MERC, Safeguard Duty, Nisagra, Juniper, Change in Law

Juniper Green Energy Private Limited (JGEPL) and its special purpose vehicle Nisagra Renewable Energy Private Limited (NREPL) recently filed a petition against the Maharashtra State Electricity Distribution Company Ltd. (MSEDCL), requesting compensation for the losses incurred due to the imposition of safeguard duty.

The two entities had requested the Maharashtra Electricity Regulatory Commission (MERC) that the imposition of safeguard duty on July 30, 2018, by the Ministry of Finance be declared as a “Change in Law.”

The two petitioners had also requested that they should be entitled to claim relief under the clauses in the PPA for the expenditure incurred under GST due to this event. The method for concluding the amount of relief that the petitioners are entitled to was also requested to be clarified. They had petitioned the state commission to direct the state DISCOM to pay the amount decided after the review.

JGEPL, originally AT Capital Advisory India Private Limited, was selected as a successful bidder by the MSEDCL to execute 100 MW of solar power projects in ten taluks under the state’s ‘Mukhyamantri Saur Krishi Vahini Yojana.’ NREPL is a special purpose vehicle of JGEPL, and its main objective is to implement the power purchase agreements (PPA) for 70 MW (7X10) of solar projects in those seven taluks in Maharashtra.

The last date for the submission of the bids under the Request for Selection (RFS) was extended to June 21, 2018. After the expiry of the June 21, 2018 deadline, the central government issued a notification dated July 30, 2018, imposing 25% safeguard duty on imports of solar cells whether assembled in modules or panels.

The imposition of the safeguard duty would lead to an additional financial burden on JGEPL and NREPL, the petitioners had argued. The PPA offers compensatory relief to JGEPL and NREPL in the event of a “Change of Law.” The “Change of Law” event as defined in the PPA also includes changes in taxes, duties, and cess that has a direct bearing on the project.

The MERC passed a common order in both the matters,  underlining that the government notification was a “Change of Law” event. The state commission also added that the actual expenditure and its consequential impact would be considered for the reimbursement. This will be possible only after JGEPL and NREPL approach the MERC again with all the necessary details.

Earlier this year, the commission had ordered that the Maharashtra DISCOM should reduce ₹0.18 (0.0025/kWh) from the discovered tariff if the bidders have not paid safeguard duty.

Shortly before this order, the MERC ruled that the Ministry of Finance’s notification that imposed safeguard duty is an event of Change in Law, and therefore the additional expenditure and other impacts will be considered for reimbursement under Change in Law.

Recently, the Central Electricity Regulatory Commission (CERC) also issued an order to compensate a solar power developer by accepting that the levy of safeguard duty was a ‘Change in Law.’ The CERC had issued a common order for two separate petitions filed by ACME Solar. The solar project developer will receive a lump-sum amount.

Image Credit: Mercom