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					</table><p>Maharashtra Electricity Regulatory Commission (<a href="https://e-filing.merc.gov.in/" target="_blank" rel="noopener">MERC</a>) has allowed wind power generators’ claim on delayed payments along with interest for energy supplied to the Maharashtra State Electricity Distribution Company (<a href="https://www.mahadiscom.in/en/home/" target="_blank" rel="noopener">MSEDCL</a>).</p>
<p>The Commission ruled that if MSEDCL failed to pay within the due date, the wind developers are entitled to the mechanism stipulated in the Late Payment Surcharge Rules for recovering its due amount.</p>
<p><strong>Background</strong></p>
<p>MERC had issued two orders in 2018 and 2019 directing MSEDCL to release payments to wind developers for the principal amount and delayed payment charges (DPC). Penalties for deviation from the payment plan included interest of 1.25% per month on delayed payment of DPC.</p>
<p>These orders were challenged by wind generators Sahyadri Industries (SIL), Shah Promotors and Developers (SPD), and Mahanagar Developers (MD) in the Appellate Tribunal for Electricity (APTEL), which found that MERC had not provided clear findings on the amount due and ordered them to determine the due amount including DPC and carrying cost.</p>
<p>The claims liabilities worked out by the wind generators are:</p>
<p><a href="https://mercomindia.com/wp-content/uploads/2023/01/Claim-Liabilities-Worked-Out-by-Petitioners-as-per-APTEL-Order.png"><img decoding="async" loading="lazy" class="aligncenter wp-image-47980 size-full" src="https://mercomindia.com/wp-content/uploads/2023/01/Claim-Liabilities-Worked-Out-by-Petitioners-as-per-APTEL-Order.png" alt="Claim Liabilities Worked Out by Petitioners as per APTEL Order" width="692" height="272" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/01/Claim-Liabilities-Worked-Out-by-Petitioners-as-per-APTEL-Order.png 692w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/01/Claim-Liabilities-Worked-Out-by-Petitioners-as-per-APTEL-Order-300x118.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/01/Claim-Liabilities-Worked-Out-by-Petitioners-as-per-APTEL-Order-650x255.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/01/Claim-Liabilities-Worked-Out-by-Petitioners-as-per-APTEL-Order-624x245.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/01/Claim-Liabilities-Worked-Out-by-Petitioners-as-per-APTEL-Order-600x236.png 600w" sizes="(max-width: 692px) 100vw, 692px" /></a></p>
<p>As per MSEDCL’s calculation, it owed SIL ₹4.40 million (~$54,086) in DPC for the period from January to September 2022, with no interest.</p>
<p>In the case of SPD, MSEDCL owed ₹35,000 (~$430) in DPC for  July 2017, and ₹152,000 (~$1,868) for October 2017. MSEDCL claimed it did not owe any interest to SPD.</p>
<p>MSEDCL stated that it owed a principal amount of ₹120,000 (~$1,475) to MD for July 2017. The DPC worked out to be ₹8.9 million (~$109,396) for the period from April 2017 to June 2018. MSEDCL again claimed it did not owe any interest.</p>
<p><strong>Commission analysis</strong></p>
<p>The Commission ruled that MSDECL should pay Sahyadri Industries an interest of ₹15.42 million (~$189,578) and a DPC of ₹4.58 million (~$56,307).</p>
<p>The Commission worked out a DPC to the tune of ₹34,000 (~$418) for July -2017 and ₹147,000 (~$1,807) for October 2017 to be paid by MSEDCL to Shah Promotors and Developers. The Commission also ordered MSEDCL to submit an interest of ₹10,000 (~$122) to SPD.</p>
<p>The commission noted that MSEDCL must pay a principal amount of ₹118,000 (~$1,450), a DPC of ₹8.87 million (~$109,045), and an interest of ₹5.25 million (~$64,542) to Mahanagar Developers.</p>
<p>In an earlier order, the MERC <a href="https://mercomindia.com/maharashtra-discom-late-payment-surcharge-to-wind-developer/" target="_blank" rel="noopener">ruled</a> in favor of a wind power developer and said that it was eligible for a late payment surcharge for January 2017 and from April 2017 to February 2018 with an interest of 1.25% per month on the outstanding amount.</p>
<p>Last November, MERC <a href="https://mercomindia.com/maharashtra-discom-asked-to-clear-dues-four-wind-generators/" target="_blank" rel="noopener">directed</a> MSEDCL to pay the principal amount to four wind project developers and clear the corresponding late payment surcharge due until the generation month of December 2020.</p>
<p>Subscribe to our real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure that you never miss any critical updates from the renewable energy industry.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/arjun-joshi/" class="vcard author" rel="author"><span class="fn">Arjun Joshi</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Arjun-Joshi-1.png" width="50" /></p>
<p><strong style="text-decoration: underline">Arjun Joshi,</strong> Staff reporter at Mercom India<br />
