GERC Reviews Petition On 105 MW Solar Project Over Safeguard Duty Impact Under Change In Law In Gujarat

ReNew Sun Energy Private Limited (RSEPL) filed a petition before the Gujarat Electricity Regulatory Commission (GERC) seeking relief under the Power Purchase Agreement (PPA) signed with Gujarat Urja Vikas Nigam Limited (GUVNL) on May 22, 2019. The petition revolves around the imposition of Safeguard Duty on imported solar modules and whether it qualifies as a “Change in Law” under the provisions of the PPA.

RSEPL had entered into a PPA with GUVNL to develop a 105 MW solar photovoltaic project. However, following the bid deadline of February 6, 2019, the Central Government, via notification dated July 29, 2020, imposed a fresh round of Safeguard Duty on the import of solar cells and modules. The petitioner argued that this imposition, effective from July 30, 2020, led to an increase in non-recurring project costs, which were not factored in during the bidding process.

The petitioner contended that under Article 9 of the PPA, such a levy qualifies as a Change in Law since it was enacted after the bid submission and has a direct impact on the project cost. RSEPL requested the Commission to direct GUVNL to reimburse the additional expenditure either through a one-time payment or by tariff adjustment. They also sought compensation for carrying costs at 14% per annum from the date of payment of Safeguard Duty to the issuance of the Commission’s order.

GUVNL responded by asserting that Safeguard Duty had already been in effect through an earlier notification issued in 2018, which expired on July 29, 2020. The current notification, they argued, is merely a continuation and not a fresh imposition. Hence, they questioned the petitioner’s claim of a Change in Law. Additionally, GUVNL highlighted that RSEPL had failed to submit necessary supporting documents like EPC contracts, invoices, Bills of Entry, and proof of correlation between imported modules and those installed in the project. Without these, they argued, the claim could not be validated.

GUVNL also opposed the claim for carrying costs, noting that the PPA does not contain any restitution clause that would entitle the petitioner to such reimbursement. They cited previous regulatory and judicial decisions to support their stance that carrying costs are only admissible when expressly provided for in the PPA.

In response, RSEPL argued that the imposition of the Safeguard Duty post-bid deadline is a new event and thus qualifies as a Change in Law. They asserted that they had submitted all required documents, including EPC contracts and auditor’s certificates, proving payment of duties and installation of modules. They emphasized that, according to bidding guidelines issued under Section 63 of the Electricity Act, 2003, solar power developers must be restored to the same financial position as if the change in law had not occurred.

The petitioner also maintained that reimbursement of the increased Goods and Services Tax (GST), which was incurred due to the imposition of Safeguard Duty, should also be treated as a Change in Law. They cited Ministry of Power communications and relevant Supreme Court judgments to justify their claims for financial restitution.

The Commission is now tasked with verifying the documentation and determining whether the petitioner is entitled to compensation, including any incremental tariff adjustment under the terms of the PPA. The decision will have implications for how duties and taxes imposed after bid submissions are treated within the framework of power sector contracts.