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In a recent decision, the Maharashtra Electricity Regulatory Commission (MERC) addressed the petition filed by T.P. Saurya Limited (TPSL) seeking compensation due to a change in law. The petition focused on the impact of an increase in Goods and Services Tax (GST) rates as notified on 30 September 2021. This case arose from the Power Purchase Agreement (PPA) signed between TPSL and Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) on 3 August 2022, with the PPA being effective from 22 July 2022.
TPSL had responded to a Request for Selection (RfS) issued by MSEDCL on 7 May 2021 for procuring 500 MW of Wind-Solar Hybrid power. The competitive bidding process, including an e-Reverse Auction conducted on 9 July 2021, resulted in TPSL and Azure Power India Pvt. Ltd. being selected at a tariff rate of Rs. 2.62 per unit. However, the initial notification that governed GST rates at the time of bid submission was replaced by a new notification on 30 September 2021, increasing GST on renewable energy devices from 5% to 12%.
The sequence of events following the bid submission included the issuance of a Letter of Award (LOA) by MSEDCL on 14 December 2021 and the subsequent petition by MSEDCL seeking tariff adoption. The Commission initially refused to adopt the discovered tariff, proposing instead a lower tariff of Rs. 2.49 per unit. This refusal prompted TPSL to file a review petition on 4 April 2022, seeking a revised tariff of Rs. 2.56 per unit due to the increased costs of steel, a critical component for their project.
The Commission, in its order dated 7 July 2022, adopted the revised tariff of Rs. 2.56 per unit and directed the execution of the PPA within 15 days. Following the execution of the PPA, TPSL issued a Change in Law Notice to MSEDCL on 12 August 2022, informing them of the increased GST rates and the resultant additional tax liability.
MSEDCL contested TPSL’s claims, arguing that the revised tariff of Rs. 2.56 per unit should have accounted for the increased GST rates. They also pointed out that TPSL had delayed issuing the Change in Law notice, which should have been done within seven days of the GST notification. TPSL countered these arguments by highlighting that the PPA was signed only on 3 August 2022, making it impractical to issue a Change in Law notice before that date.
The Commission considered the arguments from both parties and examined the provisions of the PPA. It noted that any statutory change in the tax structure affecting the project cost after the last date of bid submission qualifies as a Change in Law event. The GST notification issued on 30 September 2021 met these criteria. Additionally, the Commission found that TPSL had complied with the PPA’s requirement to issue a Change in Law notice within a reasonable time frame following the execution of the PPA.
Ultimately, the Commission concluded that the GST notification constituted a Change in Law event under the PPA. It recognized TPSL’s right to seek compensation for the increased project costs due to the higher GST rates. The Commission directed TPSL to file a separate petition to determine the exact quantum of compensation post-commissioning of the project.
Please view the document here for more details.
 has granted TP Saurya Limited compensation for increased project costs due to a GST hike on renewable energy devices. This decision comes after a detailed review of the Power Purchase Agreement and subsequent legal arguments, ensuring TPSL's economic position is maintained for their hybrid power project in Maharashtra.){kind=link}