The Appellate Tribunal of Electricity (APTEL), in a recent order, set aside an order of the Maharashtra Electricity Regulatory Commission (MERC) rejecting compensation claimed by Azure Power Thirty Four Private under the ‘Change in Law’ clause due to the imposition of Goods and Services Tax (GST).

Azure Power Thirty Four Private is a wholly-owned subsidiary of Azure Power.

APTEL directed MERC to reconsider the matter and pass appropriate orders after giving a reasonable opportunity of hearing to the aggrieved party and the Maharashtra State Electricity Distribution Company Limited (MSEDCL) and dispose of the matter within three months.

In May this year, citing an increase in costs due to a change in GST rate, Azure Power Thirty Four, had approached MERC demanding compensation. The Commission, however, dismissed the petition.

The developer had sought a compensation of ₹225.3 million (~$3.06 million) on the grounds that the increase in GST fell under the ‘Change in Law’ clause in the power purchase agreement (PPA) dated July 30, 2018, executed with MSEDCL.

The Tribunal added that the present case was similar to an earlier application filed by Tata Power Renewable Energy Limited (TPREL). The order passed by APTEL, in that case, was similar and relevant to the present case.

MERC had dismissed TPREL’s petition seeking to declare the GST on supply and service contracts for setting up solar projects amounted to ‘Change in Law.’

Background

MSEDCL had floated a tender on April 9, 2018, to procure 1,000 MW of solar power on a long-term basis from new or existing solar projects to meet its renewable purchase obligation targets.

Azure Power Thirty Power was one of the successful bidders. It signed the PPA with MSEDCL on July 30, 2018, to supply 130 MW solar from the project to be developed in Rajasthan at a tariff of ₹2.72 (~$0.039)/kWh.

MSEDCL, in its reply, said that since the GST was reduced from 18% to 8.9%, it had rejected the compensation claim.

The Tribunal asked the state commission to conduct a fresh hearing and dispose of the matter in three months.

Earlier in another order, MERC had dismissed Azure Power’s petition to direct the Maharashtra State Power Generation Company to compensate the company for the excess cost incurred due to GST.

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