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Maharashtra Regulatory Commission Approves Compensation To Tata Power Solar On Account Of Change In Law Clause

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Recently Maharashtra Electricity Regulatory Commission (MERC) approved compensation to Tata Power Renewable Energy Ltd (TPREL) on account of importing solar inverter and solar modules for their 150MW Solar Power Plant.

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On August 2019, Tata Power Company Ltd – Distribution (TPC-D) issued request for selection (RfS) for procurement of 150MW solar power for their renewable purchase obligation (RPO). After selection of TPREL as lowest bidder, letter of award (LoA) was signed between TPC-D & TPREL. On 3th Jan 2020, TPREL entered into a PPA with TPC-D for supply of 150MW solar power to TPC-D at a tariff of Rs.2.83/Kwh for 25 years. Further on 23.02.2020, TPREL entered into a supply contract with Tata Power Solar System Ltd (TPSSL) responsible for all EPC works. As per the PPA, the schedule commissioning date (SCOD) was 18 month from the date of PPA issuance i.e. 3rd July, 2021.

Accordingly, TPSSL ordered imported solar inverter and solar module at last stage of schedule commissioning date. In the mean time, on 01.02.2021, Ministry of Finance revised basic custom duty (BCD) on inverter to 20% from 5%. In addition, on 29th July 2020, Ministry of Finance extended safe guard duty (SGD) on imported solar module at the rate of 14.9% for the period of 30th July 2020 to 29th July 2021. 

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In view of the above context, TPREL submitted petition to commission for compensation on account of ‘change in law’ clause in signed PPA. 

Computation of compensation claim for BCD implementation given below.

ParticularsUnitInvoice Date (9th Feb 2021)Invoice Date (17th Feb 2021)Total
Supplier NameSUNGROW POWER SUPLLY CO. LTDSUNGROW POWER SUPLLY CO. LTD
Supplier Invoice No.100020201010004-1100020201010004-2
Invoice QuantityaNos.162238
Unit PricebUSD437504375043750
Invoice ValueC=a*bUSD7000009625001662500
Avg. Exchange RatedRatio ( USD:INR)73.8573.873:82
Invoice Value ( INR)e=c*dRs.5169500071032500122727500
Claim after 01/02/2021
Basic Custom Dutyf%20.00%20.00%20.00%
Custom Dutyg=e*f/10^7Rs. Crores1.031.422.45
SWS amount as per BOEh%10%10%10%
SWS amount as per BOEi=g*hRs. Crores0.100.140.25
Total Claimj=g+iRs. Crores1.141.562.70
Claim before 01/02/2021
Basic Custom Dutyk%5.00%5.00%5.00%
Custom Dutyl=e*k/10^7Rs. Crores0.260.360.61
SWS amount as per BOEm%10%10%10%
SWS amount as per BOEn=l*mRs. Crores0.030.040.06
Total Claimo=l+nRs. Crores0.280.390.068
Change in Law Impact
Change in Custom Duty post 1st February,2021p=j-o0.851.172.03
GST@8.9%q%8.9%8.9%8.9%
GST Amount on Custom Dutyr=p*q0.080.100.18
Total Impact of Change in Laws=p+r0.931.282.21
Petition Date13- Dec-2113- Dec-21
Number of Days considered for carrying Costt307299
SBI 1 year Marginal Cost of fund +1.25%u8.25%8.25%
Carrying CostV=s*u*t/3650.060.090.15
Total Impact of Change in Law including Carrying Costw=s+v0.991.362.36
Source : MERC Order

Thus total change in law impact due to BCD is Rs 2.36Cr.

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Computation of compensation claim of SGD extension given below :

ParticularsUnitPeriod (30.7.20- 29.1.21)Period (30.1.21- 29.7.21)Total
Invoice QuantityMWp38.85127.78166.63
Invoice ValueUSD69882052578884932754853
Ave. Exchange RateUSD: INR74.6973.8173.99
Assessable value (INR)Rs.52193151819017415412423673059
Assessable valueRs Crores52.19190.17242.37
Safeguard Duty @%14.90%14.50%
Safeguard DutyRs Crores7.7827.5835.35
GST @ 8.9%Rs Crores0.692.453.15
Total Claim ValueRs Crores8.4730.0338.50
Carrying Cost on total ClaimRs Crores2.80
Total including carrying CostRs Crores41.30
Source : MERC order

The impact of SGD along with carrying cost works out to Rs 41.30 Crores.

Commission’s Analysis & Order :

After analysing petitioner’s prayers and respondent’s submissions, commission gave the following orders.

Compensation claimed according to the above calculations are approved and Change in Law Compensation be worked out as per dispensation plus carrying cost @ 1.25% plus SBI MCLR per annum from date it paid such amount till date of this Order.

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The Tata Power Company Limited – Distribution shall convey its decision on compensation payment option to Tata Power Renewable Energy Limited within two weeks from date of this Order. The payment can be on lump sump or on installment over total PPA tenure.

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