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Arjun-Joshi-1.png" width="86" height="102" /><a href="https://mercomindia.com/author/arjun-joshi/" target="_blank" rel="noopener"><strong style="color: #00b451">Arjun Joshi</strong> </a>is a staff reporter at Mercom India. Before joining Mercom, he worked as a technical writer for enterprise resource software companies based in India and abroad. He holds a bachelor’s degree in Journalism, Psychology, and Optional English from Garden City University, Bangalore. <a href="https://mercomindia.com/author/arjun-joshi" target="_blank" rel="noopener">More articles from Arjun Joshi.</a></p>
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Maharashtra Regulator Allows Wind Developers’ Delayed Payment Charge Claim


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					</table><p>The Central Electricity Regulatory Commission (<a href="https://cercind.gov.in/" target="_blank" rel="noopener">CERC</a>) recently directed the Solar Energy Corporation of India (<a href="https://www.seci.co.in/" target="_blank" rel="noopener">SECI</a>) 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.</p>
<p>It also directed the Karnataka distribution companies (DISCOMs) to pay SECI the compensation amount due to the petitioner.</p>
<p>However, payment by SECI was not conditional upon the payments to be made by the Karnataka DISCOMs to SECI.</p>
<p>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.</p>
<p><strong>Background</strong></p>
<p>Solitaire Powertech is a power generating company with a solar power project of 30 MW capacity in the Chitradurga district of Karnataka.</p>
<p>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.</p>
<p>The PPA for the project was signed on August 2, 2016. Commissioning was set for September 2, 2017.</p>
<p>On July 1, 2017, the GST laws were introduced.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>SECI had communicated to the solar generator and the DISCOMs the revised reconciliation of the GST claims of ₹69.69 million (~$872,338).</p>
<p>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.</p>
<p><strong>Commission’s analysis</strong></p>
<p><strong> </strong>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.</p>
<p>Considering the facts, the Commission noted that the SECI should release the reconciled claims at the earliest.</p>
<p>Regarding the increase in recurring expenditure (O&amp;M) and carrying cost, the Commission tagged it with other petitions for further hearing.</p>
<p>Recently, CERC <a href="https://mercomindia.com/cerc-directs-seci-compensate-gst-claims/" target="_blank" rel="noopener">directed</a> SECI to compensate a solar developer for the additional cost incurred due to the imposition of GST laws on an annuity basis.</p>
<p>Earlier, CERC had <a href="https://mercomindia.com/commission-rejects-solar-developers-claim/" target="_blank" rel="noopener">rejected</a> a solar energy developer’s compensation petition for the additional tax burden on O&amp;M expenses and carrying costs due to a ‘Change in Law’ event.</p>
<p>Subscribe to Mercom’s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
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SECI Asked to Reimburse Solar Developer’s GST Claims


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					</table><p>The Bihar Electricity Regulatory Commission (<a href="https://berc.co.in/" target="_blank" rel="noopener">BERC</a>) recently directed the Bihar State Power Holding Company (<a href="https://www.bsphcl.co.in/" target="_blank" rel="noopener">BSPHCL</a>) to compensate a solar developer for &#8216;Change in Law&#8217; claims due to the imposition of service tax and goods and services tax (GST).</p>
<p>Regarding the carrying cost, the Commission noted that the power purchase agreement (PPA) had no provision for restoration of the petitioner to the same economic position had the &#8216;Change in Law&#8217; event not occurred. Without such provision, the question of allowance of carrying cost did not arise.</p>
<p>Azure Power Eris, a wholly-owned subsidiary of Azure Power, had filed a petition requesting an amendment in the PPA executed between Azure Power Eris and the North Bihar Power Distribution Company (NBPDCL) and the South Bihar Power Distribution Company (SBPDCL) regarding the additional cost accrued due to the imposition of GST laws.</p>
<p><strong>Background</strong></p>
<p>Bihar State Power Holding Company initiated a competitive bidding process to select solar power developers to set up 100 MW solar projects.</p>
<p>Azure Power submitted a bid for a 10 MW project and was selected as the successful bidder. In compliance with the provisions of the request for proposal (RfP), Azure Power informed Bihar State Power Holding Company regarding the execution of the project through a special purpose vehicle (SPV), namely Azure Power Eris.</p>
