1. law, govt and politics

RAJASTHAN ELECTRICITY REGULATORY COMMISSION JAIPUR
Petition No. RERC-493/14
In the matter of petition filed by M/s Adani Power Rajasthan Ltd. for determining
the compensation/tariff adjustment under Section 86 of the Electricity Act, 2003
read with Article 10 of the PPA executed with Discoms.
Coram:
Petitioner
Sh. Vishvanath Hiremath, Chairman
Sh. Vinod Pandya,
Member
Sh. Raghuvendra Singh, Member
:
Respondent :
M/s Adani Power Rajasthan Ltd.
1. M/s Jaipur Vidyut Vitran Nigam Ltd., Jaipur
2. M/s Ajmer Vidyut Vitran Nigam Ltd., Ajmer
3. M/s Jodhpur Vidyut Vitran Nigam Ltd., Jodhpur
Date of hearing :
Presents
06.01.2015, 10.03.2015 & 19.03.2015
:
1.
2.
3.
4.
Order Date
Sh. Buddy Ranganathan, Advocate for Petitioner
Ms. Susan Mathew, Advocate for Discoms
Sh. Malav Deliwala, M/s Adani Power
Sh. S.T. Hussain, Ex.En.(RA), JVVNL
:
29.04.2015
ORDER
1. M/s Adani Power Rajasthan Ltd. a generating company which has signed a
PPA dated 28.01.2010 with the Discoms has filed this petition for determining
the compensation/tariff adjustment as per Clause 10 of the PPA read with
Section 86 of the Electricity Act, 2003.
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2. Notices were issued to Respondents on 07.01.2015 to file their reply on the
petition. Petitioner, in the meanwhile, on 09.03.2015 has filed an additional
affidavit revising some of its claims.
3. The matter was heard on 19.03.2015. Sh. Buddy Ranganathan, Advocate
appeared for Petitioner. Ms. Susan Mathew, Advocate appeared for
Discoms.
4. The Counsel for the Petitioner, during hearing and in written submission has
submitted as follows:
(a) Petitioner is a Generating Company and has set up a thermal power
station at Kawai, Rajasthan with an installed capacity of 1320 MW.
(b) Earlier, Case-1 bidding process was initiated on behalf of Respondents by
Rajasthan Rajya Vidyut Prasaran Nigam Ltd for meeting the base load
power requirement of Rajasthan. The Petitioner participated in the
bidding process and submitted the bid on 06.08.2009 which was the bid
deadline. Petitioner became successful bidder at a levelised tariff of Rs.
3.2483 per kWh (revised to Rs. 3.238 per kWh on 03.12.2009) for supplying
1200 MW of power. On 17.12.2009, Letter of Intent (“LOI”) was issued to the
Petitioner and on 28.01.2010, PPA was executed between Petitioner and
Respondent Discoms. As on date the Petitioner is supplying full contracted
capacity from both Unit 1 & 2.
(c) Indian Governmental Instrumentalities have introduced and/or modified
various taxes, duties and levies subsequent to 30.7.2009 (cut off date 7
days prior to bid submission date). As a result, the Petitioner had to pay
and will be paying in future additional amounts in the form of taxes, duties
and levies which resultantly increase the cost of generation. Therefore,
Petitioner has claimed the impact of the events occurring beyond the bid
deadline that have the effect of altering the economic position of the
petitioner with respect to the bid. Unless adjustment of tariff is made, the
Petitioner’s power plant shall become economically unviable.
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(d) Imposition of these taxes, duties and levies are within the ambit of
“Change in Law” as embodied in Article 10 of the PPA read with the
definition of the expression “Laws”. The said Article 10 of the PPA records
the understanding between the parties to the effect that any change in
law that occurs after seven days prior to the bid deadline and which
results into any additional recurring and non-recurring expenditure by the
Seller (i.e. Petitioner/APRL) or any income to the Seller and affects the cost
and revenue of the Petitioner shall qualify as a “Change in Law” under
Article 10 of the PPA.
