The Karnataka Electricity Regulatory Commission (KERC) has condoned a delay of 849 days in commissioning a 20 MW solar power project by Asian Fab Tech in Chamarajanagar.

The Commission directed Bangalore Electricity Supply Company (BESCOM) to pay the agreed tariff of ₹2.89 (~$0.033)/kWh for the energy supplied and the applicable late payment surcharge.

It also set aside BESCOM’s notice demanding liquidated damages, ruling that Asian Fab Tech was not liable for any penalties.

Background

Asian Fab Tech entered into a power purchase agreement (PPA) with BESCOM on November 9, 2018, to establish the 20 MW solar power plant in Hanur Taluk, Chamarajanagar District. The project was initially scheduled for commissioning by June 17, 2020. However, due to several unforeseen delays, including land acquisition disputes, legal injunctions, regulatory hurdles, the impact of COVID-19, and adverse weather conditions, the project was commissioned only on October 14, 2022.

Asian Fab Tech sought an extension of the scheduled commissioning date to October 14, 2022, because of force majeure events beyond its control. The company also requested payment of ₹57.56 million (~$661,431) for the power supplied between October 14, 2022, and March 31, 2024, and asked for the cancellation of BESCOM’s notice imposing liquidated damages of ₹76.40 million (~$877,969) for failing to meet the conditions precedent.

BESCOM, however, argued that the delay was due to the company’s failure to act promptly rather than force majeure events. The utility insisted that Asian Fab Tech was entitled only to a reduced tariff of ₹2.312 (~$0.027)/kWh for the delayed commissioning and remained liable for the payment of liquidated damages.

Commission’s Analysis

Upon review, the Commission found that genuine force majeure events contributed to the delay. The Karnataka Power Transmission Corporation took 236 days to approve the project’s evacuation scheme, delaying the start of construction. Asian Fab Tech had also applied for land conversion under the Karnataka Land Reforms Act, 1961, on January 2, 2020, but the approval was granted only on April 26, 2022, further delaying progress.

In addition to government-related delays, the project was caught in legal disputes over land acquisition. A neighboring landowner obtained a temporary injunction on May 25, 2021, preventing the company from proceeding with construction. This injunction remained in place until it was lifted on September 9, 2022. Another landowner initiated a separate lawsuit seeking compensation and a permanent injunction against the project. This dispute was eventually settled in the Lok Adalat on November 12, 2022. These legal battles significantly hampered the timely completion of the project.

The impact of the COVID-19 pandemic was another key factor in the delay. The nationwide lockdowns and movement restrictions disrupted the supply chain of essential equipment and materials. The Ministry of New and Renewable Energy granted a five-month extension for renewable energy projects under implementation during the lockdown, further supporting the company’s claim that the delay was not due to negligence. Continuous heavy rainfall between July and September 2020 also slowed construction, compounding the existing challenges.

Despite these obstacles, the project was synchronized with the grid on October 7, 2022, and Karnataka Power Transmission Corporation issued the commissioning certificate on October 17, 2022. Power supply to BESCOM officially began on October 14, 2022.

After reviewing the evidence, KERC ruled that the 849-day delay was justifiable and extended the scheduled commissioning date to October 14, 2022.

The Commission set aside BESCOM’s notice demanding liquidated damages and directed the utility to pay the full agreed tariff of ₹2.89 (~$0.033)/kWh. BESCOM was also ordered to clear ₹57.56 million (~$661,431) in outstanding payments for the energy supplied and to pay late payment surcharges as per the PPA.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.