<p>Azure Power Eris executed the PPA for the 10 MW project with North and South Bihar Power Distribution Companies &#8211; the subsidiaries of Bihar State Power Holding Company &#8211; on January 17, 2015.</p>
<p>Azure Power Eris achieved the project&#8217;s commercial operation date on July 14, 2016. Later, in 2018, the developer filed a petition seeking relief per the &#8216;Change in Law&#8217; clause of the PPA.</p>
<p>The Commission found no merit in the case and rejected the petitioner&#8217;s claims regarding the &#8216;Change in Law&#8217; events.</p>
<p>Aggrieved by the Commission&#8217;s order, Azure Power Eris approached APTEL which <a href="https://mercomindia.com/aptel-bihar-regulator-revisit-solar-gst-claims/">remitted</a> the case back to the Commission to revisit.</p>
<p>Azure Power Eris argued that the &#8216;Change in Law&#8217; provision of the PPA protected it from any change in tax or introduction of any tax after the effective date, resulting in any additional recurring expenditure to be incurred by the petitioner.</p>
<p>The developer added that the enactment of service tax laws and GST laws were also covered under the &#8216;Change in Law&#8217; provision (Article 12), which covered the enactment, coming into effect, promulgation, amendment, modification, or repeal in India, of any law, including rules and regulations framed under such law.</p>
<p>Due to the enactment of the service tax and the GST laws, the petitioner was required to bear additional recurring expenditure after the effective date for the operation and maintenance (O&amp;M) of the project.</p>
<p>Bihar State Power Holding Company, in its reply, said that the petitioner was accountable to Bihar utilities for fulfilling all the obligations assumed under the PPA.</p>
<p>The Holding Company added that outsourcing the O&amp;M contract was entirely a commercial decision undertaken by the developer, and the risk and reward for the same should have to be borne by it.</p>
<p>Azure Power, in its reply, said that as a &#8216;standard industry practice,&#8217; the O&amp;M activities of the solar project were outsourced to the parent company of the petitioner due to its experience in providing such services in the most effective and cost-efficient manner.</p>
<p><strong>Commission&#8217;s analysis </strong></p>
<p>The Commission observed that the &#8216;Change in Law&#8217; clause under Article 12 of the PPA was not disputed. In terms of APTEL&#8217;s ruling, the petitioner&#8217;s engagement with a third-party vendor for O&amp;M services was a purely commercial decision. It did not disentitle the relief sought for the increase in cost on account of the &#8216;Change in Law&#8217; provisions of the PPA.</p>
<p>The state regulator noted that the petitioner was a 100% subsidiary company of the O&amp;M service provider, and it was in direct control of the O&amp;M service provider.</p>
<p>The Commission noted that Bihar State Power Holding Company had rightly pointed out that the present PPA had no provision for restoration of the developer to the same economic position as if &#8216;Change in Law&#8217; had not occurred. With the absence of such a provision in the PPA, the question of allowance of carrying cost did not arise.</p>
<p>Considering the case&#8217;s facts, figures, and circumstances, the state regulator directed Bihar State Power Holding Company to pay its share of &#8216;Change in Law&#8217; claims, including service tax claims of ₹331,630 (~$4,166) and GST claims of ₹2.59 million (~$32,542), based on supplementary bills of the petitioner supported with auditor&#8217;s certificate.</p>
<p>Last December, the Central Electricity Regulatory Commission <a href="https://mercomindia.com/commission-rejects-solar-developers-claim/" target="_blank" rel="noopener">rejected</a> a solar energy developer&#8217;s compensation petition for the additional tax burden on operation and maintenance expenses and carrying costs due to a &#8216;Change in Law&#8217; event.</p>
<p>Subscribe to Mercom&#8217;s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don&#8217;t miss any critical updates from the renewable industry.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener">More articles from Rakesh Ranjan.</a></p>
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
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Solar Developer to be Compensated for Additional O&M Cost Incurred Due to GST Imposition

<p>The Karnataka Electricity Regulatory Commission (<a href="https://karunadu.karnataka.gov.in/kerc/Pages/home.aspx" target="_blank" rel="noopener">KERC</a>) recently ruled in favor of Adani Green Energy (UP) and directed the Bangalore Electricity Supply Company (<a href="https://bescom.karnataka.gov.in/english" target="_blank" rel="noopener">BESCOM</a>) to compensate the solar project developer for the additional cost incurred due to the imposition of goods and services tax (GST).</p>