(e) In view of Article 10, there have been numerous events after 30.7.2009,
being the date which is 7 days prior to the bid deadline 06.08.2009, that
qualify to be termed as a “Change in Law” events in terms of Article 10 of
the PPA’s.
(f) The events of Change in Law that have occurred after 30.7.2009 and
have adversely impacted the Petitioner’s economic position during the
construction and operation period are as under –
A. Change in Law affecting Capital Cost during Construction period
No.
Change in Law
As on 30.7.2009
Current Rate
A
Change in Service Tax Rate
10.3%
12.36%
B
Levy of Work Contract Tax
4.12%
4.94%
B. Change in Law affecting Revenue and Cost during Operation Period
No.
Change in Law
As on 30.7.2009
Current Rate
C
Clean Energy Cess on Coal
NIL
Rs. 100/- per ton
D
Forest Tax on coal
NIL
@ Rs 7 per tonne
E
Change in coal pricing
mechanism from UHV basis to
GCV basis
UHV Basis
GCV Basis
F
Central Excise Duty for
domestic coal
NIL
6.18% (including
education Cess 2%
and Higher Education
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Cess 1%)
G
Royalty
H
Increase in Surface
Transportation Charges
I
Increase in Sizing Charges
J
K
L
Increase in Busy Season
Surcharge on transportation of
coal through railways during
the busy season i.e. 9 months of
the Financial year
Levy of Development
surcharge on Railway Freight
Levy of Service tax, Education
Cess and Higher Education
Cess on Total Freight on
Transportation of goods by Rail.
Rs. 40/ton for more
than 3 Km and
Rs.70/ton for more
than 10 Km. and not
more than 20 Km.
Between 200mm to
250 mm = Rs.39/ton
Upto 100 mm =
Rs.61/ton
Upto 50 mm = Rs.
70/ton
Royalty computed @
flat rate of 14% of
basic price (Ad
valorem basis)
Rs. 57/ton for more
than 3 Km. and
Rs.116/ton for more
than 10 km. and not
more than 20 Km.
Between 200mm to
250 mm = Rs.51/ton
Upto 100 mm =
Rs.79/ton
Upto 50 mm = Rs.
100/ton
5%
15%
2%
5%
Nil
12% on total freight
with 70% abatement
(effective rate 3.708%)
Rs.55 + 5% of the
Basic Price
M
Introduction of Fuel Adjustment
Component
Nil
The Railway Budget for
2013-14 levied ‘Fuel
Adjustment
Component’ form
01.04.2013.
N
Increase in Minimum Alternate
Tax levied on Book Profits
16.995%
20.9605%
O
Change in Service Tax Rate
10.3%
12.36%
(g) After filing the present petition, various new levies and changes have
been notified by the Central Government in the Union Budget for FY 2015-
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16 and altering the present position of the Petitioner and falling under the
scope of Article 10 of the PPA. The Ministry of Finance has enhanced the
Clean Energy Cess from Rs. 100/ton to Rs. 200/ton which was applicable
from 01.03.2015. Apart from the Clean Energy Cess, Ministry of Finance has
proposed to increase the Service Tax from 12.36% to 14% and levy Swachh
Bharat Cess at the rate of 2%.
(h) If the Discoms seek to dispute any specific item as not being covered by
the change in law clause, they would be bound to explain the nature of
each item and why it would not be covered by the change in law clause.
There is no such submission by the Discoms either in their reply or in the oral
arguments.
(i) Discoms in their reply relied upon the clause 15.18 of the PPA whereas the
said clause pertains to taxes, duties and levies existing as on the effective
date i.e. 30.7.2009. It could not, by definition, apply to taxes, levies, duties
etc introduced/ amended after the effective date. Taxes, duties and
levies etc. introduced/ amended after the effective date are squarely
covered by the “change in law” i.e. clause 10 of the PPA. If these taxes
and levies are to be borne by the seller then entire concept of change in
law would be rendered redundant and nugatory under the PPA.
