Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CERC) 225

CENTRAL ELECTRICITY REGULATORY COMMISSION
Jishnu Barua, Chairperson, Ramesh Babu V., Member, Harish Dudani, Member, Ravinder Singh Dhillon, Member
NTPC Green Energy Ltd. – Appellant
Versus
Telangana State Southern Power Distribution Company Ltd. – Respondent
Petition No. 219/MP/2023|Petition no 174/AT/2021

Advocates:
For the Appellants/Petitioners: Adarsh Tripathi, Ajitesh Garg, Omesh Kumar
For the Respondents: D. Abhinav Rao, Abhishek Das

Increases in GST and Basic Custom Duty on solar project inputs post-PUA signing qualify as Change in Law events entitling compensation via annuity payments at normative loan rates, with carrying cost, subject to reconciliation and Supreme Court stay on post-COD relief.

Headnote:(A) Electricity Act, 2003 - Section 79(1)(a) - Power Usage Agreements - Articles 10 & 11 - Change in Law - Increase in GST rate from 5% to 12% vide Notification No. 8/2021-Integrated Tax (Rate) dated 30.09.2021 and increase in Basic Custom Duty on solar inverters from 5% to 20% vide Notification No. 334/02/2020-TRU dated 01.02.2021 held to be Change in Law events resulting in additional expenditure for setting up solar power projects - Entitlement to compensation through pass-through in usage charges to restore economic position - Methodology: Annuity payments at discount rate of 9.12% or 10.65% (as applicable on commissioning date) equivalent to interest on loan, over 15 years, commencing 60 days from order or claim submission, with late payment surcharge. (Paras 13, 19-26, 27-33)

(B) Change in Law - Carrying Cost - Absent specific restitution clause in PUAs, eligible from date of actual payments to authorities till order date at lowest of actual interest rate (Auditor’s Certificate), working capital rate per RE Tariff Regulations or late payment surcharge rate per PUA - Post-COD compensation and carrying cost not enforceable pending Supreme Court orders in related appeals. (Paras 34-41)

(C) Competitive Bidding Projects - Compensation Methodology - Uniform discount rate based on normative interest on loan; no profit allowed; clear one-to-one correlation with invoices and Auditor’s Certificate required for reconciliation. (Paras 27-33)

Facts of the case:
Petition under Section 79(1)(a) seeking compensation for cost increase due to Change in Law events (GST and BCD hikes) affecting 1616 MW solar PV projects under CPSU Scheme Phase-II. Projects faced delays due to Covid-19 and supply issues, with extensions granted by MNRE/SECI. Respondents contested on grounds of delay, lack of consultation and no carrying cost provision.

Findings of Court:
Notifications qualify as Change in Law; compensation via annuity at specified rates for 15 years; carrying cost allowed pre-order with reconciliation; post-COD relief subject to Supreme Court orders.

Issues: (I) Whether notifications qualify as Change in Law per PUAs? (II) Entitlement to compensation? (III) Compensation calculation methodology? (IV) Entitlement to carrying cost?

Ratio Decidendi: Change in Law provisions ensure restitution to pre-event economic position; fiscal changes post-PUA signing directly impacting project costs qualify; annuity methodology uses normative loan rates for fairness in competitive bids; broad regulatory powers support carrying cost absent explicit bar, tempered by judicial restraints.

Result: Petition allowed; parties directed to reconcile and pay compensation per specified methodology; certain directions non-enforceable pending Supreme Court decision.

