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CERC Grants Compensation to Ostro Energy in Landmark Decision on GST Rate Hike

OEPL, known for its involvement in solar power projects, argued that the GST rate hike resulted in additional project costs, qualifying as a "Change in Law" event under the PPA.

December 28, 2023. By Abha Rustagi

In a significant development before the Central Electricity Regulatory Commission (CERC), Ostro Energy Private Limited (OEPL), has been granted compensation under the Electricity Act 2003 for financial repercussions arising from a change in the Goods and Services Tax (GST) rate.

The rate had been increased from 5 percent to 12 percent according to a 2021 notification, leading OEPL to seek recompense based on the terms of the Power Purchase Agreement (PPA) inked with the Solar Energy Corporation of India Limited (SECI) in 2019.

OEPL, known for its involvement in solar power projects, argued that the GST rate hike resulted in additional project costs, qualifying as a "Change in Law" event under the PPA.

The Commission, after thorough consideration, recognized the 2021 GST Notification as a "Change in Law" event. It emphasized the necessity of a clear correlation between the GST increase and its impact on the project for compensation eligibility.

The Commission directed the involved parties to reconcile claims, stressing the importance of a clear correlation between projects and invoices. Compensation was granted based on the prevailing normative cost of debt at the time of commercial operation date (COD), following principles outlined in related Supreme Court judgments.

SECI and Discoms were ordered to reconcile and disburse payments to the petitioners, with a provision for a late payment surcharge if payments were delayed beyond 60 days.

Additionally, OEPL was acknowledged as entitled to carrying costs, with consideration given to actual interest rates paid or applicable Renewable Energy Tariff Regulations. SECI was directed to pay the reconciled claims.

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Policies & Regulations

Central Electricity Regulatory Commission

CERC

Ostro energy

OEPL

Goods and Services Tax

GST

Solar Energy Corporation of India

SECI

Power purchase agreement (PPA)