APTEL Asks MERC to Release Azure Power’s Bank Guarantee for 150 MW of Solar Projects

The Appellate Tribunal for Electricity (APTEL) has asked the Maharashtra Electricity Regulatory Commission (MERC) to release the bank guarantee from Azure Power’s 150 MW solar project within two weeks.

Considering the difficulties in reaching an agreement, Azure Power had expressed its inability to sign the power purchase agreement (PPA) and requested APTEL to cancel the LoA for the 150 MW of solar projects without any financial liabilities on either of the parties.

Background

The Maharashtra State Power Generation Company (MAHAGENCO) had issued tender for 300 MW of solar projects under phase-II of the Mukhyamantri Saur Krishi Vahini Yojana program in December 2017. The capacity was to be developed on a public-private partnership (PPP) basis to supply power to agricultural (AG) feeders.


Azure was selected as the lowest bidder for three tenders of 50 MW in each block of Vidarbha-A & B, and Marathwada. The MERC also approved the power sale agreement (PSA) for these projects in December 2018. Later, in April 2019, MERC also agreed to Azure’s request to consider the levy of safeguard duty as Change in Law. Further, the commission had ruled that “the additional expenditure and other consequential impacts would be considered on an actual basis for reimbursement under Change in Law subject to prudent check. Accordingly, Azure should approach the commission later to determine the increase in cost and revenue expenditure on account of imposition of safeguard duty, if any, and the mode of recovery.”

In its earlier order dated September 11, 2019, the Commission had stated it had approved the proposed modification in ‘Change in Law’ and the scheduled commissioning date to the already approved PSA, and this has to be incorporated in the PPA and PSA. But, the conditions relating to the deemed generation compensation clause need to be incorporated in consultation with the project developer, and later, the parties should accordingly modify the PSA and PPA for the 150 MW of projects and submit signed copies of these agreements for records of the Commission.

The Commission also noted that the bidding conditions could not be changed after the completion of the bidding process, and the successful bidder cannot be compelled to adhere to such changed conditions.

The Commission had further added that any change in terms and conditions post bidding process cannot be considered unless both the parties agree to it, and it is in the interest of the consumers.

Now, during a meeting held in December 2019, Azure stated that though the tender for the project was issued in December 2017, the PPA has not yet been finalized after two years.

Considering the difficulties in reaching an agreement, Azure Power had expressed its inability to sign the PPA and requested APTEL to cancel the LoA for the 150 MW of solar projects without any financial liabilities on either of the parties.

Considering the issue, the tribunal has asked both parties (Azure Power and MAHAGENCO) to resolve the issue amicably while directing MERC to release the bank guarantee for the projects.

In June 2018, to expedite the process of development of solar PV projects for AG feeder under the program, the state government did away with the tax that the Gram Panchayat Act would have levied. A 30-year property tax rebate had been provided to developers who will be developing the solar PV projects under Mukhyamantri Saur Krushi Vahini Yojana.

Recently, MERC allowed the Maharashtra State Power Generation Company Limited (MSPGCL) and the Maharashtra State Electricity Distribution Company Limited (MSEDCL) to procure power from 184 MW of solar projects. The projects have been set up by Waaree Energies Limited (WEL) under the state’s Mukhyamantri Saur Krishi Vahini Yojana.