RAJASTHAN ELECTRICITY REGULATORY s power plant shall become economically unviable. (d) The PPA has...

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RAJASTHAN ELECTRICITY REGULATORY COMMISSION Petition No. RERC-577/15

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 (Change in Law)of the PPA executed with Discoms. Coram:

Sh. Vishvanath Hiremath, Chairman Sh. Vinod Pandya, Member Sh. Raghuvendra Singh, Member

Petitioner : M/s Adani Power Rajasthan Ltd.

Respondents : 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 hearings : 29.10.2015, 26.11.2015, 17.12.2015 & 07.01.2016

Presents :

1. Sh. S. Venkatesh, Advocate for Petitioner 2. Sh. P.N. Bhandari, Advocate for Petitioner 3. Ms. Susan Mathew, Advocate for Discoms 4. Sh. S.T. Hussain, Ex.En.(RA), JVVNL

Order Date : 15.03.2016

ORDER

1. M/s Adani Power Rajasthan Ltd. (APRL), a generating company which has

signed a PPA dated 28.01.2010 with the Discoms, has filed this petition on

19.10.2015 for determining the compensation/tariff adjustment for change in

law events as per Clause 10 of the PPA read with Section 86 of the Electricity

Act, 2003.

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2. Preliminary submissions were heard on 29.10.2015. Notices were issued to

Respondents on 30.10.2015 to file their reply on the petition.

3. Petitioner, in the meanwhile, on 30.10.2015 filed an Interlocutory Application

seeking additional relief due to occurrence of additional Change in Law

events which are not included in the main petition. Respondents have filed

reply to the petition and Interlocutory Application on 26.11.2015.

Subsequently, Petitioner filed rejoinder to reply on 16.12.2015.

4. As the claims made in Interlocutory Application also relate to change in law,

Commission deems it appropriate to consider the claims along with other

claims made in the petition.

5. The matter was finally heard on 07.01.2016. Sh. S. Venkatesh, Advocate

appeared for Petitioner and addressed arguments and Ms. Susan Mathew,

Advocate appeared for Discoms and made her arguments. Petitioner and

Respondents also filed their written submissions on 19.01.2016.

6. It is submitted on behalf of the Petitioner 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 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 Units 1 & 2.

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(c) Indian Governmental Instrumentalities have introduced and/or modified

various taxes, duties and levies subsequent to 30.7.2009 (cutoff 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.

(d) The PPA has defined the ‘Indian Government Instrumentality’ and it has to

be given a wide interpretation as it covers Government of India,

Government of Rajasthan and any Ministry, Department, Board, Authority,

Agency, Corporation, Commission under the direct or indirect control of

Government of India or Government of Rajasthan. It is also pertinent to

mention herein that the definition of Indian Government Instrumentality

also includes instrumentalities of other States as in the definition clause, the

word “State” has been qualified by “(s)” thereby meaning that even

instrumentalities of other States would fall within this definition.

(e) 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.

(f) 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

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qualify to be termed as a “Change in Law” events in terms of Article 10 of

the PPA.

(g) Taxes, duties and levies, etc., introduced/ amended after the cut-off date

are squarely covered by the “change in law”, i.e., clause 10 of the PPA. It

is undisputable that all the claims of the Petitioner are by virtue of

notifications and/or orders having the force of law issued after the cut-off

date, i.e., 30.7.2009. If taxes and levies introduced and/or amended after

the cut-off date are to be borne by the Seller, the entire concept of

change in law would be rendered redundant and nugatory under the

PPA.

(h) The Petitioner, vide notices issued from time to time informed the Change

in Law events to the Respondents and sought adjustment in tariff. The

additional cost is required to be reimbursed to the Petitioner as “Change

in Law” by way of adjustment in tariff. As the said notices were not

considered by the Respondents, the Petitioner filed petition being No.

RERC -493/14 before this Commission U/s 86 of the Electricity Act, 2003

read with Article 10 of the PPA for determining the compensation / tariff

adjustment towards Change in Law events.

(i) The said petition 493/14 was disposed of by this Commission vide order

dated 29.04.2015 with the following observation:

“11. Reading of the above terms makes in 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 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, the Petitioner is at liberty to submit to the Respondents precise details of its claims along with the supporting documents as per clause 10.4.3 within (4) weeks from today based on actual

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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”

(j) In view of the above, Petitioner submitted its claim to the Respondents in

respect of the Change in Law based on actual impact along with the

supporting documents in terms of clause 10.4.3 of the PPA for the period

up to March,15.

(k) The Respondents, on 07.10.2015, informed that they have submitted an

application for approval of the following two items as Change in Law. The

Respondents have denied all other claims of the Petitioner on implausible

and unsubstantiated grounds. The Petitioner is therefore filing the above

captioned Petition before this Commission in order to adjudicate upon the

issues.

(l) The consolidated impact of Change in Law based on actuals for the

period up to Jun-15 is indicated in the table below:

(in Rs.)

