The Appellate Tribunal for Electricity (APTEL), in a recent order, set aside the order passed by the Central Electricity Regulatory Commission (CERC) and directed Power Grid Corporation of India Limited (PGCIL) to refund the encashed performance bank guarantee amount to three wind power project developers.

Vaayu Renewable Energy (Kaveri), Vaayu Renewable Energy (Sironj), and Vaayu Renewable Energy (Krishna) had filed applications challenging the earlier order passed by CERC in which it had directed PGCIL to encash the performance bank guarantee furnished by them.

Background

Vaayu Renewable Energy (Kaveri) proposed setting up a 300 MW wind power project at Meghpur in the Kutch district of Gujarat. The wind developer applied for Stage-I and Stage-II connectivity to set up the project. Further, the developer acquired 50% of land for the project under the Gujarat Land Policy, 2004. The other two developers had also applied for Stage-I and Stage-II connectivity to set up wind projects.

After the connectivity applications, PGCIL granted Stage-I connectivity to the developer for the project with primary connectivity at the Bhuj pooling station and alternative connectivity at the Bhuj-II pooling station.

On August 3, 2018, the developer entered into a transmission agreement for connectivity, and the appellant furnished a bank guarantee of ₹50 million (~$671,429) on August 16, 2018.

The project’s acquisition of the balance land was delayed due to the directions issued by the Department of Revenue, Government of Gujarat.

As land allotment was a prerequisite for achieving financial closure, the developers informed PGCIL that the uncertainties in land allotment would adversely affect the schedule for financial closure of the projects.

Later the Government of Gujarat announced the new land policy in 2019. The new land policy 2019 considered wind power projects with a minimum capacity of 1,000 MW for allotment of revenue land. As such, the project was not covered for the allotment of the revenue land.

Against this background, the developers filed a petition with CERC requesting an eight-month extension to achieve financial closure as per the CERC Grant of Connectivity Regulations, 2009. CERC, in its order, revoked the grant of connectivity and directed PGCIL to encash the bank guarantees.

Tribunal’s analysis

The Tribunal observed that the developers had failed to achieve the milestones for Stage-II connectivity and PGCIL was right in revoking the grant of connectivity to the developers. However, there was no provision for encashment of bank guarantees by PGCIL.

CERC, in its order, had said, “It is noted that before the new land policy, the petitioners had been granted more than 50% of the land required for their projects. Further, the petitioners had also applied for allotment of balance revenue land required for their projects. We observe that the government policies quoted by the petitioners are regarding revenue land. However, the petitioners had the option of acquiring other lands, such as private land.”

“It is noted that the developers were granted Stage-II Connectivity on July 19, 2018, and as per the detailed procedure, the petitioners were required to complete the financial closure by April 18, 2018, which the developers failed to achieve. Hence, the Stage II Connectivity granted to the petitioners is revoked,” CERC had added.

APTEL said that CERC’s order was based on the premise that there was a provision pertaining to the encashment of bank guarantee if the developer failed to complete the dedicated transmission line within 24 months from the date of the intimation of the bay allocation. However, in the present case, CERC permitted the encashment of the bank guarantee before the completion of 24 months.

The Tribunal highlighted that the developers had filed a petition with CERC much before the specified period of 24 months as required to commission the dedicated transmission line.

APTEL made it clear that the forfeiture of a bank guarantee was an act of levying penalty. Since the requisite period of 24 months had not yet elapsed, the penalty of encashment of the bank guarantee should not have been imposed.

Last May, CERC, responding to ReNew Power’s petition, directed PGCIL not to encash bank guarantees submitted towards its wind projects.

Earlier, CERC had directed the Solar Energy Corporation of India not to encash the performance bank guarantee furnished by Adani Wind Kutchh One for the delay in commissioning 250 MW of wind projects.

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