The Central Electricity Regulatory Commission (CERC) recently directed the Solar Energy Corporation of India (SECI) to compensate a solar developer for the additional cost incurred due to the imposition of goods and services tax (GST) laws on an annuity basis.

It also directed the Karnataka distribution companies (DISCOMs) to pay SECI the compensation amount due to the petitioner.

However, payment by SECI was not conditional upon the payments to be made by the Karnataka DISCOMs to SECI.

Solitaire Powertech had filed a petition seeking compensation for the increase in capital cost due to the introduction of the Goods and Services Tax (GST) laws as per the provisions of the power purchase agreement (PPA) signed with SECI.

Background

Solitaire Powertech is a power generating company with a solar power project of 30 MW capacity in the Chitradurga district of Karnataka.

In 2016, SECI invited bids to set up 1,000 MW of grid-connected solar power projects under the National Solar Mission (NSM) Phase II, Batch III, Tranche-V in Karnataka. The reverse auction process was carried out on June 9, 2016, and Solitaire Powertech was declared the successful bidder after quoting a viability gap funding (VGF) support of ₹7.35 million (~$92,002)/MW at the applicable tariff of ₹4.43 (~$0.055)/ kWh.

The PPA for the project was signed on August 2, 2016. Commissioning was set for September 2, 2017.

On July 1, 2017, the GST laws were introduced.

The petitioner argued that the implementation of GST had increased the recurring and non-recurring expenditure after the PPA was signed and, consequently, adversely impacted the business.

The solar generator said that the enactment of the GST Law was squarely covered by the definition of ‘Change in Law’ under Article 12 of the PPA, and it should be compensated for the ‘Change in Law’ event.

The petitioner and SECI had reconciled the ‘Change in Law’ claims relating to the enactment of GST laws. SECI submitted that the reconciled claim was sent to the Karnataka DISCOMs, who neither commented upon nor objected to the said amount.

SECI had communicated to the solar generator and the DISCOMs the revised reconciliation of the GST claims of ₹69.69 million (~$872,338).

SECI had approached the petitioner and proposed to pay a lump sum of ₹20.99 million (~$262,740) and a remaining annuity of ₹692,552 (~$8,668). It also sent the proposal to the distribution licensees of Karnataka. Solitaire Powertech accepted the revised proposal made by SECI.

Commission’s analysis

 The Commission observed that SECI had proposed to pay a lump sum of ₹20.99 million (~$262,740) and the remaining amount in a monthly annuity of ₹692,552 (~$8.668) spread throughout the remaining 13 years from the commercial operation date, which the petitioner accepted. The petitioner and SECI had also admitted that the GST claims stood reconciled between the two parties.

Considering the facts, the Commission noted that the SECI should release the reconciled claims at the earliest.

Regarding the increase in recurring expenditure (O&M) and carrying cost, the Commission tagged it with other petitions for further hearing.

Recently, CERC directed SECI to compensate a solar developer for the additional cost incurred due to the imposition of GST laws on an annuity basis.

Earlier, CERC had rejected a solar energy developer’s compensation petition for the additional tax burden on O&M expenses and carrying costs due to a ‘Change in Law’ event.

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