Sr. No. Change in Law items FY 13-14 FY 14-15 FY15-16

(Q1) Cumulative

Impact

1 Clean Energy Cess on Coal 11,00,74,383 37,31,26,630 21,81,81,970 70,13,82,983

2 Forest Tax on coal 1,12,125 56,030 - 1,68,155

3 Change in coal pricing mechanism from UHV basis to GCV basis

1,28,80,858 5,30,37,612 71,22,872 7,30,41,343

4 Central Excise Duty for domestic coal 3,03,39,859 6,35,20,691 82,99,830 10,21,60,380

5 Royalty 2,73,55,977 3,71,88,486 51,54,066 6,96,98,529

6 Increase in Surface Transportation Charges 9,339 - - 9,339

7 Increase in Sizing Charges 17,90,695 1,51,53,393 21,10,334 1,90,54,422

8

Increase in Busy Season Surcharge on transportation of coal through railways during the busy season, i.e., 9 months of the Financial

18,26,63,759 34,98,69,378 12,51,70,408 65,77,03,544

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Sr. No. Change in Law items FY 13-14 FY 14-15 FY15-16

(Q1) Cumulative

Impact year

9 Levy of Development surcharge on Railway Freight

8,23,55,261 16,96,74,038 5,12,06,342 30,32,35,641

10

Levy of Service tax, Education Cess and Higher Education Cess on Total Freight on Transportation of goods by Rail

10,22,27,249 20,91,00,835 6,25,93,471 37,39,21,555

11 Introduction of Fuel Adjustment Component

14,14,30,061 53,75,06,349 22,33,19,327 90,22,55,736

12 Increase in Minimum Alternate Tax - - - -

13 Change in Service Tax Rate – Operation Period - - - -

14 Port Congestion Surcharge - 12,14,15,311 11,18,90,305 23,33,05,616

15 CG Paryavaran Upkar - - - - 16 CG Vikas Upkar - - - -

17 Change in Class for coal and coke - - (4,30,92,021) (4,30,92,021)

18 Restriction on Ash Content in coal to 34% - - - -

19 TOTAL 69,12,39,567 1,92,96,48,751 77,19,56,904 3,39,28,45,222

(m) PPA entered into between the Petitioner and the Respondents provides

for an exhaustive code qua the concept of “Change in Law”. The

fundamental philosophy behind the said code is to ensure that additional

recurring/non-recurring expenditure by the Seller due to the “Change in

Law” event is compensated through monthly Tariff Payment, to the extent

to restore the same economic position of the affected party as if such

change in law has not occurred. The concept of Change in Law has been

introduced in the Agreement/ PPA to ensure that the parameters/

contours based on which the Petitioner had bid for supplying power do

not change in times to come and that no detriment to either the

Petitioner or the Respondent is caused due to such change in law events.

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(n) It is the contention of the Respondents that according to Article 6.1.1, the

value of Escalation Index 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. In this regard it is

submitted that in principle the Escalation Rates on coal are based only on

the base rate of domestic coal and/or transportation. The Escalation

rates could not and in fact do not cover changes in taxes, levies, and

other cesses, duties, etc.

(o) Petitioner has claimed the Change in Law in terms of the provision of the

PPA and the claim of the Petitioner is valid. Further, the Petitioner submits

that the change in rate of taxes and other Change in Law events claimed

by the Petitioner are additional recurring/non-recurring expenditure after

the cut-off date and is affecting the revenue/cost of the Petitioner in

supplying electricity to the Respondents and needs to be compensated

to bring it back to the same economic position as was existing on the cut

–off date. It is not feasible for any bidder to contemplate the change in

rate of taxes at the time of bidding and that is the reason Article 10 has

been included in the PPA, so that the additional burden of change in

rates of taxes can be compensated. Again, if the contention of the

Respondent is accepted, the entire provision of Change in Law under the

PPA would be rendered otiose.

(p) The reference to the RFP by the Respondents has no relevance in the

present case as the Petitioner is only seeking invocation of “Change in

Law” on events in conformity with Article 10. It is further submitted that the

stand of the Respondents is also belied by the orders of other State

Commissions including the MERC, the GERC, the CERC and also the

finding of the Appellate Tribunal for Electricity in Judgment dated

12.09.2014 in Appeal No.288/2013 Wardha Power Vs MERC. A perusal of

the aforesaid Orders/Judgments makes it abundantly clear that almost all

the items of claims as claimed by the Petitioner in the Petition have been

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accepted by the other Commissions and / or the Hon’ble APTEL to

constitute “change in law” under in pari materia clauses of the PPA in

those cases.

(q) In view of the above stated facts and submissions, Petitioner prayed to –

(i) Approve the Change in Law events as claimed in the petition

(ii) Approve the methodology adopted by the Petitioner for claiming the

impact of Change in Law events

(iii) Direct the Respondents to pay the Change in Law compensation for

the period upto June 2015 for the Change in Law events approved

(iv) Direct the Respondents to pay 95% of the Change in Law

compensation indicated in the petition for the period upto June 2015

as an interim arrangement subject to adjustment based on final

approval.

(v) Direct the Respondents to reimburse the carrying cost (interest) at SBI

PLR plus 2% from the date of applicability of the respective Change in

Law events claimed in the petition.

(vi) Pass such further order(s) as this Commission may deem just and

proper in the fact and circumstances of the case and in the interest of

justice.

7. Per contra, the Counsel for the Respondents has submitted that:

(i) Petitioner is not entitled to be compensated through tariff for all

additional recurring and non-recurring costs but only 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, modification, etc. related to various statutory taxes, duties,

charges, 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.

