TaxTMI 
TaxTMI 
2020 (8) TMI 957
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....e bid process in terms of Section 63 of the Electricity Act, 2003 (for short, 'the Electricity Act'). The terms of PPA contained a tariff, and that could be varied only as per the specific provisions contained in the PPA, not otherwise. 2. APRL made a claim for an increased tariff under the change in law provisions in the PPA (Article 10). On 23.10.2006, Rajasthan Rajya Vidyut Utpadan Nigam Limited (for short, 'RVUN') conveyed to Adani Exports Limited its selection as a joint venture partner for the formation of a Joint Venture Company. It was stated that business activities of the proposed Joint Venture Company shall be limited to mining and supply of coal from allotted captive coal block for the requirement of existing/new thermal power stations of RVUN and/or for new projects of the State. 3. On 2.8.2007, a Letter of Intent (for short, 'LoI') was issued by RVUN in favour of Adani Enterprise Limited (for short, 'AEL') for developing the coal block under a joint venture at Parsa East and Kente Basan, wherein it was provided that the coal can be utilised at the discretion of the Government of Rajasthan for new upcoming projects in the State und....
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....andard coal for the project from Indonesia. The said agreement was terminated on 10.6.2010. 10. On 2.7.2009, APRL prayed to the Ministry of Coal for granting long-term coal linkage of 'F' grade coal from South Eastern Coalfields Limited for the Kawai Project for 7.082 MT per annum of coal. The Government of Rajasthan extended the validity of the MoU up to 20.3.2010. RVUN was advised to apply for the allocation of coal blocks for meeting coal requirements for its projects and the Kawai Project under the Government Dispensation Scheme. It may invite tenders for mining and delivery of coal, as was done in Parsa East and Kente Basan coal blocks. 11. According to the RFP, APRL submitted its bid on 6.8.2009. It offered a total contracted capacity of 1200 MW from the Kawai Project. The levelized tariff after negotiation was settled at Rs. 3.238/KWh for 25 years. The tariff in the bid was quoted based on domestic coal. The imported coal was limited, being a temporary measure, as fallback support option till the Government instrumentality resumed domestic coal supply. 12. On 12.8.2009, AEL requested to allot Kente (Extn.) coal block for meeting the coal requirement of the K....
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....he adoption of a tariff for 1000 MW procurement and had made specific observations. 19. On 24.3.2011, the Director General of Mineral and Coal issued a Regulation specifying the formula for calculation of benchmark price with reference to the international market price of coal. 20. APRL wrote a letter to the Ministry of Power, Government of India on 11.10.2011 for grant of coal linkage to it along with other 12th Five Year Plan Projects; however, it was delayed for more than a one year for various reasons, due to which conditions subsequent under the PPA could not be fulfilled, and lenders of money to the Kawai Project had started levying penal interest due to delay in coal linkage allocation. A request was made for grant of coal linkage for the Kawai Project. It was stated that CIL was directed to execute an FSA for the 11th Five Year Plan Projects, did not address the problems that continue to affect the 12th Five Year Plan Projects. In the light of the non-availability of domestic coal and the prohibitive cost of the alternate fuel, the Kawai Project became unviable for the tariff committed. Therefore, a request was made to grant coal linkage. The Ministry of Power, on 26.....
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....acity mentioned above. The New Coal Distribution Policy, 2013 (NCDP of 2013), was notified on 26.7.2013 by the Central Government for the revised arrangement for the supply of coal to identified thermal power stations of 78000 MW. AEL was not one of the thermal power stations included in the same. 23. The Ministry of Power issued a letter on 31.7.2013, in which the change in law was considered regarding a shortfall in domestic coal in the quantity indicated in the Letter of Assurance (for short, 'LoA') or FSA. The Revised Tariff Policy under the Electricity Act was issued on 28.1.2016. AEL was given the coal supply to the fullest extent in 2018 under the SHAKTI Policy. It entered into an FSA with NCL/SECL for procurement of coal under the SHAKTI Policy. 24. The State Commission ultimately decided the Petition No. 392 of 2013, filed by AEL on 17.5.2018. AEL was held entitled to relief under the change in law on account of NCDP of 2013. The amount of compensation payable to AEL was not computed. Dissatisfied with the order passed by the State Commission, Rajasthan DISCOMS filed an appeal before the Appellate Tribunal for Electricity (for short, 'the APTEL'). The....