<p>The Commission termed the imposition of GST laws as a ‘Change in Law’ event while supporting  Adani Green Energy’s claim in their petition filed in December 2018.</p>
<p>The state regulator directed BESCOM to make the payments in three equal installments within 90 days. If the DISCOM failed to do so, it would have to pay a late payment surcharge at the rate of 1.25% per month as per the terms of the power purchase agreement (PPA).</p>
<p>However, the Commission rejected the developer’s plea for carrying cost.</p>
<p><strong>Background</strong></p>
<p>Adani Green Energy (UP), a wholly-owned subsidiary of Adani Green Energy, owns a 20 MW solar project in the Mandya district of Karnataka.</p>
<p>The Karnataka Renewable Energy Development Limited (<a href="https://kredl.karnataka.gov.in/english" target="_blank" rel="noopener">KREDL</a>) had invited proposals to set up 290 MW of solar projects in 17 taluks of Karnataka in 2016. Adani Green Energy (UP) was one of the successful bidders.</p>
<p>The developer signed the PPA with BESCOM for the 20 MW project at a tariff of ₹4.84 (~$0.065)/kWh on June 29, 2016.</p>
<p>After the signing of the PPA, the government of India introduced GST. The petitioner, in its submission, said that the imposition of GST led to an incremental impact on the cost of the project.</p>
<p>The developer said that it was entitled to compensation of ₹60.03 million (~$807,061) towards the additional cost incurred due to the GST imposition and the refund of ₹6.44 million (~$86,581) towards additional operations and maintenance (O&amp;M) charges after the imposition of GST.</p>
<p>The petitioner said it was also entitled to ‘carrying cost’ due to the ‘Change in Law’ event.</p>
<p>BESCOM argued that the developer had executed the PPA and started implementing the project much before the GST laws came into force, and hence, it was not entitled to any relief.</p>
<p>Further, the DISCOM added that if the O&amp;M services were outsourced to a third party, no claims for such additional tax payable on such outsourced services could be considered a ’Change in Law’ event.</p>
<p><strong>Commission’s analysis</strong></p>
<p>The Commission observed that the imposition of GST laws was a ‘Change in Law’ event as it was enacted after the signing of the PPA on June 29, 2016. Hence, the increase in cost needed to be reimbursed by the DISCOM.</p>
<p>It ruled that the invoices of ₹48.85 million (~$656,754) raised by the developer should be considered for GST compensation.</p>
<p>Regarding the increase in O&amp;M expenses, the Commission noted that outsourcing O&amp;M services to a third party was a commercial decision. Any increase in cost cannot increase the liability of the DISCOM. It added that there was no PPA provision to provide relief towards O&amp;M expenses.</p>
<p>On the topic of carrying cost, the state regulator said that there was no specific provision in the PPA for restoring the petitioner to the same economic position as before the imposition of the GST laws.</p>
<p>Since the amount of compensation was not huge, it would not be appropriate to determine the incremental tariff for the remaining period of the PPA. It directed BSECOM to make the payment in three equal installments within 90 days.</p>
<p>In August last year, KERC had <a href="https://mercomindia.com/regulator-dismisses-solar-developers-plea/" target="_blank" rel="noopener">dismissed</a> Adani Green Energy’s (UP) plea for relief under the ‘force majeure’ clause in its PPA with the Gulbarga Electricity Supply Company Limited.</p>
<p>Earlier, KERC had <a href="https://mercomindia.com/karnataka-regulator-reduces-tariff/" target="_blank" rel="noopener">issued</a> an order denying Adani Green Energy’s (UP) requests for relief under the ‘force majeure’ clause of its PPA with the Chamundeswari Electricity Supply Company.</p>
<p>Subscribe to Mercom’s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates </a>to ensure you don’t miss any critical updates from the renewable industry.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener">More articles from Rakesh Ranjan.</a></p>
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
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Karnataka DISCOM Asked to Compensate Solar Project Developer for GST Claims

<p>The Central Electricity Regulatory Commission (<a href="http://www.cercind.gov.in/" target="_blank" rel="noopener">CERC</a>), in a recent order, approved an imported coal-based thermal power generator&#8217;s request for compensation for the additional expenses incurred due to the increase in clean energy cess on coal, settlement of dues because of the introduction of Goods and Services Tax (GST) on imported coal, and the &#8216;carrying cost&#8217; on account of &#8216;Change in Law&#8217; events.</p>