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(ii) After passing the Commission’s order dated 29.04.2015 in petition

RERC/493/2014, Respondents appointed an internal committee to

scrutinise and examine the issue and the said committee after much

deliberations had recommended to grant relief to the Petitioner for

the cost incurred for payment of (a) Clean Energy Cess and (b)

Central Excise Duty Impact solely for the reason that the same has

been granted in other States and approved by other Regulatory

Commissions.

(iii) All the financial impact on the Petitioner due to increased taxes, duties

and levies are not covered under the PPA. It is stated that as per the

terms of the PPA, the Seller shall bear and pay all the statutory taxes,

duties, levies and cess assessed/levied on the Seller for execution of

the agreement and supplying power as per the terms of the

agreement. The relevant clauses of the PPA in this regard read as

follows:

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.

(iv) Petitioner has claimed change in law under different heads affecting

capital cost during construction period and recurring cost during

operation period. All these increases in taxes, cess, charges, etc. do

not fall within the four corners of “Change in Law” clause as envisaged

under Article 10 of the PPA. Under the head affecting Capital cost

during construction period, 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 is reproduced as under:

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“ 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/ non-recurring 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 said Article, the change in tax or introduction of

tax should be related to supply of power.

(v) 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

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by CERC for payment of Escalable (or indexed) capacity charge and

Escalable Energy Charge, as per the provisions of the PPA.

(vi) CERC in its notification dated 7.04.2015 for the period 1.04.2015 to

30.09.2015 has already notified the escalation rates, therefore,

Petitioner is not entitled to anything beyond that envisaged under the

PPA. Escalation rates notified by CERC are as under:

1. Imported coal :-20.53%

2. Transportation of Imported Coal : -57.77%

3. Inland Handling of Imported Coal : 6.08%

4. Inland Transportation charges for coal : 12.48%

5. Domestic coal : 0.00%

(vii) All increase/modification in the statutory taxes, duties and levies

imposed by the Indian Governmental Instrumentalities which have

affected the cost and revenue of the Petitioner would not fall within

the ambit of the definition “Change in Law”.

(viii) 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.

(ix) 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 Commission, 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. Except for the Petitioner, no other Generator companies

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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 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.

(x) Petitioner is not entitled for any provisional compensation or interim

reliefs as the Petitioner has miserably failed to establish its case in the

petition. The balance of convenience is also not in favour of the

Petitioner. 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 Commission with malafide intention. The definition of

Change in Law and Law provided in the PPA is sufficient enough to

dismiss the claim as filed by the Petitioner.

(xi) 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 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. The 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.

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(xii) Respondents have already taken a decision to grant relief to the

Petitioner under two heads and it is not entitled for any reliefs other

than what is already agreed.

(xiii) In view of the above facts and legal position, it is in the interest of

justice as well as public interest that the petition filed by the Petitioner

may be dismissed with costs as to the Respondents.

Commission’s Views & Decisions

8. Commission has heard Ld. Counsels appearing for both the parties who

made elaborate submissions both on Law and facts. We have also

considered the pleadings made by the parties and also documents

submitted in support of claims and counter claims besides the judgements

and orders cited.

9. At the outset we make it clear that we are not examining the claims relating

to clean energy cess & central excise duty in this order as these have been

settled in accordance with the terms of PPA. Further we are also not dealing

with the claims which have actually not been incurred but added in the list

on hypothetical basis.

10. There is no dispute between the parties that their relationship as supplier and

procurer is entirely governed by terms of PPA dt. 28.01.2010. There is also no

dispute that Petitioner is supplying electricity to procurers pursuant to terms

of PPA.

11. The dispute that has arisen between the parties is on account of the claim

made by the Petitioner for compensation under change in law which is

provided in article 10 of the PPA. Therefore, it is necessary to look in to the

wording of Article 10 of PPA before proceeding further.

“ARTICLE 10: CHANGE IN LAW 10.1 Definitions

In this Article 10, the following terms shall have the following meanings:

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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:

• the 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.

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:

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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.

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:

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(a) the Change in Law; and (b) 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 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.”

12. Further, Commission has also kept in view the judgment dt. 12.09.2014 of

Hon’ble APTEL and also orders of CERC dt. 30.03.2015 & 03.02.2016, MERC dt.

20.04.2015 and GERC dt.21.10.2011. In judgment dt. 12.09.2014 in Appeal No.

288/2013, M/s Wardha Power Vs MERC, the Hon’ble APTEL has held that the

Appellant is entitled to claim made based on change in law, if seller incurs

any additional recurring or non-recurring expenditure as a consequence of

change in law, and the same shall be allowed to it is as contemplated in

PPA.

13. CERC in petition no. 06/MP/2013 in case of Sasan Power Vs MP Power

Management Company Ltd. has held that if seller has to bear any additional

expenditure on account of change in law events as defined in PPA it shall

be entitled to be compensated to the extent of additional expenditure

incurred or to be incurred. It is noted that in the said petition the

Respondents herein, namely, Rajasthan Discoms were also parties.

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14. Further, in a recent order dated 03.02.2016, CERC in the case of GMR-

Kamalanga Energy Ltd. Vs Dakshin Haryana BijliVitran Nigam Ltd. & Ors has

reiterated the above principles. Similarly, GERC & MERC have allowed

impact of change in law to Generating Companies, as prescribed in the

PPAs.

