CERC Orders NTPC to Pay ACME Solar GST Relief Along With Late Payment Surcharge

The Central Electricity Regulatory Commission (CERC) has directed the National Thermal Power Corporation (NTPC) to pay the dues claimed by ACME Solar along with late payment surcharge within 30 days of the order. The payment is for reimbursing the sum that was incurred as additional capital expenditure after the introduction of GST Law.

Last year, ACME Solar Holding Ltd had issued a letter to NTPC for the payment of dues totaling ₹226.8 million (~$3.179 million) for solar projects in Karnataka and ₹99.2 million (~$1.39 million) for projects in Telangana.

ACME had filed a petition before the Commission for their non-compliance with the CERC’s earlier order asking NTPC and Karnataka and Telangana DISCOMs to pay the late payment surcharge as per the PPAs from January 15, 2019, which expired 60 days from the date of submission of the claim.

The respondents to the above petition were: NTPC, Southern Power Distribution Company of Telangana Limited, Northern Power Distribution Company of Telangana Limited, Bangalore Electricity Company Limited (BESCOM), Mangalore Electricity Supply Company Limited (MESCOM), Chamundeshwari Electricity Supply Corporation Limited (CESC), Gulbarga Electricity Supply Company Limited (GESCOM), Hubli Electricity Supply Company Ltd (HESCOM).


Background

ACME Solar Holding Ltd (the petitioner) had signed the PPAs with NTPC to set up solar projects in several states with a total capacity of 150 MW.

In June 2016, ACME Kurukshetra and ACME Rewari entered PPAs with NTPC for the supply of power in the state of Karnataka.

In August 2016, ACME Mahbubnagar and ACME Yamunagar entered PPAs with NTPC for power supply in the state of Telangana.

After almost a year, in July 2017, the government implemented the Goods and Services Tax. The petitioners stated that with GST, new tax slabs of 5% to 28% were introduced on goods required for the execution, construction, and operation of solar projects which were previously exempted or were under lower tax slabs.

After the implementation of GST, the petitioners issued Change in Law event notices to the respondents. Since there was no response from NTPC and DISCOMs, ACME filed the petitions before the Commission seeking the approval of Change in Law and “consequential relief” to compensate for the increase in capital cost due to the introduction of GST Laws.

Meanwhile, the Commission held that the GST Laws are covered as Change in law under Article 12 of the PPA. For the claim, the petitioners need to exhibit clear and one to one correlation between the projects, the supply of goods or services, and the invoices raised by the supplier of goods and services backed by auditor certificate.

Further, the order noted that the amount as determined by petitioners should be on a ‘back to back’ basis to be paid by DISCOMs under the PSAs. The claim should be paid within 60 days from the date of the Commission’s order failing which it would attract late payment surcharge.  Subsequently, the petitioners issued supplementary invoices to NTPC claiming ₹325 million (~$4.56 million).

Supplementary Invoices Issued by ACME Solar to NTPC Claiming GST Relief

NTPC had been coordinating between the petitioner and the respective DISCOMs to ensure the payment is made. Since the payment was delayed, NTPC ensured the late payment surcharge also to be paid by the DISCOMs. But NTPC also argued that it could not make payments to the petitioner until the DISCOM pays the amount to NTPC. This was a matter of contention for the petitioner who argued that if NTPC is to only pay the petitioner after having received the amounts from DISCOMs, then the entire purpose of NTPC’s participation in the case where it was to provide the much-needed bankability to the project is exhausted. Further, the petitioners said that the terms of the PPAs make it clear that the payments are to be made by NTPC without any dispute and at no point was the payment to the petitioner subject to NTPC having received it from DISCOMs.

The Commission viewed that the PPA and PSA are “interconnected and inextricably linked” to each other. “The back-to-back nature of the PPA and PSA implies that the DISCOMs are liable to pay to NTPC all that it has to pay to the petitioners,” the Commission underlined.

However, payment to the petitioner by NTPC is not conditional upon what it receives from the DISCOMs, the Commission clarified. The Commission, having held that GST is a change in law, decided that NTPC is liable to pay to the petitioners as per the decisions of the Commission contained in its earlier order. The Commission, having held that GST is a change in law, decided that NTPC is liable to pay to the petitioners as per the decisions of the Commission contained in its earlier order.

Accordingly, NTPC has been directed to pay the due claim with the late payment surcharge through supplementary invoices within 30 days date of the order and then claim the same from the DISCOMs.

Image credit: Greenskies Renewable Energy