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....tion of the compensatory tariff, in any event, would have to be done by the State Commission. (g) The Generator cannot raise the invoice, and the liability to make payment by the Appellants does not crystallise. Therefore, there is no question of liability of late payment surcharge for such a period. At best, depending on the conduct of the Generator and in terms of restitution principle, simple interest may be considered for the period prior to determination by the State Commission. However, the application of late payment surcharge cannot be applied when there is no delay or default in payment of bills. (h) APRL had admitted that two periods are separate until the determination of change in law, which is carrying cost, and thereafter raising of invoices, there may be a default by the procurer, which is late payment surcharge. As the two periods are separate, there is no logic to apply the late payment surcharge, which is for the second period to the first one. 26. Shri. Prashant Bhushan, learned Counsel appearing on behalf of Federation argued as under: (a) the main question is whether the bid submitted by APRL was premised on domestic coal or import....
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....uidelines of 2005 issued Under Section 63 of the Electricity Act lay down that to participate in the competitive bidding for a PPA, an entity has to show ready availability of fuel source for the power plant. In the case of domestic coal, the bidder shall have made firm arrangements for fuel tie-up either by way of coal block allocation or fuel linkage. These Guidelines have been issued by the Government of India, which issued the NCDP of 2007. If the grant of LoA/FSA/linkage was to be considered automatic on entering into a PPA, then there was no need for having this criterion for eligibility. The decision in Energy Watchdog and the Policy have not been appreciated correctly. (h) The SHAKTI Policy was notified on 22.5.2017. Those IPPs, which were having PPAs based on domestic coal, but were having no LoA or FSA for coal supply either under NCDP of 2007 or NCDP of 2013, could now participate in the auction and get 100 per cent of their normative requirement of coal supply. Under the SHAKTI Policy, APRL was given coal supply to the full extent of the normative requirements for generating and supply of electricity to the Rajasthan DISCOMS within five years. The SHAKTI Alloca....
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....art of bid only to demonstrate the raw material's readiness as APRL was required to submit proof of linkage/fuel arrangement to qualify as a bidder. (e) Rajasthan DISCOMS admitted in their affidavit dated 31.7.2013 before the RERC that non-availability of coal from the Central Government put the case of APRL within the scope of change in law. Once they have admitted that bid was based on domestic coal, non-availability of which entitles APRL to claim compensation under the change in law as per Article 10 of the PPA. They cannot wriggle out of their obligation. The eligibility to get coal linkage under the SHAKTI Policy to APRL confirms that the PPA was based on domestic coal. The PPA was based on domestic coal, and the concurrent findings do not suffer from any infirmity or perversity. (f) The non-allocation of domestic coal linkage to APRL is a change in law event as is apparent from various documents, affidavit dated 31.7.2013 and entitlement under the SHAKTI Policy. (g) In Energy Watchdog, this Court recognised the change in NCDP of 2007 as change in law event for a project which did not have any LoA or FSA at the time of bid submission. It was not....