15. Commission has examined the claims made by the Petitioner with the

touchstone of Article 10 of PPA and the orders referred to above. As

discussed Commission is considering the following claims of the Petitioner

made on the ground that these claim fall in the scope of the Article 10 i.e.,

Change in Law.

S. N. Change in Law items i. Change in Rate of Royalty Payable on Domestic Coal.

ii. Change in Pricing Mechanism of Coal From Useful Heat Value Basis to Gross Calorific Value Basis

iii. Increase In Sizing Charges for Coal Charged by Coal India Ltd. iv. Increase in Surface Transportation Charges

v. Increase in Busy Season Surcharge on Transportation of Coal by Indian Railways

vi. Increase in Development Surcharge Levied on Transportation of Coal by Railways

vii. Levy of Service Tax on Transportation of Goods by Indian Railways viii. Levy of Fuel Adjustment Component ix. Levy of Port Congestion Surcharge x. Levy of Forest Tax xi. Change in Classification of Coal for Train Load Movement

xii. Increase in Fees for ‘Consent to Operate’ Required Under Rajasthan Air (Prevention & Control Of Pollution) Rules, 1983 And Rajasthan Water (Prevention & Control Of Pollution) Rules, 1975

16. It is submitted by Petitioner that claims made by them are authorised under

one law or the other, therefore, come under the scope of Change in Law

terms of the PPA. We do not subscribe to this general approach. It may be

that every expenditure relates to some law or the other but to make a claim

for that, it should be established that it falls within the scope of Change in

Law as stated in PPA. The claim based on a ‘Change in Law’ therefore, shall

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have to satisfy the conditions specified in five bullets in Article 10.1.1 of the

PPA.

17. Keeping in view the Article 10 of the PPA, Commission now proceeds to deal

with each Change in Law claim made by the Petitioner:

i. Change in Rate of Royalty Payable on Domestic Coal.

18. The Petitioner has submitted that the Government of India, Ministry of Coal,

issued a Notification No. G.S.R. 349(E) dated 10.05.2012 to increase the rate

of royalty on Coal from 5% to 14% ad-valorem on the price of coal.

Therefore, the said enhancement in the rate of Royalty on coal squarely falls

under 1st Bullet of Article 10 of the PPA as an event of Change in Law and

hence the Petitioner needs to be compensated for the same.

19. Respondent Discoms contended that Royalty charges cannot be treated as

tax but these constitute fee and the same were in existence at the time of

bid submission and therefore do not qualify as change in law.

20. Commission has considered this claim. ‘Royalty’ is charged under

notification issued as per the provisions of Mines & Minerals (Regulations and

Development) Act, 1957 and rate of royalty is liable for change once in

three (3) years. Petitioner has claimed the difference in royalty now payable.

21. The contention of the Respondent that royalty was in existence at the time

of submitting the bid and hence does not qualify for change in law claim,

has to be rejected as mere existence of levy on the date 7 days prior to the

bid deadline will not disentitle the Petitioner from making the claim unless it is

shown that royalty rate has not changed since then. Hon’ble Supreme Court

while dealing with the cases relating thereto has held that the royalty is a tax

imposed on the minerals extracted which includes coal.

of 32 RERC/577/15

22. Therefore, change in rates of royalty on coal falls within the 1st bullet of

Article 10.1.1 of PPA and the Petitioner has to be allowed the impact of

change.

ii. Change in Pricing Mechanism of Coal from Useful Heat Value Basis to Gross Calorific Value Basis

23. The Petitioner has claimed that the Government of India vide Notification

no. S.O 2920 (E) dated 30.12.2011 has switched over from Useful Heat Value

(UHV) based pricing mechanism to that based on Gross Calorific Value

(GCV) from 01.01.2012. Coal India Limited, based on the switchover, revised

the prices. The said switch over from UHV mechanism to GCV pricing

mechanism led to increase in the prices of coal and therefore falls under the

1stand 2nd Bullet of Article 10 and constitutes an event of Change in Law and

hence the Petitioner needs to be compensated for the same.

24. Petitioner also submitted that since Coal is a nationalized commodity and

governed under Coal Mines (Nationalization Act) 1973 and is entirely under

the control of Central Government and since the distribution of coal is

effected by Central Government under Policies notified under the provisions

of Mines and Minerals (Development And Regulation) Act, 1956, hence any

change in methodology of pricing constitutes a Change in Law event.

25. The Respondents have contended that these issues are being agitated and

pending before the Hon’ble CERC, hence, the same are not acceptable to

Respondent Rajasthan Discoms.

26. CERC in its recent orders dated 03.02.2016 in the case of GMR-Kamalanga

Energy Ltd. Vs Dakshin Haryana BijliVitran Nigam Ltd. & Ors (Petition No.

