CERC Recognises BCD And GST Notifications As Change In Law For 110 MW Rajasthan Solar Project

In a significant decision dated December 31, 2025, the Central Electricity Regulatory Commission (CERC) ruled on two petitions filed by M/s T.P. Saurya Limited (TPSL) related to its 110 MW solar photovoltaic project in Rajasthan. The petitions were filed seeking relief under the “Change in Law” provision after government notifications led to an increase in the overall project cost. TPSL stated that these policy changes occurred after it had submitted its bid and therefore qualified for compensation under the Power Purchase Agreement signed with Kerala State Electricity Board Limited (KSEBL).

The dispute mainly revolved around two government notifications issued in 2021. The first was the Basic Customs Duty notification, which imposed a 40 percent duty on imported solar modules with effect from April 1, 2022. The second was a Goods and Services Tax notification that increased the GST rate on renewable energy devices from 5 percent to 12 percent. TPSL submitted that both notifications came into force after its bid submission date of October 16, 2020, and hence increased its project cost unexpectedly.

TPSL argued that under the terms of the PPA, any change in law after the bid submission date that impacts project cost entitles the developer to compensation. The company also stated that it had acted responsibly and followed the project timeline, ultimately achieving early commissioning of the solar project on June 1, 2023.

KSEBL opposed the petitions on multiple grounds. It argued that the CERC did not have jurisdiction to hear the matter and claimed that TPSL had delayed the import of solar modules on its own, even though it was aware that the Basic Customs Duty would come into force. KSEBL also pointed to a tariff reduction agreement signed in September 2021, stating that this should be treated as a revised bid date. According to KSEBL, since the BCD notification was already known by then, TPSL should not be allowed to claim it as a Change in Law event.

The Commission rejected these arguments. CERC held that it had jurisdiction as the matter involved the interstate sale of power. It further clarified that the last date of bid submission remains the reference point for determining Change in Law, and this date does not change due to later tariff negotiations or agreements. The Commission found that TPSL had not acted negligently and had demonstrated diligence by completing the project ahead of schedule.

CERC declared both the Basic Customs Duty and the GST notifications as valid Change in Law events. For compensation, the Commission approved an annuity-based payment method spread over 15 years, using a discount rate of 9.12 percent. It also allowed TPSL to recover carrying costs, meaning interest on the extra funds arranged to meet the increased tax burden.

The Commission directed TPSL and KSEBL to reconcile the additional expenses using certificates from statutory auditors, ensuring a clear link between the project and the invoices submitted. However, CERC noted that while the order is final, the actual implementation of compensation related to post-commercial operation period and carrying costs will depend on further directions from the Supreme Court of India, where related matters are currently pending.