| Work Detail |
In a recent case before the Gujarat Electricity Regulatory Commission (GERC), Tata Power Saurya Limited submitted a petition under Section 86(1)(f) of the Electricity Act, 2003, alongside Article 9 of their Power Purchase Agreement (PPA) from 2021. Tata Power Saurya is seeking a formal declaration that two specific notifications from October 2022 and February 2023, issued by the Central Board of Indirect Taxes and Customs (CBIC), qualify as “Change in Law” events. These notifications amended the Project Imports Regulations (PIR), removing solar power projects from their scope. Consequently, Tata Power Saurya argues they should receive compensation for the increased costs due to the loss of concessional customs duties on imported solar equipment.
The background of the case reveals a complex sequence of regulatory changes. Initially, Tata Power Saurya was awarded a contract under a tender process issued by Gujarat Urja Vikas Nigam Limited (GUVNL) in January 2021. Following successful bidding, a Power Purchase Agreement (PPA) was signed in April 2021, with the project set to benefit from favorable import duty conditions. This included incentives under the PIR, which allowed for concessional rates on project-specific imports. However, changes in the PIR by CBIC in 2022 and 2023 removed these benefits, affecting the project’s financial planning.
In response to the regulatory amendments, Tata Power Saurya issued a “Change in Law” notice to GUVNL. The company claimed that the amended customs duties on solar imports disrupted their project costs, undermining the financial assumptions made when bidding. They argued that the exclusion of solar projects from the PIR should entitle them to compensation under the PPA. The PPA’s Article 9 details provisions for “Change in Law,” including compensation for significant changes impacting project costs due to legislative or regulatory alterations.
During the hearing, Tata Power Saurya’s counsel outlined the sequence of events, explaining that the amendment to the customs regulations introduced unexpected financial burdens. The counsel referenced the Ministry of Power’s 2016 Tariff Policy, which directs regulatory bodies to consider national policies when addressing tariff-related issues. This policy aligns with Tata Power’s stance that they are entitled to relief under the PPA’s “Change in Law” clause.
Representing GUVNL, their counsel argued that the customs duty changes should not be considered a “Change in Law” under the PPA. GUVNL claimed that the 2021 government notification, issued before the bidding deadline, had clearly outlined the imposition of customs duties on solar imports. GUVNL contended that Tata Power Saurya should have accounted for potential duty changes in their bid, as the government’s intention was apparent. GUVNL also noted that Tata Power had delayed the procurement of solar panels, suggesting that these delays might be partly responsible for the increased costs.
Further complicating the issue, GUVNL pointed to an undertaking signed by Tata Power, in which they agreed not to claim additional costs or tariff increases due to delays. They argued that this commitment disqualifies Tata Power from invoking “Change in Law” provisions to mitigate the new customs duties. Additionally, GUVNL emphasized that any duty impact should be limited to costs incurred before the project’s revised commissioning date in December 2022, which was established through extensions granted for the project.
The GERC has allowed both parties to submit additional documents and evidence within two weeks, indicating that the regulatory body seeks more clarity before making a final decision. The outcome of this case will likely clarify how “Change in Law” clauses apply to evolving customs regulations, impacting future renewable energy projects. Both parties await further hearings, with a decision expected in the coming months. |