79/MP/2013) has on similar claim held that

“58. We have considered the submissions of the petitioner. Prior to 1.1.2000, the Central Government under Section 4 of the Colliery Control Order, 1945, was empowered to fix the grade-wise and colliery-wise prices

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of coal. Subsequently, based on the recommendations of Bureau of Industrial Costs and Prices (BICP), Government of India decided to de-regulate the prices of all grades of coking coal and A, B, and C grades of non-coking coal from 22.3.1996. Subsequently, based on the recommendation of the Committee on Integrated Coal Policy, the Government of India decided to de-regulate the prices of soft coke, hard coke and D grade of non-coking coal with effect from12.3.97. The Government also decided to allow CIL and SCCL to fix prices of E, F and G grades of non-coking coal once in every six months by updating the cost indices as per the escalation formula contained in the 1987 report of the BICP and on 13.3.1997, necessary instructions were issued to CIL and SCCL in this regard. The pricing of coal was fully deregulated after the Colliery Control Order, 2000 notified on 1.1.2000 in supersession of the Colliery Control Order, 1945. Under the Colliery Control Order, 2000 the Central Government has no power to fix the prices of coal. Therefore, the prices of coal from CIL and its subsidiaries were market based. Only the pricing methodology was UHV basis at the time of bid submission which was switched over to GCV based pricing w.e.f. 1.1.2012 vide Govt. of India notification dated 30.12.2011. In our view, any decision affecting the price of inputs for generating electricity including coal cannot be covered under Change in Law except the statutory taxes, levies and duties having an impact on the cost of or revenue from the supply of electricity to the procurers. As already noted, para 2.7.2.4 of the RfP required the bidders to reflect all costs involved in procuring the inputs (including statutory taxes, duties and levies thereof) in the quoted tariff. Moreover, the petitioner has quoted stream 1 tariff consisting of non-escalable capacity charges and non-escalable energy charges, thereby taking all risks of price escalation in inputs including coal. Therefore, change from UHV to GCV based pricing cannot be covered under change in law. Hon`ble Appellate Tribunal For Electricity in the judgment dated 12.9.2014 in Appeal No. 288 of 2013 has observed as under:

“According to the bidding documents, the Appellant is not entitled to any increase in energy charges on account of increase in base price of fuel. However, the impact on account of change in the expenditure due to Change in Law has to be allowed as per the actuals subject to verification of proof submitted by the Appellant.”

In the light of above judgement also, the change in the base price of fuel on account of switchover from the UHV method to GCV method of coal pricing is not admissible under change in law.”

27. While agreeing with CERC, Commission is of the view that the change in

methodology for calculation of the cost of coal by Coal India Ltd. (CIL) is

only a means to arrive at the coal cost. Merely because CIL is a Government

instrumentally, the change in method made by it cannot be considered as

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change in law as contemplated in PPA. Commission is of the view that every

change/action made by Government instrumentally will not fall within the

category of change in law unless the same comes under Clause 10 of the

PPA. Therefore, we do not allow the claim made on this ground.

iii. Increase in Sizing Charges for Coal Charged by Coal India Ltd.

28. The Petitioner has submitted that at the time of Bid Deadline, sizing charges

were applicable in accordance with CIL notification dated 12.12.07. The

said prices were increased first vide CIL Notification No. 1181 dated 15.10.09

and then further increased vide CIL Notification w.e.f 16.12.2013. Increase in

sizing charges is pursuant to notification by a Governmental Instrumentality,

which is a Change in Law event within the meaning of 1st Bullet of Article 10

of the PPA.

29. The Respondent Discoms have not accepted increase in Sizing Charges for

Coal as an event of change in law under article 10 of the PPA, for the reason

that these issues are being agitated and pending before the CERC.

Respondents also contended that fuel handling and transportation charges

are not payable as escalation index covers these items.

30. Commission is of the view that the increase in Sizing Charges for Coal is part

of the methodology for the calculation of the cost of coal decided by Coal

India Ltd. (CIL). Commission while agreeing to CERC order dt. 03.02.2016 at

para 28 above has already held that merely because CIL is a Government

instrumentally, the change in method of charging made by it for coal pricing

cannot be considered as change in law as contemplated in PPA. Therefore,

we do not allow the claim made due to increase in sizing charges by CIL.

iv. Increase in Surface Transportation Charges

31. The Petitioner submitted that at the time of Bid Deadline, surface

transportation charges were applicable as per Coal India Limited (“CIL”)

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notification dated 12.12.2007. Subsequently, CIL, vide Notification No. 1181

dated 15.10.2009 and Notification no. 2340 dated 13.11.2013, increased the

Surface Transportation Charges. Increase in surface transportation charges is

pursuant to notification by a Government instrumentality, which qualifies as

an event of Change in Law according to 1st Bullet of Article 10.1.1 of the

PPA.

32. The Respondents have contended that the said issues are being agitated

and pending before CERC. Respondent further contended that the said

issues are also covered under the escalation index issued by CERC, therefore

the same is not acceptable to the Respondents.

33. Commission is of the view that the increase in Surface Transportation

Charges for Coal is part of the methodology for the calculation of the cost

of coal decided by Coal India Ltd. (CIL). Commission while agreeing to

CERC order dt. 03.02.2016 at para 28 above has already held that merely

because CIL is a Government instrumentally, the change made by it in

method for coal pricing cannot be considered as change in law as

contemplated in PPA. Therefore, we do not allow the claim made due to

increase in Surface Transportation Charges by CIL.


34. The Petitioner submitted that at the time of bid deadline, the busy season

surcharge as per rate circular no. 89 of 2007 dated 10.09.2007 was 5% of

basic freight. However, through Circular No.38 of 2011 dated 12.10.2011,

Circular No. 28 of 2012 dated 27.09.2012 and Circular no. 24 of 2013 dated

18.09.2013, the GOl, Ministry of Railways increased the busy season

surcharge to 10%, 12% and 15% respectively. The said revision of Busy Season

Surcharge on the Base Freight rate, by the Ministry of Railways squarely falls

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under the 1st and 2nd Bullet of Article 10 of the PPA and hence qualifies as an

event of change in law.

