CERC Awards GST Relief to Solar Developers Amid NTPC, RUVNL Objections

The Central Electricity Regulatory Commission (CERC) in a latest ruling has granted compensation to selected solar developers against rise in GST rates after the signing of agreements. The central power regulator allowing categorising the same under the 'change of law' event. This came after the respondents in the case--NTPC and RUVNL objected to the arguments of the petitioners. 

CERC issued the order in a petition led by Rising Sun Energy Pvt Ltd in this regard. The solar company argued that the July 2017 rollout of revised GST rates increased project costs for solar plants commissioned between July and November 2017. The solar project was located in the Bhadla Solar Park Phase-II in the Jodhpur district of Rajasthan

Respondents Opposed Compensation 

The developers sought compensation for both recurring and non-recurring expenses, including post-commissioning and operation and maintenance (O&M) costs, along with carrying costs and interest on delayed payments.

NTPC and Rajasthan Urja Vikas Nigam Ltd (RUVNL) opposed parts of the claims, arguing that some post-commissioning expenses were beyond the scope of the original petition and that NTPC acted only as an intermediary, with ultimate financial liability resting with RUVNL. RUVNL also said the legality of post-commissioning claims was being challenged before the Supreme Court in the Parampujya Solar Energy case.

GST Revised Recognised as Change in Law

CERC ruled that the introduction of GST constitutes a Change in Law under the power purchase agreements, noting that the tax was introduced after the agreements were signed. The commission also cited an Appellate Tribunal for Electricity judgment in the Parampujya Solar Energy case, which held that Change in Law relief should include post-commissioning and O&M expenses.

The regulator allowed GST compensation for implementation and support agreement charges and annual lease rent linked to solar park projects, and said developers were entitled to carrying costs to account for the time value of money.

NTPC directed to pay developers

CERC directed NTPC to pay the reconciled compensation amounts to the developers, regardless of whether it receives corresponding payments from RUVNL. RUVNL will subsequently reimburse NTPC, the order said.

The parties have been asked to jointly reconcile the additional expenditures with supporting auditor certificates. Carrying costs will be calculated from the date of payment to authorities until the date of the order, based on the lowest of the actual interest paid, the working capital rate or the late payment surcharge rate.

However, enforcement of payments related to post-commissioning compensation and carrying costs will remain subject to the final outcome of the Parampujya case pending before the Supreme Court, the regulator said.