In a recent development, M/s Eden Renewable Cite Pvt. Ltd. has filed a petition seeking relief under Section 79(1)(b), Section 79(1)(f), and Section 79(1)(k) of the Electricity Act, 2003. The petition is related to the imposition of safeguard duty on the import of solar cells, whether assembled in modules or panels, as per Notification No. 2/2020-Customs (SG) dated 29.07.2020 by the Department of Revenue, Ministry of Finance, Government of India.
The petitioner, having established a 300 MW (AC) capacity Solar PV ground-mount project in Rajasthan, entered into a Power Purchase Agreement (PPA) with Solar Energy Corporation of India Limited (SECI). The agreement involved the sale of 250 MW of solar power to BSES Rajdhani Power Limited (BRPL) and 50 MW to BSES Yamuna Power Limited (BYPL). The petitioner claims that the imposition of safeguard duty post the bid submission has led to increased capital expenditure, impacting the project’s viability.
The petition, initially disposed of on 16.12.2021, was revisited following an order by the Appellate Tribunal for Electricity (APTEL) in April 2022. The matter was restored, and subsequent hearings took place. The petitioner also filed an Interlocutory Application, highlighting events post-petition filing, including communications with SECI and BSES Discoms.
The petitioner contends that the 2020 safeguard duty notification constitutes a Change in Law event, affecting the project’s financial feasibility. Respondents, including SECI and BSES Discoms, dispute this, arguing that the petitioner should have factored in the impact of safeguard duty during the bid submission.
The regulatory commission, after careful consideration, held that the 2020 safeguard duty notification is indeed a Change in Law event as per the terms of the PPA. The commission emphasized that the bid was submitted before the imposition of safeguard duty, and, therefore, the petitioner is eligible for compensation under Article 12 of the PPA.
The commission determined that the appropriate compensation methodology is a discount rate of 9% and an annuity period of 15 years. It directed SECI and Discoms to make monthly annuity payments to the petitioner, starting from the 60th day of the order date. Late payment surcharge provisions were also outlined.
Regarding carrying costs, the commission affirmed the petitioner’s entitlement to compensation, endorsing a rate of 10.41% per annum. The commission emphasized that the restitutionary principle, as highlighted in the PPA and supported by legal precedents, requires compensating the affected party to restore their financial position.
Notably, the commission clarified that the directions related to compensation for the period pre-Commercial Operation Date (COD) would be enforced. However, the enforcement of directions for the post-COD period, including carrying costs, is subject to further orders from the Hon’ble Supreme Court in a related matter. In summary, the regulatory commission’s ruling recognizes the petitioner’s right to compensation for the adverse financial impact caused by the imposition of safeguard duty, emphasizing the importance of adhering to contractual obligations and restitutionary principles in power purchase agreements.
