Petition No. 170/MP/2011. Case: Talcher-II Transmission Co. Ltd. Vs Tamil Nadu State Electricity Board and Ors.. Central Electricity Regulatory Commission

Case NumberPetition No. 170/MP/2011
CounselFor Appellant: Shri Amit Kapoor and Shri Aproova Misra, Advocates and For Respondents: Shri M.G. Ramachandran, Advocate for PGCIL, Shri S. Vallinayagam and Shri S. Balaguru, Advocates for TANGEDCO, Shri R.B. Sharma, Advocate for GRIDCO, Shri A.K. Asthana and Shri Alok Roy for RPTL, Shri Anil Rawal and Shri Janmali Mankara for NKTCL
JudgesPramod Deo, Chairperson, S. Jayaraman, V.S. Verma and M. Deena Dayalan, Members
IssueElectricity Law
Judgement DateMay 09, 2013
CourtCentral Electricity Regulatory Commission


  1. The petitioner, Talcher-II Transmission Co. Ltd. in the present petition filed under clause (c) of sub-section (1) of Section 79 of the Electricity Act read with the adjudicatory power of this Commission under clause (f) thereof, has made the following prayers, namely-

    (a) Through a consultation proceeding amongst the parties herein help evolve a fair and reasonable solution to salvage the Project by restoring its original economic equilibrium at the time of award by setting off the adverse effect in time and cost over-runs due to the supervening circumstances and unavoidable delays intervening with the implementation of the Project beyond the control of the Petitioner, amount to an event of Force Majeure in terms of the TSA.

    (b) Extend the COD of Project by giving clear working period of 30 months for each element as provided for initially to be reckoned from the date of grant of authorization under Section 164 of the Electricity Act, 2003, and issuance of project import certification as per Project Import Regulation 1986 and compensate for reduction of "Revenue Earning Years"

    (c) Grant such escalation of Input/Capital Costs as pleaded above by the Petitioner; and relief for loss of opportunity in view of extension of this project.

    (d) Pass such other Order(s) and directions as this Hon'ble Commission deems fit and appropriate in the facts and circumstances of the present case.

    Background Facts

    The petitioner was incorporated on 1.5.2007 by Rural Electrification Corporation Transmission Projects Company Limited as its wholly owned subsidiary for augmentation of Talcher-II Transmission System ("the Project") comprising the following elements across the States of Orissa and Andhra Pradesh, namely:

    (a) 400 kV D/C Talcher II-Rourkela (Quad) Transmission Line (Length 161 Kms),

    (b) 400 kV D/C Talcher II-Behrampur Transmission Line (Length 220 Kms),

    (c) 400 kV D/C Behrampur-Gazuwaka Transmission Line (Length 290 Kms),

    (d) 400/200 kV Behrampur Sub-station.

  2. On 6.10.2008, Rural Electrification Corporation Transmission Projects Company invited bids in accordance with Tariff Based Competitive Bidding Guidelines for Transmission Service issued by the Central Government for implementation of the Project as the Transmission Service Provider. While the bid process was under way, Rural Electrification Corporation Transmission Projects Company on 8.12.2008 was granted approval by Ministry of Power ("the Ministry") under Section 68 of the Electricity Act. The approval was subject to the condition that the implementing agency would commence construction of the Project within 3 years from issue of thereof. Reliance Power Transmission Limited which participated in the competitive bidding process was declared as the successful bidder and the Letter of Intent was issued in its favour on 18.12.2009. Prior thereto, the Transmission Service Agreement ("TSA") was signed between the petitioner and the Long Term Transmission Customers ("Beneficiaries") on 10.9.2009. Reliance Power Transmission Limited had furnished Contract Performance Guarantee to the Beneficiaries on 23.4.2010 and the petitioner company was subsequently acquired by Reliance Power Transmission Limited on 27.4.2010 pursuant to execution of the Share Transfer Agreement. The approval earlier issued by the Ministry under Section 68 of the Electricity Act was transferred to the petitioner by REC Transmission Projects Company Ltd. under the latter's letter dated 20.5.2010.

  3. On 5.5.2010, the petitioner filed two petitions before this Commission; Petition No. 145/2010 under Section 63 of the Electricity Act, 2003 for adoption of the transmission charges discovered through the process of competitive bidding, and Petition No. 146/2010 for obtaining transmission licence. This Commission by order dated 4.11.2010 adopted the levelised annual transmission charges of ` 144.00215 crore and also granted the transmission licence to the Petitioner on 8.11.2010, valid for a period of 25 years.