(j) On the issue of escalation rates on coal, Discoms relied upon the
Schedule 6, Escalation Index of PPA. In this regard, it is submitted that inprinciple the escalation rates on coal are based only on the base rate of
domestic coal and/or basic Railway freight rates. The escalation rates
could not and in fact do not cover changes in taxes, levies, and other
cesses, duties, etc. Comparison of the notification of Freight Rates issued
by the Ministry of Railways dated 20.12.2010 with the Explanatory
Memorandum to the escalation rates notified by the CERC clearly shows
that the escalation rates are based on the base rate notified by the
Government. The stand of the Discoms is also belied by the orders of other
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State Commissions including the MERC, the GERC and also the finding of
the Appellate Tribunal for Electricity in Judgment dated 12th September
2014 in Appeal No.288/2013 Wardha Power Vs MERC.
(k) The other contention raised by the Discoms is that the Petitioner has not
provided the details of the actual payments made by the Petitioner
towards the “change of law” items.
(l) The claim of the Petitioner is for recovery of the “change in law” items on
a normative basis on the presumption, as if the coal were being procured
from the domestic coal linkage which was the fundamental presumption
of the bid. If the Discoms continue to insist on making payment at the PPA
rate which itself is premised on the availability of domestic coal linkage,
such presumption must necessarily be carried forth into all the necessary
corollaries and consequences of such presumption.
(m) The aforesaid principle is based on the well settled legal principle that if
one is bidden to presume a certain state of affairs as real then one must
also accept the natural consequences and corollaries flowing from such
putative state of affairs and not let the imagination boggle when faced
with the consequences of such presumption. Reliance may be made to
the judgment of Lord Asquith in the House of Lords in East End Dwellings Vs
Finsbury Borrough Council [1951] AC 109 at page 132-133 and CWT
Hyderabad Vs Trustees of HEH The Nizam’s Jewellery Trust – [2003] 5 SCC
122, paras 19-21. The aforesaid judgments are in the realm of a fiction
created by a statute and the same principle can be extended to the
conduct of a party which is based on a presumption.
(n) Discoms also argued that actual computation of “Change in Law” has
not been submitted by the Petitioner. In this connection it is submitted that
each of the claims in the petition is supported by a specific per unit
computation of the impact of each of the items of the change in law
claim. The computation provided by the Petitioner along with the copies
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of the various statutory notifications and orders etc. of the Government
and
its
Instrumentalities,
is
the
documentary
proof
of
such
increase/decrease in cost.
(o) The two conditions in the PPA under clause 10 namely that (i) change in
law effecting capital cost during the construction period would be
payable only with effect from the date on which the total increase
exceeds Rs. 16.50 Cr and (ii) the increase in expenses for the operating
period should be at least 1% of the value of the letter of credit for the
relevant contract year have both been satisfied. In
any
case
the
aforesaid two conditions are only a trigger for payment of the impact of
“change in law” and are not conditions quantifying the eligibility of the
claim for change in law.
(p) Petitioner is already undergoing severe financial constraints on account of
not having a domestic coal linkage and is forced to rely almost
completely on expensive imported coal. Despite this the Petitioner has
continued the supply of power well above and beyond the normative
availability fixed under the PPA. The actual additional cost incurred by
the Petitioner is much more than the Change in Law compensation
claimed by the Petitioner through this petition. Therefore if Commission is
graciously pleased to grant the present relief under Change in Law, the
financial stress presently being undergone by the Petitioner would be
alleviated to some extent.
(q) There is no question of the Petitioner charging twice over for the present
claim. The issue of compensatory tariff is pending before this Commission
in Petition No. 392/2013. If this Commission were graciously pleased to
consider the compensatory tariff as the whole differential between the
current actual landed cost of coal and the base landed cost of coal (as if
the Petitioner had a domestic coal linkage) at the time of Bid cutoff date
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without any Change in Law events till date then obviously the Petitioner
could not bill the aforesaid claim in addition to the compensatory tariff.
