Agreement) are interconnected and inextricably linked to each other and introduction of Goods and Services Tax comes under the scope of the “Change in Law” clause for power purchase agreements (PPAs).
The order was passed after the case in which petitions were filed by two solar developers ie. Sadipali Solar Private Limited and Jyoti Solar Solutions Private Limited against the Solar Energy Corporation of India (SECI), the Ministry of New and Renewable Energy (MNRE), and the Grid Corporation of Odisha (GRIDCO).
The companies have claimed that the enactment of GST Laws constitutes a change in the law in terms of the provisions of the PPAs.The companies also asked respondents to compensate for additional charges and carrying costs. For 10 MW of solar ground-mounted projects, Jyoti Solar (Jyoti Infrastructure Pvt Ltd) claimed Rs.7,55,13,001 whereas Sadipali Solar (IBC Solar Ventures) claimed Rs. 2,59,00,000 for 20 MW of solar projects. Both projects are located in Odisha.
On 08.02.2017, Jyoti Solar Solutions Private Limited entered into a PPA with SECI for sale of power of 10 MW Solar PV ground-mounted project located at Ganjaudar Village, Patnagarh Town, Bolangir District in the State of Odisha at a tariff of Rs. 4.43 per kWh for a period of 25 years from the COD. On 31.05.2017, Sadipali Solar Private Limited entered into a Power Purchase Agreement (hereinafter referred to as ‘PPA’) with SECI for sale of power of 20 MW Solar PV ground mount project located at Village Kandel and Sindhbahali, Tehsil Kesinga, District Kalahandi in the State of Odisha at a tariff of Rs. 4.43 per kWh for a period of 25 years from the COD.For both the projects, the Effective Date of the PPA was 22.12.2016 and the Scheduled Commissioning Date (hereinafter referred to as ‘SCoD’) for the project was 22.12.2017.
On 01.07.2017, the Central Goods and Services Tax Act, 2017 (CGST Act) and the Integrated Goods and Services Tax Act, 2017 (IGST Act) for levy and collection of tax on inter-State supply of goods or services or both by the Central Government were enacted.
SECI claims to have given an extension to the Petitioner for 61 days during the period between 01.07.2017 and 30.08.2017 for achieving the commissioning till 21.02.2018 on account of the promulgation of the GST Laws following MNRE Office Memorandum dated 20.06.2018 concerning extension in SCoD of Solar Plant on account of GST Laws.
In its response, the CERC said that since the enactment of GST took place after the execution of the PPA and all conditions dealing with “Change in Law” according to article 12 of the PPA have been met with, and the developers are entitled to relief under the clause and denied the claim for reimbursement of carrying costs.
The commission stated that the Petitioners are directed to make available to the Respondents all relevant documents exhibiting clear and one to one correlation between the projects and the supply of goods or services, duly supported by relevant invoices and Auditor’s Certificate. The Respondents are further directed to reconcile the claims for Change in Law on receipt of the relevant documents and pay the amount so claimed to the SPDs.
Accordingly, it is directed that the GST bills shall be paid within 60 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.This will obviate the hardship of the Respondents for a one-time payment.
Alternatively, the Petitioners and the Respondents 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 PPAs. After the approval, SECI would be liable to pay the petitioner regardless of whether GRIDCO pays SECI or not. The SECI would be eligible to claim the same from GRIDCO.