MERC Grants ReNew Solar To Claim Safeguard Duty Under Change in Law


Maharashtra Electricity Regulatory Commission (MERC) has recently passed an order in regards with ReNew Solar Power Private Limited seeking an appropriate mechanism for grant of an appropriate adjustment/ compensation to offset financial or commercial impact of change in law events on account of imposition of safeguard duty on solar cells and modules.


M/s ReNew Solar Power Private Limited (RSPPL) filed Petition before the Commission against Maharashtra State Electricity Distribution Company Ltd.RSPPL’s main prayers were to declare the imposition of safeguard duty via Safeguard Duty Notification as Change in Law in terms of the PPA, which has a direct effect on the Project,To evolve a suitable mechanism to compensate the Petitioner for the adverse financial loss incurred by the Petitioner on account of Change in Law through a lump sum payment and to grant carrying cost from the date of incurring of the cost by the Petitioner till the date of disbursal of the compensation considering that increase in cost has been financed by both debt and equity.

MSEDCL issued its Request for Selection (RfS) of Solar Power Developers (SPDs) for the development of 1000 MW (AC) Solar Projects through a competitive bidding process on 9 April 2018. RSPPL was selected as the successful bidder pursuant to Letter of Award (LoA) dated 25 May 2018. In terms of the LoA, RSPPL entered into a PPA dated 27 July 2018 with MSEDCL for development of solar energy based power plant of 250 MW capacity at Village Mallaipatti, Tal. Kayatha, Dist., Tuticorin, State – Tamil Nadu.


Central Govt. imposed SGD of 25%  plus valorem deducting anti dumping duty, if any, when imported during the period from 30th July 2018 to 29th July 2019,20%  plus valorem deducting anti dumping duty, if any, when imported during the period from 30th July 2019 to 29th January 2020 and 15% plus valorem deducting  anti dumping duty, if any, when imported during the period from 30th January 2020 to 29th July 2020. The issuance of SGD Notification and the consequent imposition of SGD on the import of solar cells and modules has resulted in an increase in the expenditure incurred by RSPPL after the last date of bid submission and thus had a direct adverse impact on the Project.

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RSPPL has funded the entire amount through its equity, RSPPL would also be liable to return on equity equivalent to 20.39% (pre-tax) which is equivalent to 16% (post tax) which has been considered by the Commission in the RE Tariff Order.

Commission clarified  that  the disbursement made to RSPPL would not include SGD and RSPPL would be liable to arrange the additional funds on his own account without recourse to the lender/ project securities until the tariff is increased by the State Commission/ relevant agency. But RSPPL incurred the entire amount of SGD through their own equity hence, on the final tariff being approved by the Commission, the additional amount on account of SGD would be disbursed subject to the maximum debt of Rs. 973.26 crores (i.e. 75% of the Project cost inclusive of safeguard duty).Once the Commission passes an order allowing safeguard duty as a change in law and thereby directing the payment of an incremental tariff, RSPPL would have recourse to the additional debt (subject to an overall cap of Rs. 973.26 crores).

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MSEDCL submitted that The onetime compensation of SGD will burden the consumers heavily. If the compensation is made through tariff spread over the entire tenure of PPA, then the same will be gradually recovered from consumers through ARR and tariff petitions. It stated that RSPPL has miserably failed to understand the entire purpose of fixation of interest rate for arriving at a generic tariff for renewable projects.It highlighted that the claims of interest is not only fallacious but farcical as well.

RSPPL stated that the carrying costs cannot be treated at par with delayed payments made by MSEDCL under the PPA, in as much as the edifice of granting carrying costs is a principle of restitution i.e. to place RSPPL in the same financial position as if the change in law not occurred. Meaning thereby that RSPPL would be granted carrying costs to the extent of the actual costs (interest cost or return on equity) incurred by them so that RSPPL can be restored to the same economic position.

At the e-hearing through video conferencing held on 9 June 2020, the representative of RSPPL and MSEDCL reiterated their submission in the Petition. MSEDCL impressed upon the necessity of getting details of RFID tags to ensure that the modules which are installed under the current PPA are eligible for SGD. RSPPL contended that for the entire PPA capacity, the installed modules are eligible for SGD. Further, there are about 11 Lakhs modules installed at site and getting details from each module will take a time period of more than 2 years.

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The commission ordered that ReNew Solar Power Private Limited is eligible for claiming compensation on account of imposition of Safeguard Duty (including additional GST) under Change in Law provisions of PPA for capacity of 362.50 MW of Solar module/panel installed at project location. It also instructed to provide undertaking stating that all modules installed at the project site for supplying power to Maharashtra State Electricity Distribution Company Ltd. have been imported from the Country/ies which are subjected to Safeguard Duty. 

Commission instructed that Maharashtra State Electricity Distribution Co. Ltd. shall complete this process within 15 days from date of this Order and compensation amount ascertained earlier shall be re-verified and in case of any deviation, same shall be adjusted with holding/carrying cost in future payments.

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