(r) Further if this Hon'ble Commission were graciously pleased to grant a
compensatory tariff as the net difference between the current actual
landed cost of coal minus the “Base landed cost of coal at Bid cutoff
date plus change in law items”(i.e. Base landed cost of coal at bid cutoff
date including the subsequent Change in Law impact till date), then
obviously both would be concurrent. From the formula suggested by the
Committee
constituted
by
the
Commission
for
determination
of
Compensatory Tariff, it is clear that Petitioner is not getting any
compensation on account of Change in Law in the Compensatory Tariff
being proposed by the Committee. If this Commission were pleased to
reject the claim for compensatory tariff, in any event, the present claim
would still continue. Therefore, there is no question of any overlap
between the two claims.
(s) Hon’ble Commission is empowered to adjudicate and decide upon the
issues contended herein to be events of Change in Law. Therefore, the
Petitioner has filed the present petition before this Commission and
humbly prayed that this Hon’ble Commission may be pleased to:
(i) Direct the Respondents to make the payment of the tariff adjustment
at the rates arrived and as per the methodology indicated in the
petition for the aforementioned Change in Law events from the date
of commencement of power supply under the PPA.
(ii) Direct the Respondents to make payment at 95% of the rates
indicated in the petition for the respective change in law items as an
interim relief, during the pendency of this petition, subject to
adjustment based on final approval.
(iii) Direct the Respondents to reimburse the carrying cost (interest) at SBI
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PLR plus 2% from the date of applicability of the respective Change in
Law events claimed in the petition.
(iv) Pass such further order(s) as this Hon’ble Commission may deem just
and proper in the fact and circumstances of the case and in the
interest of justice.
5. The Counsel for the Respondent during hearing and in written submission has
contended that:
(a) The present petition is hit by the Doctrine of Res Judicata. The Petitioner
has already filed a petition bearing No. RERC/392/2013 for compensatory
tariff claiming 100% dependency on imported coal for the project. While
the said petition is still pending before this Commission, the Petitioner has
filed the present petition claiming compensatory tariff on the basis of
Change in Law event occurred in Indian law on the basis of assumption of
100% dependency on domestic coal supply which cannot be permissible
in the eye of law. The Petitioner is not entitled to claim double
compensation and the present claim during the pendency of Petition
No.392/2013 is nothing but a blatant abuse to the process of law and
therefore is liable to be dismissed with heavy costs as to the Respondents.
(b) The entire petition has been filed on the basis of imaginary figures treating
the source of coal as “domestic”(ie 100%) when it is admitted position that
the Petitioner are partially depending upon imported coal. It is stated that
no petition can be allowed on the basis of assumptions and presumptions.
All the figures mentioned in the petition are imaginary figures and
therefore the petition is not maintainable.
(c) Petitioner is not entitled for compensating all additional recurring and
non-recurring costs through tariff, but entitled for those squarely covered
under the terms of the PPA dated 28.01.2010. However, PPA provides for
compensation through tariff for Change in Law, but all changes,
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modification, etc. related to various statutory taxes, duties, charges, etc.
subsequent to the cutoff date i.e. 30.07.2009 do not fall within the ambit of
“change in law” clause as envisaged under Article 10 of the PPA.
Respondents are not required to reimburse the Petitioner all the additional
cost which has resulted due to change, modification and increase in
taxes, etc.
(d) As per the PPA, seller shall bear and pay all the statutory taxes, duties,
levies and cess assessed/levied on the seller in relation to the execution of
the agreement and for supplying power as per the terms of the
agreement. The relevant clauses of the PPA are reproduced as under:
“Clause 15.18.1:
The Seller shall bear and promptly pay all statutory taxes, duties, levies and
cess, assessed/levied on the Seller, contractors or their employees, that are
required to be paid by the Seller as per the Law in relation to the execution of
the Agreement and for supplying power as per the terms of this agreement.
Clause 15.18.2:
Procurers shall be indemnified and held harmless by the Seller against any
claims that may be made against Procurers in relation to the matters set out in
Article 15.18.1.”
(e) Petitioner has failed to produce any documentary evidence showing the
actual impact of the increase in the rates on the Petitioner or the actual
payments made by the Petitioner under the different captions.
