Safeguard, Anti-Dumping, and Customs Duty Part of Change in Law Clause for Solar Tenders (1)

Gujarat Electricity Regulatory Commission (GERC) has allowed Gujarat Urja Vikas Nigam (GUVNL) to incorporate the introduction, modification, or changes in rates of safeguard duty, anti-dumping duty, customs duty, and goods & service tax, including surcharge in the ‘Change in Law’ clause of all future solar tenders.

The Commission also allowed GUVNL to offer an additional 500 MW greenshoe option in its upcoming solar tender to secure capacity beyond bucket size at the lowest quoted tariff.

Background

The earlier iteration of the ‘Change in Law’ clause in the power purchase agreements (PPA) of GUVNL did not provide for the implication of imposition of safeguard duty and anti-dumping duty as pass-through in tariff.


The ambiguity regarding safeguard duty and anti-dumping duty led to the discovery of a high tariff in the tender issued by GUVNL in February 2018. The tender was later scrapped and re-tendered with the revised clause for “Change in Law,” incorporating safeguard duty and anti-dumping duty, directly affecting the solar project cost.

GUVNL has intimated the Commission regarding the bidding process for procuring a 500 MW non-park solar project. While the Commission’s approval of the tariff discovered in the previous tender is pending, GUVNL has issued another tender for the project, given the low solar tariffs. GUVNL submitted that in the earlier tender, the GST was covered under the ambit of Change in Law provisions and was limited to GST on solar modules. However, it proposed to include the GST of critical project components, such as inverters and balance of systems, directly affecting project cost for better participation in the tender.

In a reverse auction for 2,270 MW capacity, the discovered tariff for 500 MW is ₹2.29 ($0.030)/kWh, whereas the quoted tariff of unsuccessful bidders of 270 MW capacity was ₹2.29 – 2.30 ($0.030 – $0.031)/kWh. But it could not be allocated due to the bucket size of 500 MW. There was no greenshoe option to allot additional capacity beyond 500 MW in the tender.

In the upcoming tender, GUVNL is contemplating an additional 500 MW greenshoe option to tie up cheaper capacity beyond bucket size at the lowest tariff. The greenshoe option is beneficial to the licensee as well as the consumer if the discovered tariff is found to be attractive by GUVNL.

GUVNL recently invited bids to purchase power through a competitive bidding process from 500 MW of grid-connected wind power projects (Phase-III) with the greenshoe option for an additional capacity of up to 500 MW.

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