CERC Awards Compensation To Torrent Power Over Surged GST Rates

The Central Electricity Regulatory Commission (CIRCLE)in his last judgmentawarded compensation to a subsidiary of torrent power against the increase in Goods and Services Tax (GST). Its subsidiary, Torrent Solargen Limited (TSL), is a generation company. It had established its ISTS connected 115 MW wind power project in Kutch district of Gujarat.

The company said it submitted a bid for the government's wind energy project. The tender was floated by the Solar Energy Corporation of India (SECI). It was part of its 2500 MW ISTS connected wind energy projects (Tranche VI). The petitioner, in the case of Torrent, had won the tender with the offered price of Rs 2.76 per unit. It received an order for 115 MW of wind energy within the framework of the tender.

SECI issued the Request for Selection (RfS) on August 3, 2018. The LOA was issued on October 24, 2018 and the Power Purchase Agreement (PPA) was signed on May 3, 2019. The Commercial Operation Date Scheduled (SCOD) was July 22, 2020. However, the Ministry of Finance, on June 28, 2017, filed its first GST notification. It was reviewed on September 30, 2021.

Torrent Solargen, in its petition to the CERC, said that the Ministry of Finance's September 30, 2021 notification increased the rates of GST on supply of equipment from 5% to 12%. This, the petitioner said, generated an additional impact of around Rs 37 crore for the implementation of the project.

In its petition to the CERC, the company appealed to consider this as a “change of law event and grant the corresponding compensation. The Central Commission, after hearing the petitioner and the respondents, SECI and Haryana Power Purchasing Center (HPCC), considered Torrent's plea and ordered compensation to the company, admitting its plea to consider increasing rates of the GST as a law change event.

“…we find that the petitioner's project was affected by the impugned notification. Therefore, TSL is entitled to compensation due to change in law in terms of section 12 of the PPA due to the impugned notification i.e. GST notification 2021. It is pertinent to mention here that during the course of the hearing held on 23.08.2023, the Petitioner clarified that the Change of Law claims are for the period prior to the Commercial Operation Date only,” the CERC order reads.

The Commission also held that the petitioner was responsible for the costs of care. It added: “The Commission further orders that respondent HPPC be obligated to pay SECI all previously settled claims that SECI is required to pay to petitioner. However, the payment to the petitioner by SECI is not conditional on the payment to be made by the HPPC answerable to SECI,” he said.