The
Petitioner also failed to prove that whether they are entitled for the
different heads as are claimed by them. Only annexing the notification
showing the increase in rates on various taxes, cess, charges etc would
not be enough to claim compensation or increase in the tariff. The
relevant Clause 10.3.3 of the PPA is reproduced for reference:
“Clause 10.3.3: For any claims made under Article 10.3.1 and 10.3.2 above,
the Seller shall provide to the Procurers and the Appropriate Commission
documentary proof of such increase/decrease in cost of the Power Station
or revenue/expense for establishing the impact of such Change in Law.”
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(f) Petitioner has claimed escalation in the tariff due to increase in rates of
Service Tax and Work Contract Tax. In this regard Change in Law clause
reproduce as under:
“ it means the occurrence of any of the following events after the date, which is
seven days prior to the Bid Deadline resulting into any additional recurring/ nonrecurring expenditure by the Seller or any income of the Seller:
·
Any enactment, coming into effect, adoption, promulgation,
amendment, modification or repeal (without re-enactment or
consolidation) in India, of any Law, including rules and regulations framed
pursuant to such Law;
·
A change in the interpretation or application of any Law by any Indian
Governmental Instrumentality having the legal power to interpret or apply
such law, or any Competent Court of Law;
·
The imposition of a requirement for obtaining any Consents, Clearances
and Permits which was not required earlier;
·
A change in the terms and conditions prescribed for obtaining any
Consents, Clearances and Permits or the inclusion of any new terms or
conditions for obtaining such Consents, Clearances and Permits; except
due to any default of the Seller;
·
Any change in tax or introduction of any tax made applicable for supply
of power by the Seller as per the terms of this Agreement.”
In view of above, Petitioner is not entitled to invoke the Change in Law
clause and therefore not entitled for any relief under this caption as firstly
increase in the rate of tax is not covered under Article 10 of the PPA,
secondly as per Article 10 of the PPA, the change in tax or introduction of
tax should be related to supply of power.
(g) In similar matters the Hon’ble Gujarat Electricity Regulatory Commission
and Maharashtra Electricity Regulatory Commission had held that Clean
Energy Cess imposed after the cut-off date would fall within the Changein-law clause of the PPA, it is only on the basis of the admission by the
State Government regarding the eligibility. It is stated that the Petitioner is
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entitled to seek relief only with respect to the change in law squarely
covered under Article 10 of the PPA and not beyond that.
(h) The Petitioner had failed to submit any documentary proof of actual
payments as claimed in the notice dated 16.04.2014 either before the
Respondents or before this Hon’ble Commission. The entire claim as is
evident from the petition itself is based on assumptions and presumptions
and all the figures mentioned therein are imaginary. Petitioner miserably
failed to prove how the taxes like Forest Tax, Increase in sizing charges,
etc. are covered under Article 10 of the PPA. As per Clause 1.2.11, a law
shall be construed as a reference to such law including its amendments or
re-enactments from time to time, which clearly means that any increase
in rate of taxes by way of a notification is not covered under the definition
“Change in Law” as stipulated in the PPA dated 28.01.2010.
(i) Every enactment coming into operation or change in interpretation
cannot become a Change in Law for the purpose of the PPA unless it has
a financial impact on the agreement between the parties to the extent as
mentioned in the PPA. Further as per Article 6.1.1, the value of Escalation
Index (for Quoted Escalable Energy Charges, Quoted Escalable Inland
Transportation Charges, Quoted Escalable Overseas Transportation
Charges and Quoted Escalable Fuel Handling Charges) shall be
computed by applying the per annum inflation rate specified by CERC for
payment of Escalable (or indexed) capacity charge and Escalable
Energy Charge, as per the provisions of the PPA.
(j) Other relevant clauses with related to escalation are as follows:
“Clause 6.1.5: It is clarified that the Seller shall be entitled for payment of
“Payable Escalable Energy Charges” under Schedule 4 of this PPA only on
the basis of CERC notified Annual Escalation Rate for Domestic Coal
(Linkage Based) from time to time irrespective of type of coal used.