35. The Respondents have contended that the increase in busy season

surcharge on transportation of coal through railway during the busy season,

i.e., 9 months of the financial year is not covered under change in law

because this Tax was in existence at the time of bidding and also, such

changes are covered under escalable part of tariff therefore not

acceptable as Change in Law.

36. The Commission observes that the Busy Season Surcharge on Coal

Transportation has been imposed by the Ministry of Railways. The increase

made by Ministry of Railways in our view cannot come within the scope of

‘Change in Law’ as provided in the PPA though it may increase

transportation charges. The increase has to be incurred by the Petitioner as

an additional cost in the coal cost which has to be to its account. Merely

because Railway under its power imposes surcharge on coal transportation,

it cannot be equated to a surcharge levied as tax or cess of Finance Ministry

under Finance Act. The Petitioner was expected to take into account the

possible revision in these charges while quoting the bid. As already stated,

the Petitioner was expected in terms of para 2.7.2.4 of the RfP to include in

quoted tariff all costs involved in procuring the inputs. Since freight charges

are a cost involved for procuring coal which is an input for generating power

for supply to Discoms under the PPA, the Petitioner cannot claim any relief

under change in law on account of revision in freight charges. Accordingly,

the claim of the Petitioner on this account is disallowed. Therefore,

Commission does not accept the claim.

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37. The Petitioner submitted that at the time of Bid Deadline, the Development

Surcharge on Coal Freight was 2% on Normal Tariff Rate (Basic Freight + Busy

Season surcharge + Other Charges) being the rate as specified in Circular

No. 58 of 2007 dated 29.05.2007. Subsequently the GOI, Ministry of Railways,

issued a Rate Circular No. 38 of 2011 dated 12.10.2011 to increase the

Development Surcharge on Coal to 5% of Normal Tariff Rate. The increase in

Development Surcharge from 2% to 5% squarely falls under the definition of

Change in Law as prescribed under the 1st Bullet of Article 10 of the PPA.

38. The Respondent Discoms have contended that the change in levy of

Development Surcharge on Railway Freight is not covered under change in

law because this Tax was in existence at the time of bidding and such

changes are covered under escalable part of tariff therefore not

acceptable to the Respondents.

39. The Commission observes that the Development Surcharge levied on Coal

Transportation has been imposed by the Ministry of Railways. The increase

made by Ministry of Railways in our view cannot come within the scope of

‘Change in Law’ as provided in the PPA though it may increase

transportation charges. The increase has to be incurred by the Petitioner as

an additional cost in the coal cost which has to be to its account. Merely

because Railway under its power imposes surcharge on coal transportation,

it cannot be equated to a surcharge levied as tax or cess of Finance Ministry

under Finance Act. Therefore, as discussed at para 37, Commission does not

accept the claim.

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vii. Levy of Service Tax on Transportation of Goods by Indian Railways

40. The Petitioner submitted that at the time of Bid Deadline no service tax was

applicable on total freight on transportation of goods by rail. Subsequently

the GOI, Ministry of Finance (“MoF”) vide Notification No. 9/2010 dated

27.02.2010 brought Transportation of Goods by Rail under the ambit of

Service Tax. However, through various notifications including Notification No.

43/2012 dated 02.07.2012, the same was kept in abeyance till 30.09.2012.

The applicability of the same from 01.10.2012 has been notified through

Circular No. 27 of 2012 dated 26.09.2012 issued by Ministry of Railway, GOI

and Service Tax was started to be levied @ 3.708% effective rate (12.36%

service tax with abatement of 70%). The Service Tax rate has been further

increased to 14% w.e.f. 01.06.2015 vide Ministry of Finance Notification No.

14/2015 dated 19.05.2015. Further, with effect from 15.11.2015, Swatch

Bharat Cess has been levied @ 0.5% as a duty on service tax over and

above 14% Service Tax payable by the Petitioner. Therefore, in this case the

event of levy of Service Tax on transportation of goods by railways is squarely

covered under the 1st and 5th Bullet of Article 10.1.1 of the PPA and the

same cannot be relegated to the CERC escalation index.

41. The Respondents have contended that the impact of change in imposition

of Service tax on total freight on Transportation of goods by Rail is being

passed on through the escalation rate and therefore not acceptable to the

Respondents.

42. Commission observes that Service Tax has been levied on Total Freight on

Transportation of Goods by Rail vide the Ministry of Finance, GoI Notification

No. 9/2010 dated 27.02.2010 and Rate Circular No. 27 of 2012 dated

26.09.2012 of Ministry of Railways. The Notification was issued subsequent to

30.07.2009 (7 days prior to the bid deadline) and satisfies the Change in Law

criteria as per PPA provisions.

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43. Further, it is observed that the Base Freight Rate is being used by the CERC

for computation of the Escalation Index. Service Tax on Transportation being

levied additionally as a percentage of Normal Tariff Rate, is not covered in

the escalation rates notified by CERC.

44. In view of above, the Commission considers levy of service tax on

transportation of goods by Indian Railways as “Change in Law” as per Article

10.1.1 of the PPA and the Petitioner needs to be compensated for bringing

him to the same economic position as existing at the time of bid deadline.

viii. Levy of Fuel Adjustment Component

45. The Petitioner submitted that the High Speed Diesel was a regulated

commodity sold at subsidized price to all. However, the same has been

deregulated recently. Because of the same, there has been gradual

increase in the prices, since HSD is a prominent fuel being used by Railways.

