CERC Grants Compensation For GST Hike Impact On 350 MW Solar Power Project Under ‘Change In Law’ Provision

M/s Beempow Energy Private Limited (BEPL) filed a petition seeking compensation for the financial impact caused by the increase in Goods and Services Tax (GST) from 5% to 12%/18% as per Notification No. 8/2021-Central Tax (Rate) dated 30.09.2021. The case was heard by the Central Electricity Regulatory Commission (CERC), with Madhya Pradesh Power Management Company Limited (MPPMCL), West Central Railway (WCR), and Rewa Ultra Mega Solar Limited (RUMSL) as respondents.

BEPL had participated in a bidding process for a solar power project at Agar Solar Park in Madhya Pradesh. After securing the project, it entered into power purchase agreements (PPAs) on 25.11.2021 with MPPMCL and WCR through RUMSL. The project involved a 350 MW capacity solar power plant, with a tariff set at ₹2.444/kWh.

BEPL argued that the increase in GST on renewable energy components, implemented after it submitted its bid, constituted a “Change in Law” under Article 17 of the PPAs. The company sought financial compensation to recover the additional costs incurred due to the tax hike. The petition highlighted that the increase in GST significantly raised project expenses, necessitating relief from the Commission.

Despite being notified, the respondents did not submit any reply to the petition. The Commission considered previous rulings on similar cases and found that the GST hike qualified as a “Change in Law” under the PPAs. It ruled that BEPL was entitled to compensation for the additional expenses, subject to financial reconciliation based on the project’s invoices and an auditor’s certificate.

For the calculation of compensation, the Commission determined that a discount rate of 9.12% would be used over an annuity period of 15 years. It also ruled that the liability for annuity payments would commence 60 days from the order date or the date of claim submission by BEPL, whichever was later. If payments were delayed, late payment surcharges would apply as per the PPAs.

Additionally, the Commission allowed BEPL to claim carrying costs for the period between the actual payment of additional GST and the issuance of this order. This would be calculated at the lower of the actual interest rate paid by BEPL, the working capital interest rate under applicable RE Tariff Regulations, or the late payment surcharge rate specified in the PPAs.

However, the Commission noted that the Supreme Court had placed restrictions on enforcing compensation claims for post-commercial Operation Date (COD) periods. Therefore, the compensation granted for pre-COD expenses would be enforced, while any post-COD claims would be subject to further orders from the Supreme Court.

The Commission upheld BEPL’s claim under the “Change in Law” provision and directed the respondents to compensate the company accordingly. The order ensures that BEPL is restored to its original economic position before the GST increase, while also maintaining compliance with legal precedents and regulatory frameworks.