Clause 6.1.6: It is further clarified that the Seller shall be entitled for payment
of “Payable Escalable Inland Transportation Charges” under Schedule.4 of
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this PPA on the basis of CERC notified “Annual Escalation Rate for Inland
Transportation Charges for coal upto 1000 kms distance from time to time.
(k) CERC in the explanation for the notification on escalation factors and
other parameters, dated 1.10.2014 already notified the escalation rates as
follows and the Petitioner is not entitled to anything beyond that which is
envisaged under the PPA:
1.
Imported coal
:-15.09%
2.
Transportation of Imported Coal
: -5.13%
3.
Inland Handling of Imported Coal
: 1.60%
4.
Inland Transportation charges for coal
: 2.28%
(l) As per the PPA the relief for Change in Law can be claimed for
Construction Period and Operation Period. In order to invoke the Change
in Law during construction period the requirements are:
(a) Change in Law must fall within the ambit of Article 10.1.1
(b) Due to the change in law, there was an increase of at least Rs.16.50
crores in the Capital Cost.
(c) For each Rs.16.50 crores the Non Escalable Capacity Charges shall be
an amount equal to 0.267% of the Non Escalable Capacity Charges.
(m) However no documentary evidence or statements were produced by the
Petitioner in support of their contention, in the absence of which it is not
possible to consider whether the Petitioner is entitled for any reliefs as
claimed by them in the petition.
(n) Similarly for claiming relief for the operation period, the requirements are:
(a) The case should be covered under Article 10 of PPA.
(b) The increased revenue/ additional revenue incurred should be in
excess of an amount equivalent to 1% of the value of the Letter of
Credit in aggregate for the relevant contract year.
(o) Further Article 10.3.3 requires the Seller to provide documentary evidence
of such increase in the absence of which, even if it is held that the claim is
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covered under Article 10, the quantum and extent of “increment in tariff”
cannot be decided.
(p) Increase in works contract tax, increase in rates of royalty, increase in
surface transportation charges, increase in busy season surcharge by
Indian Railways, increase in Development Surcharge on Railway Freight
and levy of Fuel Adjustment Component are neither covered within the
definition of “Law” nor “change in Law” clause under the PPA and
therefore the Petitioner is not entitled to claim any benefit under the said
clause.
(q) Petitioner is not entitled for any relief as prayed in the petition. Clause
2.4.1.1 B (xi) of the RFP provides that the Bidder shall take into account all
costs including capital and operating costs, statutory taxes, levies, duties
while quoting such Tariff. It shall also include any applicable transmission
costs and transmission losses from the generation source up to the
interconnection point. Availability of the inputs necessary for supply of
power shall be ensured by the Seller and all costs involved in procuring
the inputs (including statutory taxes, duties, levies thereof) at the plant
location must be reflected in the quoted tariff. It is stated that the rates
have been quoted by the Petitioner after taking into consideration all the
applicable taxes, etc. and once the rates have been approved by this
Hon’ble Commission therefore, the Petitioner is not entitled to claim any
compensation towards the increase in the rates of such taxes, etc. which
is obviously expected in the normal course of business.
(r) Further, Petitioner has neither produced adequate documentary proof in
support of its contentions nor satisfied the Respondents till date as to how
the Change in Law clause is applicable to the case of the Petitioner. It is
stated that except for the Petitioner no other Generator companies have
invoked the provisions of Change in Law clause and if the relief as prayed
is granted to the Petitioner, it will be used as a precedent by other
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Generator companies and the same would result in huge financial impact
on the Respondents which is against public interest as ultimately the
consumers of the Respondents have to bear the additional financial
impact.
Taking shelter of the change in law clause, the Petitioner is
seeking 100% relief for all the additional expenses shelled out after the cut
off date irrespective of whether it is covered under the PPA or not.
