Responding to a recent petition, the Central Electricity Regulatory Commission (CERC) declared that the imposition of Safeguard Duty (SGD) in July 2018 was covered under the “Change in Law” clause in the power purchase agreements (PPA) between Solairepro Urja Private Limited (SUPL) and the National Thermal Power Corporation (NTPC). The Commission has directed NTPC to reimburse the cost incurred due to the imposition of safeguard duty after evaluating the supporting documents.

The order came on the heels of a petition filed by Solairepro (a special purpose vehicle of Engie), seeking the Commission to direct the NTPC to pay ₹1.55 billion (~$21.6 million), the amount incurred on additional expenses because of the imposition of safeguard duty. Solairepro also stated that the Goods and Services Tax (GST) paid by the petitioner on this account was ₹77.34 million (~$1.09 million), and it has also asked for the reimbursement of this amount.

In its response, the NTPC said that it was just a trader, and if the CERC directed the requested amounts to be reimbursed, then it should ultimately be paid by the two DISCOMs – Andhra Pradesh Southern Power Distribution Company Limited and Andhra Pradesh Eastern Power Distribution Company Limited.

NTPC also said that the change in law clause does not have a provision that requires the affected party to be restored to the same economic state before the change in law event. It said that the relief under the clause is restricted only to the actual costs incurred by them, for which invoices are provided.

NTPC said that the claim for GST compensation by the petitioner was also invalid. This is because claims for taxes on taxes are inadmissible in court.

In its final order, the Commission declared that the imposition of safeguard duty was indeed an event covered under the ‘change in law’ clause. It said that the IGST on the safeguard duty was allowed as well because in cases where the imported goods are liable to safeguard duty, the value for the calculation of IGST includes the safeguard duty amount, and therefore, it has to be allowed.

It directed the petitioner to produce all the relevant documents explaining the importing of goods and their purpose, along with all relevant invoices. The CERC stated that the NTPC was liable to pay the claimed amounts to Solairepro. It, however, noted that it is eligible to claim the amount from the other involved distribution companies (DISCOMs) who were listed as respondents in the petition.

The Commission directed the NTPC and the other respondents to pay the claimed amount within two months, failing which, a late payment surcharge will be imposed as provided under the power purchase and sale agreements. Alternatively, it suggested that the parties may come to a mutual agreement for settlement, which would require the dues to be settled within the duration of the PPA.

It also noted that the claim for carrying cost cannot be admitted.

The CERC has been hearing similar cases these days. It also ruled in favor of Azure Power in a case against the Solar Energy Corporation of India (SECI).

Similarly, in an order passed a few weeks ago, the Commission noted that only if there is a provision in the PPA for the restoration of the petitioner to the same economic position, the petitioner is eligible for carrying cost.

The CERC had issued a similar ruling on the PPAs that do not have a provision dealing with restoration to the same economic position. This order came on a petition filed by the project developer, Parampujya Solar, a wholly-owned subsidiary of Adani Green Energy Limited.