The Railway Budget for 2013-14 considered levy of ‘Fuel Adjustment

Component’ linking Tariffs with movement of Fuel Prices from 01.04.2013.

Pursuant thereto, the GOI, Ministry of Railways, in exercise of powers

conferred under section 30, 31 and 32 of the Railways Act, 1989 issued Rate

Circular dated 22.03.2013 effective from 01.04.2013, and, through Rate

Circulars dated 04.10.2013, 20.06.2014 and 16.03.2015, revised the freights.

Moreover, the said Notifications which have incorporated the Fuel

Adjustment Component have been issued by an Indian Government

Instrumentality and fall squarely within the definition of ‘Change in Law’.

Further, as per the 2nd Bullet of Article 10.1.1 if there is any change in the

interpretation or application of existing law then the same will also qualify as

a Change in Law event. Therefore, the same falls under Change in Law and

the Petitioner needs to be compensated for the same.

46. The Respondent Discoms have contended that the impact of change in

freight rate due to FAC is being passed on through the escalation rate

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notified by CERC. Therefore, it will not be appropriate to once again allow

the impact of FAC through the provisions of change in law.

47. Commission observes that there is merit in this contention of Respondents. It

is noted that CERC computes escalation in the Base Freight. Any variation in

base freight due to any reason including FAC gets reflected in the

escalation index. Therefore, we hold that the Fuel Adjustment Component

does not qualify as a change in law event as claimed by the Petitioner.

ix. Levy of Port Congestion Surcharge

48. The Petitioner submitted that at the time of Bid Deadline, no Port Congestion

Surcharge was applicable. Subsequently, vide Rate Circular No. 36 of 2014

dated 20.11.2014, issued under Section 30 of the Railways Act, Central

Government has levied a Port Congestion Surcharge of 10% on Basic Freight

Rate with effect from 24.11.2014 and the same has been notified to the

respondents vide letter dated 06.07.2015.

49. The Respondent Discoms have contended that the change in levy of Port

Congestion Surcharge on Railway Freight is not covered under change in

law because such changes are covered under escalable part of tariff

therefore not acceptable to the Respondents.

50. In Commission’s view, the levy of Port Congestion Surcharge does not

qualifying as an event of Change in Law under 1st Bullet of Article 10.1.1 of

the PPA as contended by the Petitioner. We observe that the levy gets

covered in fuel price escalation and hence cannot be allowed as Change

in Law.

x. Levy of Forest Tax

51. The Petitioner submitted that at the time of Bid Deadline, no Forest Tax was

applicable on coal. Thereafter, the Forest Department, Chhattisgarh State

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Government vide its letter 6658/2012/Bilaspur dated 31.10.2012 conveyed to

SECL that, in accordance with Chhattisgarh Government, Forest

Department letter No. 3541/2531/2010/10-2/Budget dated 06.10.2012, forest

tax @ Rs. 7/ton under Chhattisgarh Transit (Forest Produce Rule) 2001 will be

leviable on coal mined and transported from SECL mines which are located

in Forest area with effect from 01.11.2012.

52. The Respondent Discoms have contended that this is not a ‘Forest Tax’ but a

fee imposed by the government for transportation of forest produce and

such fee for transportation pass is similar to toll/entry fee and does not meet

the criteria of “Change in Law”.

53. In Commission’s view, this is not a “Forest Tax” as contended. It is a fee

imposed by the Government of Chhattisgarh for transportation of forest

produce. Such fee for transportation pass is akin to toll / entry fees and does

not meet the criteria of “Change in Law” stipulated in the Change in Law

Articles of the PPA. Therefore, the Commission disallows the Levy of Forest Tax

on Coal as a “Change in Law” event.

xi. Change in Classification of Coal for Train Load Movement

54. The Petitioner submitted that at the time of Bid Deadline the rates applicable

for transportation of coal by Railways was as per Class 150 of Railways freight

schedule. Subsequently, vide Rate Circular No. 8 of 2015 dated 16.03.2015,

rates applicable for transportation of coal by Railways was changed to class

145 of Railways freight schedule and that such change in classification has

resulted in reduction of burden on the Petitioner. The same has been notified

by the Petitioner to the Respondents vide letter dated 06.06.2015 even

though such change is in favour of Respondents.

of 32 RERC/577/15

55. Respondent Discoms contended that the benefit due to change in freight

rate is being passed on through the CERC escalation rate and therefore not

acceptable to the Respondents.

56. The Commission notes that class 150 of Railways freight schedule was

applicable to the Petitioner at the time of bid deadline. The change in class

to 145 was vide notification dated 16.03.2015, which is subsequent to the bid

deadline. Commission observes that the CERC Index, which uses Base Freight

Rate linked to the class of goods, includes the impact of change in class for

railway freight for coal from 140 to 150. Thus, the impact of change in freight

rate due to change in freight class is being passed on through the CERC

escalation rate. Therefore, the Commission does not consider this event as

“Change in Law” as per Article 10.1.1 of the PPA.

xii. Increase in Fees for ‘Consent to Operate’ Required Under Rajasthan Air (Prevention & Control of Pollution) Rules, 1983 and Rajasthan Water (Prevention & Control of Pollution) Rules, 1975

57. The Petitioner through Interlocutory Application submitted that at the time of

Bid Deadline as per the Notification dated 25.05.2007 the application fee for

‘Consent to Operate’ under Rajasthan Air and Water Act was Rs. 91,500/-

each [Rs. 61,000 X 1.50] for air and water, i.e., a total of Rs. 1,83,000/-.