(s) Petition is not clear about the total financial impact in terms of money but
a vague statement has been made that the Change in Law events had
resulted into increase in the Petitioner’s cost by more than 1% of the Letter
of Credit. It is apparent that the calculations are not based on actual but
on assumptions and presumptions which is not permissible.
(t) Prayers and the reliefs sought by the Petitioner are beyond the scope of
the PPA and once a valid agreement is entered into between the parties,
the parties cannot go beyond that. The Petitioner has to strictly comply
with the terms and conditions of the PPA and no relief beyond the scope
of the PPA can be granted to the Petitioner. The Petitioner has wrongly
interpreted the provisions of the PPA and has approached this Hon’ble
Commission with malafide intention. The Petitioner is not entitled to claim
anything beyond what is provided in the PPA. The definition of Change in
Law and Law provided in the PPA is sufficient enough to dismiss the claim
as filed by the Petitioner.
Commission’s Views & Decisions
6. We have examined the submissions made by both the parties.
7. Petitioner has sought to allow payment of tariff adjustments for the ‘change
in law events’ from the commencement of supply as per the terms of the
PPA. Per contra Respondents have opposed the claims on the ground that
the entire petition has been filed on the basis of imaginary figures treating
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the source of coal as “domestic” and no petition can be allowed on the
basis of assumptions and presumptions.
8. We observe from the petition that the Petitioner has based its claim on the
presumption that coal is being procured from domestic coal linkage though
it is using imported coal on the ground of non availability of Domestic coal
and has already filed a petition seeking the difference in price and this
Commission in petition number 392/2013 has in principle accepted the
compensation claimed by the Petitioner. The Petitioner has accepted during
the oral hearing and the same is reiterated in the written submissions which
reads as under;
“(i) The claim of the Petitioner is not limited to reimbursement of actual payment.
(ii) The claim of the Petitioner is for recovery of the change in law items on a
normative basis on the presumption, as if the coal were being procured from the
domestic coal linkage which was the fundamental presumption of the bid.”
9. Therefore, the question which arises is whether the Petitioner is entitled to
claim change in law compensation on the basis of notional calculation of
the impact of change in law on domestic coal on the ground that the bid
was based on domestic coal despite actual use of imported coal.
10. For deciding the question it is necessary to look into Clause (10) of PPA which
deals with impact of change in law.
“ARTICLE 10: CHANGE IN LAW
10.1 Definitions
In this Article 10, the following terms shall have the following meanings:
10.1.1 "Change in Law" means the occurrence of any of the following events after
the date, which is seven (7) days prior to the Bid Deadline resulting into any
additional recurring/ non-recurring expenditure by the Seller or any income
to the Seller:
·
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the
enactment,
coming
into
effect,
adoption,
promulgation,
RERC/493/14
·
·
·
·
amendment, modification or repeal (without re-enactment or
consolidation) in India, of any Law, including rules and regulations
framed pursuant to such Law;
a change in the interpretation or application of any Law by any Indian
Governmental Instrumentality having the legal power to interpret or
apply such Law, or any Competent Court of Law;
the imposition of a requirement for obtaining any Consents, Clearances
and Permits which was not required earlier;
a change in the terms and conditions prescribed for obtaining any
Consents, Clearances and Permits or the inclusion of any new terms or
conditions for obtaining such Consents, Clearances and Permits; except
due to any default of the Seller;
any change in tax or introduction of any tax made applicable for supply
of power by the Seller as per the terms of this Agreement.
but shall not include (i) any change in any withholding tax on income or
dividends distributed to the shareholders of the Seller, or (ii) change in respect
of UI Charges or frequency intervals by an Appropriate Commission or (iii) any
change on account of regulatory measures by the Appropriate Commission
including calculation of Availability.
10.2 Application and Principles for computing impact of Change in Law
10.2.1 While determining the consequence of Change in Law under this Article 10,
the Parties shall have due regard to the principle that the purpose of
compensating the Party affected by such Change in Law, is to restore through
monthly Tariff Payment, to the extent contemplated in this Article 10, the
affected Party to the same economic position as if such Change in Law has
not occurred. (emphasis added).
