Reading Time: 2 minutes
The Central Electricity Regulatory Commission (CERC) recently ruled on a petition filed by M/s. Morjar Windfarm Development Private Limited. The petition sought approval for treating an increase in the Goods and Services Tax (GST) rate from 5% to 12% as a “Change in Law” under a Power Purchase Agreement (PPA) with the Solar Energy Corporation of India (SECI). The company requested compensation for the additional financial burden caused by this GST increase.
The project, located in Gujarat, was part of a competitive bidding process initiated by SECI to procure 1,200 MW of wind power. The PPA, signed in October 2019, specified a tariff of ₹2.82/kWh and set a commissioning deadline of March 2021. However, due to unforeseen events, including COVID-19 disruptions and regulatory changes, the project’s schedule was extended multiple times, with the final commissioning completed in June 2023.
The petitioner argued that the GST hike, implemented in October 2021, significantly increased project costs. Since this event occurred after the bid submission date, it qualified as a “Change in Law” under Article 12 of the PPA. SECI acknowledged the GST increase but requested verification of claims before offering compensation. Meanwhile, some respondents, including BSES Rajdhani Power Limited (BRPL), objected to the delays and additional costs, claiming these disrupted contractual agreements.
After examining the case, the Commission ruled in favor of the petitioner. It recognized the GST notification as a “Change in Law” and directed SECI to compensate the petitioner for the increased expenses. The compensation will follow a 15-year annuity model, with a discount rate of 9.12%. SECI must reconcile these costs with clear documentation, supported by an auditor’s certificate.
Additionally, the Commission granted the petitioner the right to claim carrying costs for the period between incurring the GST-related expenses and receiving compensation. However, enforcement of these carrying costs remains subject to ongoing legal proceedings in the Supreme Court.
The decision reflects CERC’s commitment to maintaining financial viability in renewable energy projects while balancing the interests of all stakeholders involved in India’s energy transition.
