Petition No. 157/MP/2015. Case: Coastal Gujarat Power Limited Vs Gujarat Urja Vikas Nigam Ltd. and Ors.. Central Electricity Regulatory Commission

Case Number:Petition No. 157/MP/2015
Party Name:Coastal Gujarat Power Limited Vs Gujarat Urja Vikas Nigam Ltd. and Ors.
Judges:Gireesh B. Pradhan, Chairperson, A.K. Singhal, A.S. Bakshi and Dr. M.K. Iyer, Members
Issue:Electricity Act, 2003 - Sections 63, 79, 79(1)(b); Finance Act, 1994 - Sections 65, 66, 93, 94; Gujarat Green Cess Act, 2011 - Section 20; Gujarat Value Added Tax Act, 2003 - Sections 3, 5A, 9, 9(1), 9(6); Income Tax Act, 1961 - Section 80 IA
Judgement Date:March 17, 2017
Court:Central Electricity Regulatory Commission
 
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Order:

  1. The petitioner, Coastal Gujarat Power Limited, a subsidiary of Tata Power Company Ltd. has set up a 4000 MW Ultra Mega Power Project at Mundra in the State of Gujarat (Mundra UMPP) based on imported coal after Tata Power Company Ltd. was selected as the successful bidder based on the competitive bidding carried out in accordance with Section 63 of the Electricity Act, 2003 (2003 Act). The tariff of the Mundra UMPP has been adopted by this Commission under Section 63 of the 2003 Act vide order dated 19.9.2007 in Petition No. 18/2007.

  2. The petitioner has entered into a PPA dated 22.4.2007 with the distribution companies in the States of Gujarat, Maharashtra, Rajasthan, Punjab and Haryana for supply of 3800 MW from Mundra UMPP for a period of 25 years, namely Gujarat Urja Vikas Nigam Limited, Maharashtra State Electricity Distribution Company Limited, Ajmer Vidyut Vitran Nigam Limited, Jaipur Vidyut Vitran Nigam Limited, Jodhpur Vidyut Vitran Nigam Limited, Punjab State Power Corporation Limited and Haryana Power Generation Corporation Limited (collectively referred to as "Procurers"). Subsequently, the petitioner and the Procurers have entered into a Supplemental PPA on 31.7.2008 for advancement of the Scheduled Commercial Operation Dates (SCOD) in terms of Article 3.1.2 (iv) of the PPA as per the following details:

  3. The petitioner has filed the present petition under section 79(1)(b) of the Electricity Act, read with Article 13 of the PPA and Paragraph 4.7 of the Competitive Bidding Guidelines seeking the following reliefs under 'Change in Law' events during the Operating Period.

    "(

    1. Levy of Clean Energy Cess by the Government of India in the Finance Act, 2010 with effect from 1.7.2010 in terms of Notification No. 354/72/2010-Clean: Energy Cess dated 24.6.2010 issued by the Ministry of Finance, Government of India.

    (b) Changes in Customs Duty on Imported coal (Customs Duty "BCD" and Countervailing Duty "CVD")

    (c) Reduction in Excise Duty with effect from 1.3.2008 and 17.3.2012 in terms of Notification No. 2/2008-Central Excise: dated 1.3.2008 and Notification No. 18/2012-Central Excise: dated 17.3.2012 respectively issued by the Ministry of Finance, Government of India.

    (d) Reduction in Central Sales Tax Rate Duty with effect from 1.4.2007 and 1.6.2008 in terms of Notification No. 34/135/2005-ST dated 29.3.2007 and Notification No. 28/11/2007-ST dated 30.5.2008 respectively issued by the Ministry of Finance, Government of India.

    (e) Increase in the Gujarat Value Added Tax Rate with effect from 1.4.2008 pursuant to Gujarat Value Added Tax (Amendment) Act, 2008.

    (f) Increase in the rate of Service Tax pursuant to Notification No. 32/2007-Service Tax: dated 22.5.2007 and Notification No. 7/2008-Service Tax: dated 1.3.2008 issued by the Ministry of Coal, Government of India.

    (g) Levy of Green Cess in terms of Gujarat Green Cess Act, 2011 and the Gujarat Green Cess Rules, 2011 with effect from 28.7.2011.

    (h) Additional conditions imposed by the Ministry of Environment and Forests, Government of India pursuant to Corrigendum dated 26.4.2011 which amended the earlier approval letters dated 2.3.2007 (Environmental Clearance) and 5.4.2007 (amendment to Environmental Clearance dated 2.3.2007) issued by MoEF."

  4. The petitioner has submitted that the details of financial impact on the Project on account of the aforesaid events as under:

  5. The petitioner has submitted that in accordance with Article 13.3 of the PPA, the petitioner notified the procurers on 11.7.2011, 26.2.2013, 8.3.2013,12.3.2013 and 28.3.2013 about the above stated events amounting to "Change in Law' affecting the revenues/cost of the petitioner during the operating period.