10.3 Relief for Change in Law
10.3.1 During Construction Period
As a result of any Change in Law, the impact of increase/decrease of Capital
Cost of the Power Station in the Tariff shall be governed by the formula given
below:
For every cumulative increase/ decrease of each Rupees Sixteen crore Fifty
Lakh (Rs.16.50 crore) in the Capital Cost during the Construction Period, the
increase/ decrease in Non Escalable Capacity Charges shall be an amount
equal to zero point two six seven (0.267%) of the Non Escalable Capacity
Charges. In case of Dispute, Article 14 shall apply.
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RERC/493/14
It is clarified that the above mentioned compensation shall be payable to
either Party, only with effect from the date on which the total increase/
decrease exceeds amount of Rupees Sixteen crore Fifty Lakh (Rs.16.50 crore).
10.3.2 During Operating Period
The compensation for any decrease in revenue or increase in expenses to the
Seller shall be payable only if the decrease in revenue or increase in expenses
of the Seller is in excess of an amount equivalent to 1 % of the value of the
Letter of Credit in aggregate for the relevant Contract Year.
10.3.3 For any claims made under Articles 10.3.1 and 10.3.2 above, the Seller shall
provide to the Procurers and the Appropriate Commission documentary
proof of such increase/ decrease in cost of the Power Station or revenue/
expense for establishing the impact of such Change in Law.
10.3.4 The decision of the Appropriate Commission, with regards to the
determination of the compensation mentioned above in Articles 10.3.1 and
10.3.2, and the date from which such compensation shall become effective,
shall be final and binding on both the Parties subject to right of appeal
provided under applicable Law.
10.4 Notification of Change in Law
10.4.1 If the Seller is affected by a Change in Law in accordance with Article 10.1
and the Seller wishes to claim relief for such a Change in Law under this
Article 10, it shall give notice to the Procurers 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.
10.4.2 Notwithstanding Article 10.4.1, the Seller shall be obliged to serve a notice to
the Procurers under this Article 10.4.2, even 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 Procurers
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.
10.4.3 Any notice served pursuant to this Article 10.4.2 shall provide, amongst other
things, precise details of:
(a)
(b)
the Change in Law; and
the effects on the Seller.
10.5 Tariff Adjustment Payment on account of Change in Law
10.5.1 Subject to Article 10.2, the adjustment in monthly Tariff Payment shall be
effective from:
(i) the date of adoption, promulgation, amendment, re-enactment or repeal of
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RERC/493/14
the Law or Change in Law; or
(ii) the date of order/ judgment of the Competent Court or tribunal or Indian
Governmental Instrumentality, if the Change in Law is on account of a change in
interpretation of Law.
10.5.2 The payment for Change in Law shall be through Supplementary Bill as
mentioned in Article 8.8. However, in case of any change in Tariff by reason of
Change in Law, as determined in accordance with this Agreement, the
Monthly Invoice to be raised by the Seller after such change in Tariff shall
appropriately reflect the changed Tariff.”
11. Reading of the above terms makes it clear that to claim compensation
Petitioner has to establish the actual impact of change in law along with
precise details. In other words it cannot be claimed on a notional basis. This is
clear from the language of Clause 10.2.1. According to us, what is
contemplated under Clause 10 of the PPA is the compensation to the
affected party. Therefore unless Petitioner shows that it has been actually
affected by the change in law it cannot make a claim for compensating it.
12. In view of above, we are not examining the item wise justification of the
claims on the ground of change in law at this stage.
13. However, Petitioner is at liberty to submit to the Respondents precise details
of its claims along with supporting documents as per Clause 10.4.3 within (4)
weeks from today based on actual impact of change in law and
Respondents are directed to examine them thereafter in another (4) weeks
and grant them relief as per the terms of the PPA with the approval of this
Commission or communicate their views.
14. This petition stands disposed of in the above terms.
(Raghuvendra Singh)
Member(T)
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(Vinod Pandya)
Member(F)
(Vishvanath Hiremath)
Chairman
RERC/493/14