<p><a href="https://coalandoil.com/#page-1" target="_blank" rel="noopener">Coastal Energen</a> had filed a petition with the Commission seeking compensation on account of &#8216;Change in Law&#8217; events as per the terms of the power purchase agreement (PPA) signed with the Tamil Nadu Generation and Distribution Corporation Limited (<a href="https://www.tangedco.gov.in/" target="_blank" rel="noopener">TANGEDCO</a>) for a 558 MW project.</p>
<p><strong>Background</strong></p>
<p>Coastal Energen is a thermal power generating company and had set up a 1,200 MW power project in the Thoothukudi district of Tamil Nadu. The generator had entered into a PPA with TANGEDCO to supply 558 MW of power for 15 years.</p>
<p>The company sought compensation based on &#8216;Change in Law&#8217; events that had a significant financial impact on the costs and revenue during the operating period. The generator claimed that it was entitled to be compensated and restored through monthly tariff payment as before &#8216;Change in Law&#8217; came into effect.</p>
<p>The generator had also filed an application seeking TANGEDCO to pay ₹4.79 billion (~$66.03 million) as the pending amount due to the &#8216;Change in Law&#8217; events.</p>
<p><strong>Commission&#8217;s analysis</strong></p>
<p>The clean energy cess rebranded as clean environment cess, was ₹50 (~$0.74)/ton when it was <a href="https://mercomindia.com/clean-environment-cess-funds-clean-energy-programs-india-will-now-used-towards-gst-compensation-fund/" target="_blank" rel="noopener">introduced</a> in 2010, raised to ₹100 (~$1.5)/ton in 2014 and to ₹200 (~$3)/ton in the 2015-2016 budget. It was again doubled from ₹200 (~$3)/ton to ₹400 (~$6)/ton in the 2016-17 budget. Since July 2017, the cess was abolished, and a new cess on coal production called the GST compensation cess took its place at the same rate of ₹400 (~$6)/ton.</p>
<p>Replying to the generator’s petition on clean energy cess, the regulator said that since the revised rates of clean energy cess had been introduced through amendments to the Finance Acts, the said changes are covered in the &#8216;Change in Law&#8217; clause in the PPA. The increase in the clean energy cess had been allowed as a &#8216;Change in Law&#8217; event up to June 30, 2017.</p>
<p>Further, the regulator observed that the generator was entitled to recover the GST in proportion to the coal consumed. The consumption had to be corresponding to the scheduled generation at normative parameters as per the applicable tariff regulations of the Commission or at actual, whichever is lower, for the supply of power to TANGEDCO. The Commission directed the petitioner to furnish along with its monthly bill the proof of payment and computations duly certified by the auditor to TANGEDCO.</p>
<p>Regarding the &#8216;carrying cost&#8217;, the Commission clarified that the generator was eligible for &#8216;carrying cost&#8217; arising out of approved &#8216;Change in Law&#8217; events from the effective date of &#8216;Change in Law&#8217; until the actual payment was made.</p>
<p>The Commission added that the generator would be eligible for &#8216;carrying cost&#8217; at the actual interest rate it paid for arranging funds or the rate of interest on the working capital. The compensation would be according to the applicable CERC Tariff Regulations or the late payment surcharge rate as per the PPA, whichever is lower.</p>
<p>The Petitioner has submitted that since carrying cost is compensation for the time value of money and is different from interest; it is entitled to be compensated and restored to the same economic position as if such ‘Change in Law’ events had not occurred.</p>
<p>&#8220;The petitioner is entitled to charge the compensation on account of &#8216;Change in Law&#8217; events during the operating period. However, it is clarified that the petitioner should be entitled to claim the compensation after the expenditure allowed under &#8216;Change in Law&#8217; during the operating period exceed 1% of the value of &#8216;Letter of Credit&#8217; in aggregate. For this purpose, the generator should furnish all the relevant documents,&#8221; the Commission noted.</p>
<p>While the CERC has said that the generator is eligible to claim ‘carrying cost’ in this case, this has not been <a href="https://mercomindia.com/cerc-denies-claim-carrying-costs-om-expenses-gst-law/" target="_blank" rel="noopener">allowed</a> in several cases by solar project developers.</p>
<p>Subscribe to Mercom&#8217;s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates </a>to ensure you don&#8217;t miss any critical updates from the renewable industry.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener">More articles from Rakesh Ranjan.</a></p>
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
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