Subsequently, the State Government vide Gazette Notification dated

10.12.2010 amended the above referred rules to increase the Fees from Rs.

61,000/- per annum to Rs. 2,49,000/-. Further, vide Notification dated

05.06.2015, the fees was revised to Rs. 48,000 + Rs. 1000 per Crore of

incremental investment above Rs. 50 Crore. It is submitted that the effect of

the said Notification is that annual Fees required for Consent to Operate has

increased to Rs. 2,12,34,000/-. The Petitioner has notified the same to the

respondents vide letter dated 22.10.2015. The event of increase in fee for

consent to operate has led to increase in cost of generation and such

increased cost needs to be reimbursed by the Respondents.

of 32 RERC/577/15

58. Respondents in reply contended that as per clause 3.1.1 (f) and 4.2.1 (a), the

Seller has to obtain and maintain all consents, clearance and permits

required for supply of power to the Procurers as per the terms of the PPA.

Also it is the duty of the Petitioner to challenge such exorbitant rates.

Petitioner has not submitted any proof of applicability or challenge.

59. The contention of the Respondents that seller has to obtain and maintain all

consents, clearance and permits required for supply of power at its cost is

untenable as the cost to be incurred for operation of plant if increased has

to be compensated.

60. The Commission notes that the item under change in law claim existed at

the rate of Rs. 91,500/ton at the time of bid deadline. It is further noted that

the increase in fee for consent to operate was notified by Rajasthan

Government and thus falls under third bullet of Article 10.1.1 to qualify as

change in law. Therefore, the extra amount is to be paid by the Petitioner to

the Rajasthan Government every year as a fee for the “Consent to

Operate”. Such additional fee which was not envisaged at the time of

bidding therefore falls under the last but one bullet, hence has to be

allowed.

Compensation on Account of Change in Law

61. The Petitioner submitted that it had also filed a Petition invoking regulatory

powers of this Commission seeking compensatory Tariff owing to the

Indonesian Coal crisis. However, the Commission in the said Petition, being

Petition No. 392 of 2013, passed an order dated 25.06.2014 inter-alia

constituting a Committee to look into the quantum of Compensatory Tariff

payable to the Petitioner. The Committee has submitted its Report to this

Commission in August, 2015. However, the Committee while determining the

extent of Compensatory Tariff has compared the cost of Bidded Coal vis-à-

vis the cost of Domestic coal as on date. The Petitioner submitted that the

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entire quantum of compensation qua ‘Change in Law’ cannot be on actual

basis as the Committee, after deliberation with the Respondents, has also

provided a mechanism based on current cost of coal and not the cost of

Coal as on 7 days prior to the bid deadline. Therefore, there is a

considerable extent of notional impact on the generator which cannot be

accounted for in terms of the above and the same will have to be

considered by the Commission in adjudicating the present dispute. It was

prayed to resolve the aforesaid issue by taking a holistic view to ensure that

the Petitioner is not subjected to financial loss.

62. Commission cannot agree with the above submission. Commission will

consider and take a decision on merit when it will deals with petition 392/13.

At any rate, for any claim made under Article 10 of the PPA, it has to follow

the procedure provided in the PPA and on actual basis, not on notional

basis. To make a claim under Article 10 of the PPA, Petitioner has to establish

that there is an actual impact of change in law and produce the proof

along with precise details. Therefore, Petitioner has to make claims only on

actual basis and as per the relevant terms of the PPA. Otherwise,

Respondents are under no obligation to allow the claims which are not

based on actuals and not as per the terms of the PPA.

Summary:

63. Based on the above analysis and decisions, the summary of our decision

regarding the Change in Law is as under:

Sr. No. Change in Law items

Decision of the

Commission i. Change in Rate of Royalty Payable on Domestic Coal. Allowed

ii. Change in Pricing Mechanism of Coal From Useful Heat Value Basis to Gross Calorific Value Basis

Not Allowed

iii. Increase In Sizing Charges for Coal Charged by Coal India Ltd.

Not Allowed

iv. Increase in Surface Transportation Charges Not Allowed

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Sr. No. Change in Law items

Decision of the

Commission


Not Allowed


Not Allowed

vii. Levy of Service Tax on Transportation of Goods by Indian Railways

Allowed

viii. Levy of Fuel Adjustment Component Not Allowed ix. Levy of Port Congestion Surcharge Not Allowed x. Levy of Forest Tax Not Allowed

xi. Change in Classification of Coal for Train Load Movement

Not Allowed

xii.

Increase in Fees for ‘Consent to Operate’ Required Under Rajasthan Air (Prevention & Control of Pollution) Rules, 1983 and Rajasthan Water (Prevention & Control of Pollution) Rules, 1975

Allowed

64. From the foregoing discussion, this petition stands disposed of in the above

terms.

(Raghuvendra Singh) (Vinod Pandya) (Vishvanath Hiremath)

Member(T) Member(F) Chairman

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