  6. The petitioner has submitted that the events of Change in Law have financial impact on the cost and revenue of the petitioner during the operating period for which the petitioner is entitled to be compensated in terms of Article 13 of the PPA. Accordingly, the petitioner has filed the present petition with the following prayers:

    "(

    1. Declare that each of the items set out in Paragraphs 67 to 106 above are a "Change in Law" impacting revenues and costs during the Operating period in FY 2011-12, FY 2012-13 and FY 2013-14;

    (b) Declare that the petitioner is liable to pay a sum of Rs. 25,96,00,000 along with the carrying cost in terms of Article 13.4.2 of the PPA, as a result of reduction in overall cost during the operating period of the project due to the Change in Law events as set out in Paragraphs 67 to 106.

    (c) Direct the Procurers to raise the Supplementary Bills for the sum of Rs. 25,96,00,000 along with the carrying cost;

    (d) Pass any such other and further relief as this Hon'ble Commission deems just and proper in the nature and circumstances of the present case."

  7. Notices were issued to the respondents to file their replies to the petition. Replies to the petition have been filed by Gujarat Urja Vikas Nigam Limited (GUVNL) vide its affidavit dated 17.8.2015, Rajasthan Distribution Companies (AVVNL/JVVNL/JdVVNL) vide affidavit dated 17.8.2015, Haryana Utilities (UHBVNL & DHBVNL) vide affidavit dated 27.8.2015, Punjab State Power Corporation Limited (PSPCL) vide its affidavit dated 10.9.2015, Maharashtra State Electricity Distribution Company Limited (MSEDCL) vide its affidavit dated 17.9.2015. The petitioner has filed its rejoinder to the replies of the respondents. The Commission also heard the learned counsels for the petitioner and the respondents at length. After consideration of the submissions of the petitioner and respondents, the claims of the petitioner has been dealt with as under:

    (a) Compliance of the provisions of the PPA with regard to Notice under Change in Law;

    (b) Consideration of the claims under Change in Law on merit;

    (c) Carrying cost on the Change in law events allowed in this order;

    (d) Mechanism for processing and reimbursement of amount claimed under Change in Law.

    1. Compliance with the provisions of notice for Change in Law events:

  8. The claims of the petitioner in the present petition pertain to the Change in Law events during the operating period. Article 13.3 of the PPA envisages for notification of the Change in Law events to the Procurers as under:

    "13.3 Notification of Change in Law

    13.3.1 If the Seller is affected by a Change in Law in accordance with Article 13.2 and wishes to claim a Change in Law under this Article it shall give notice to the Procurer of such Change in Law as soon as reasonably practicable after becoming aware of the same or should reasonably have known of the Change in Law.

    13.3.2 Notwithstanding Article 13.3.1, the Seller shall be obliged to serve a notice to all Procurers under this Article 13.3.2 if it is beneficially affected by a Change in Law. Without prejudice to the factor of materiality or other provisions contained in this Agreement, the obligation to inform the Procurer contained herein shall be material. Provided that in case the Seller has not provided such notice, the Procurers shall have the right to issue such notice to the Seller.

    13.3.3 Any notice served pursuant to this Article 13.3.2 shall provide, amongst other things, precise details of:

    (a) the Change in Law; and

    (b) the effects on the Seller of the matters referred to in Article 13.2."

  9. The petitioner has submitted that consolidated notices were issued to all the procurers on 11.7.2011 for Clean Energy Cess, Countervailing Duty and additional condition by MoEF intimating them about the Change in Law for the Construction Phase, on 26.2.2013 for Gujarat Green Cess, Basic Customs Duty, Excise Duty intimating them about the Change in Law for the Operation period, on 8.3.2013 for revision in Countervailing Duty, on 12.3.2013 for approximate impact of Change in Law on the petitioner and 28.3.2013 for additional instance of change in law. In this regard, no response was received from the procurers.

  10. We have considered the submissions of the petitioner. Under Article 13.3 of the PPA, the seller is required to give the notice about occurrence of Change in Law events as soon as reasonably practicable after becoming aware of such events. The petitioner gave notices dated 11.7.2011, 26.2.2013, 8.3.2013, 12.3.2013 and 28.3.2013, 11.7.2011, 26.2.2013, 8.3.2013, 12.3.2013 and 28.3.2013 to the procurers. In the said notices, the petitioner has brought out the occurrence of Change in Law events and apprised the procurers about the impact of such events. The procurers have not responded to the notices of the petitioner. Thereafter, the petitioner has filed the present petition. In our view, the requirement of Article 13.2 of the PPA has been complied with.

    1. Consideration of the claims of the petitioner under change in law on merits.

  11. The Petitioner has approached the Commission under Article 13 of the PPA read with Section 79 of the Act and Para 4.7 of the Competitive Bidding Guidelines for compensation of the cost incurred by the petitioner due to "Change in Law" during the operating period. Section 79(1)(b) and (f) of the Electricity Act, 2003 provides as under:

    79 (1). The Central Commission shall discharge the following functions, namely,

    (a).........................

    (b) to regulate the tariff of generating companies other than those owned or controlled by the Central Government specified in clause (a), if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State.

    ........................................

    (f) to adjudicate upon disputes involving generating companies or transmission licensee in regard to matters connected with clauses (a) to (d) above and to refer any dispute for arbitration

    As per the above provision, the Central Commission has the power to adjudicate the dispute involving a generating company covered under clause (b) of sub-section (1) of Section 79 of the Act i.e. a generating company having a composite scheme for...

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