CERC Grants Change In Law Relief For 320 MW Rajasthan Solar Project Over GST Hike And GIB Protection Costs

The Central Electricity Regulatory Commission (CERC) has granted financial relief to Avaada Sunrays Energy Private Limited after recognizing two major regulatory developments as valid “Change in Law” events. The ruling, issued on February 4, 2026, relates to Avaada’s 320 MW solar power project located in Rajasthan and addresses unexpected costs arising after the signing of its power sale agreement.

The case is linked to a Power Purchase Agreement (PPA) signed in October 2020 between Avaada Sunrays and NHPC Limited. Under the agreement, Avaada agreed to supply solar power at a fixed tariff discovered through competitive bidding. At the time of bidding and signing the PPA, certain taxes and compliance requirements were in place, based on which the project costs were calculated.

After the PPA was executed, two significant changes occurred. First, the central government revised the Goods and Services Tax (GST) structure for solar power systems in late 2021. The GST rate, which was earlier 5 percent, was effectively increased to 12 percent and later to 13.8 percent through changes in the tax treatment of goods and services used in solar projects. This led to a sharp rise in equipment and project costs.

Second, a Supreme Court order directed solar and transmission project developers in certain regions to install bird diverters on overhead transmission lines. This measure was introduced to protect the Great Indian Bustard, a critically endangered species found in Rajasthan and nearby areas. The requirement was not in force when Avaada submitted its bid, resulting in additional and unplanned expenses.

Avaada approached the CERC seeking compensation of more than ₹44 crore under Article 12 of the PPA, which allows tariff adjustments if laws or regulations change after the bid submission date. The company stated that both the GST increase and the bird protection mandate were beyond its control and had a serious impact on the project’s financial viability.

Punjab State Power Corporation Limited (PSPCL), one of the power procurers, opposed the claim. PSPCL argued that Avaada had earlier waived its right to seek “Change in Law” compensation during other tariff-related proceedings. It also claimed that the petition was filed after the allowed time limit.

The CERC rejected these objections. The Commission clarified that Avaada’s earlier waiver applied only to Basic Customs Duty issues and could not be extended to other regulatory changes, such as GST revisions or environmental protection orders. The Commission also ruled that the petition was filed within the legally permitted period.

In its order, the CERC confirmed that both the GST hike and the Great Indian Bustard protection measures qualify as “Change in Law” events. It approved compensation through a monthly annuity payment mechanism, spread over 15 years, with an interest rate of 9.12 percent.

However, the Commission noted that the actual implementation of payments for the period after the project’s commercial operation date depends on the outcome of a related case pending before the Supreme Court. The final compensation amount will be determined after a detailed audit and reconciliation of invoices. The ruling strengthens regulatory certainty for renewable energy developers facing policy changes after project awards.