Table of Content
1. project background and parties involved (Para 1 , 2 , 3)
2. petitioner's change in law claims (Para 4 , 8 , 10)
3. factual timeline and commissioning delays (Para 5 , 16 , 17 , 25)
4. respondents' objections to delay and claims (Para 9 , 11)
5. issues framed and preliminary objections rejected (Para 12 , 13 , 14 , 15 , 18)
6. gst rate increase qualifies as change in law (Para 19 , 20 , 21 , 22)
7. bcd increase on solar inverters is change in law (Para 23 , 24)
8. annuity-based compensation methodology approved (Para 26 , 27 , 28 , 29 , 30 , 31 , 32)
9. carrying cost entitlement despite no restitution clause (Para 34 , 35 , 36 , 37 , 38)
10. findings summary with supreme court caveats (Para 39 , 40 , 41 , 42 , 43)

ORDER

The Petitioner, NTPC Green Energy Limited (NGEL), is a wholly owned subsidiary of NTPC Limited (NTPC). NTPC has implemented 1692 MW of solar capacity under the Central Public Sector Undertaking Scheme. On 05.03.2019 the Ministry of New & Renewable Energy (MNRE) issued Central Public Sector Undertaking (CPSU) Scheme Phase-II for setting up of 12000 MW Grid-Connected Solar photovoltaic Power Projects (SPVP) by the Government Producers with viability Gap Funding support for self-use or use by Government/ Government Entities either directly or through Distribution Companies vide Guideline No. 302/4/2017-Grid Solar dated 05.03.2019 including subsequent amendments and clarification thereof. Solar Energy Corporation of India (SECI) issued the Request for Selection (RfS-1) Document for setting up of 2000 MW grid-connected SPVP in India (Tranche-I) under the CPSU Scheme. On 01.08.2019, SECI issued RfS (RfS-2) for the selection of Solar power Developers to set up 1500 MW Grid (Including Mini and Micro Grid) connected SPVP anywhere in India on “Build Own Operate” (B-O-O) (Tranche -II) under CPSU Scheme. On 20.08.2019, an e- reverse auction was conducted by SECI and NTPC was declared successful under Tranche-I. NTPC was allocated 769 MW out of 2000 MW under Tranche -I. Accordingly, SECI issued a Letter of Award dated 28.09.2019 in favour of NTPC. On 08.11.2019, an e-reverse auction was conducted by SECI and NTPC was declared successful under Tranche-II. NTPC was allocated 923 MW out of 1500 MW under Tranche II. SECI issued a Letter of Award dated 25.11.2019 in favour of NTPC. Consequentially, NTPC entered into several Power Usage Agreements (PUAs) with Respondents for the sale of Solar Photovoltaic Power by NTPC to Telangana State Southern Power Distribution Company Limited. (TSSPDCL) and Telangana State Northern Power Distribution Company Limited (TSNPDCL). As per the PUAs, NTPC had set up 1692 MW Solar PV Power station at various locations for onwards sale of power to TSSPDCL & TSNPDCL. Due to Covid-19 pandemic, the supplies and site progress have been severely affected. Considering the severe pandemic situation, MNRE has also issued OMs dated 13.08.2020 and 29.06.2021, allowing time extension of 5 months and 76 days respectively for RE projects. MNRE, vide its OM dated 02.06.2021, has granted a further extension of 6 months due to the temporary shortage of domestically manufactured solar PV cells. Further, due to supply chain disruption, MNRE vide its letter dated 27.12.2022 has further extended the scheduled commissioning date up to 30.09.2024. Accordingly, SECI has granted a time extension in the Schedule Commissioning Date (SCoD), and the same has been tabulated as under:

The tariff was adopted by the Commission vide order dated 13.12.2021 in Petition no. 174/AT/2021. Subsequently, in order to achieve the monetisation target given to it under the National Monetisation Pipeline, NTPC decided to consolidate its Renewable Energy Portfolio under one company by way of transfer of its operating/ near operating Renewable Energy Units (15 in number) and the appropriate equity stake in its other wholly owned subsidiary, i.e. NGEL. For the purpose of the said transfer, a scheme was framed by NTPC, which was duly approved

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2026 Supreme(Online)(CERC) 225

Increases in GST and Basic Custom Duty on solar project inputs post-PUA signing qualify as Change in Law events entitling compensation via annuity payments at normative loan rates, with carrying cost, subject to reconciliation and Supreme Court stay on post-COD relief.

Cases Referred (2)