  4. Under the TSA, different elements of the Project were to be commissioned within 30 months of the effective date. The effective date is defined under Article 2.1 of the TSA as under:

    Effective Date:

    This Agreement shall be effective from later of the dates of the following events:

    a. The Agreement is executed and delivered by the Parties; and

    b. The Selected Bidder has acquired for the Acquisition Price, one hundred percent (100%) of the equity shareholding of REC Transmission Projects Company Limited, in Talcher-II Transmission Company Limited along with all its related assets and liabilities as per the provisions of the Share Purchase Agreement, and

    c. The Selected Bidder, on behalf of the TSP, has provided the Contract Performance Guarantee, as per terms of Article 3.1 of this Agreement.

  5. Thus, the effective date is the latest date of the dares of the three events referred to in Article 2.1 of the TSA. The TSA was signed on 10.9.2009, Contract Performance Guarantee was furnished on 23.4.2010 and the shares of the petitioner company were acquired by Reliance Power Transmission Ltd. on 27.4.2010. Therefore, the effective date in the present case was 27.4.2010. Accordingly, the Scheduled COD of the Project is latest by 26.10.2012; 42 months counted from 27.4.2010.

    Petitioner's Case

  6. Firstly, the petitioner has alleged delay in issuing authorisation under Section 164 of the Electricity Act ("the authorisation") by the Ministry. The petitioner has stated that it had been actively pursuing the case for grant of the authorisation in accordance with the procedure notified by the Ministry under Notification dated 13.4.2010 since June 2010, but was not granted till the date of filing of the present petition. The petitioner has stated that on 19.6.2010, it published Public Notices of the proposed inter-State transmission scheme in the newspapers having circulation in each of the two States involving the right of way for the proposed transmission corridor, calling for observations and representations. It has been stated that on 3.7.2010, the petitioner published the Public Notices in the Gazette of India as well, as required under the procedure notified by the Ministry. The petitioner has submitted that it did not receive any observation or representation on its proposal within the prescribed period of two months of the publication of the Public Notices. Thereafter, the petitioner has claimed, it pursued the matter with CEA and the Ministry for grant of the authorisation. The petitioner under its letter dated 15.9.2010 apprised CEA of the publication of the Public Notices and non-receipt of observations or representations. The petitioner has stated that it approached the Ministry first on 9.11.2010 for grant of the authorisation and further by its letter dated 29.12.2010 informed the Ministry of grant of transmission licence by this Commission, seeking to expedite grant of the authorisation. Thereafter the petitioner sent certain reminders as well. Subsequently in response to the Ministry's letter dated 26.5.2011, directing it to furnish an affidavit regarding non-receipt of objections on the route alignment selected for the proposed transmission lines, it submitted the affidavit dated 22.6.2011. The authorisation was, however, granted on 11.8.2011 and published in the Official Gazette on 12.8.2011. The petitioner has alleged that delay in grant of the authorisation by the Ministry adversely affected the implementation of the Project, since for want of the authorisation it was not able to draw funds it had tied up with the financial institutions and could not undertake construction activity. According to the petitioner, authorization was essential for commencement of construction work to pre-empt any risk of disruption of work and also for the safety of the field personnel. In the absence of the authorisation, the petitioner has averred, it was required to negotiate with the owners/occupiers of land through which the transmission lines are to pass and obtain their consent, which, as stated by the petitioner, was a difficult task.

  7. The next grievance of the petitioner is about nomination of Sponsoring Authority for availing of concessional customs duty under Section 157 of the Customs Act, 1962 read with Heading 9801 of the First Schedule to the Custom Tariff Act, 1975 and Project Imports Regulations, 1986. The petitioner has stated that under the Project Import Regulations, the transmission lines above 66 kV are entitled to registration for import of goods at a concessional rate of Customs Duty of 5% against the normal rate of 7.5%, on certification by the Sponsoring Authority. The petitioner has stated that the State Governments have been declared as the Sponsoring Authority for private sector intra-State transmission projects but there is no specific designated Sponsoring Authority for private sector inter-State transmission projects. Accordingly, the petitioner approached the Ministry on 18.2.2011 seeking designation of a Sponsoring Authority in this behalf for availing of concessional Customs Duty. However, no response was received by the petitioner who has alleged that the petitioner was unable to import equipment and finalize procurement of critical goods and inputs though it had obtained the Financial Closure of the loan finance for the Project on 25.10.2010 and had also awarded EPC contracts for the Project on 27.10.2010. The petitioner has claimed that the Project costing/bid was predicated on the understanding that the concession in Customs Duty would be available for implementation of the Project. The petitioner has stated that it has been prejudiced since it is liable to pay the normal customs duty of 7.5%, enhancing the capital cost by ` 3.2 crore and accordingly affecting the viability and the timely implementation of the Project.

  8. The petitioner has sought to invoke the Force Majeure clause under the TSA on two grounds, firstly the authorisation was not...

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