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....ic coal, the Bidder shall have made firm arrangements for fuel tie up either by way of coal block allocation or fuel linkage * In case of domestic gas, ..... b) Fuel arrangements in the following cases shall have to be made for the quantity of fuel required to generate power from the power station for the total installed capacity. * In case of imported coal, the Bidder shall have either acquired mines having proven reserves for at least 50% of the quantity of coal required OR shall have a fuel supply agreement for at least 50% of the quantity of coal required for a term of at least five (5) years or the term of the PPA, whichever is less. .... (emphasis supplied) 29. In the MoU dated 20.3.2008, which was entered into between APRL and the Government of Rajasthan, the Government of Rajasthan had only agreed to provide assistance in securing coal linkage/coal block. Article 2.2 of the MoU is extracted hereunder: 2.2 The State will facilitate smooth implementation of the Project as may be required including making it's best effort to facilitate getting coal linkage/coal block from the Central Government or coal from any other source f....
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....en by APRL and GoR. Imported Coal: Captive coal block/coal linkage will be made available for the Kawai Project with the support of Govt. of Rajasthan. However, we have also made an arrangement for supply of imported coal for at least 50% of the total requirement of the power project for 5 years, as fall back support arrangement. Name of the mine acquired or owned and country Not applicable Proven reserves of the mine (in case of mine allocation) Not applicable At least fifty percent (50%) of the quantity of coal required for the power station at Normative Availability on an annual basis and supporting computation for the same. 2.54 Million MT with coal having GCV (ARB) of 4250 Kcal/Kg. Supporting computation attached. Copy of the fuel supply agreement(s) for at least fifty percent (50%) of the total the quantity of coal required for a term of at least five (5) years or the term of the PPA (which even is less) for the power station at Normative Availability on an annual basis. Copy of the Fuel Supply Agreement dated 25th June 2009 with Adani Enterprises Ltd. for supply of 3 Million MT of Imported coal up to Sept 2018 is attached. Our Fuel s....
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.... in making its best efforts to facilitate in getting Coal Linkage/Block or Coal from any other sources for the Power Project. We meet the fuel requirement on the basis of imported coal tie-up. However, we are sure to get domestic fuel tie-up with support of the Government of Rajasthan. In view of this, we submit that our bid should be evaluated on the basis of Domestic Coal tie-up. We undertake that payment considering domestic coal escalations will be acceptable to us during the terms of the PPA. (emphasis supplied) 34. The Rajasthan DISCOMS issued an LoI dated 17.12.2009 to APRL inter alia containing the following condition: Your offer to provide 1200 MW power at the rates mentioned at Annexure-1 and escalations thereof on domestic coal is based on your commitment that the above rates would be applicable even in case of coal requirement being met by you by way of back up arrangement with imported coal. (emphasis supplied) 35. APRL on 18.12.2009, communicated its unconditional acceptance to the LoI thus: We acknowledge with thank receipt of RRVPNL LoI No. RVPN/CE(NPP&R)/D 81 dated 17th December 2009 in favour of Adani Power Rajast....
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....rplus capacity (in MW) Total Capacity : 1320 MW Net Capacity (after Aux Consumption @ 8% : 1215 MW PPA executed so far : NIL Surplus Capacity : 1215 MW (B) Details of primary fuel Sl.No. Particulars Details (to be furnished by the Bidder) 1. Primary fuel (Insert as applicable: "Domestic coal/Imported Coal/Domestic (pipeline) gas/Imported gas (RLNG)" Domestic Coal from Captive Coal/Coal Linkage and Imported coal as fallback support arrangement 2. Fuel Source (Insert as applicable: "Coal India Limited (CIL) coal linkage/domestic captive coal mine/imported coal/domestic (pipeline) gas/imported gas (R­LNG) Captive Coal Block/Long Term Coal Linkage and Imported Coal Supply FSA for five year of PPA term 3. Fuel grade (Applicable only in case of coal) ­­ 4. Name of the CIL subsidiary from which coal is proposed to be sourced or name and location of the captive mine (as applicable). ­­ 5. Bidder to insert the applicable price mechanism, based on whether the primary fuel is covered under: 1. Administered Price Mechanism ("APM"); or 2. Controlled and notified by an independent Regulator; or 3. Cont....
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.... for various requirements, including fuel source. For domestic coal, the requirement was of firm arrangement for fuel tie-up and imported coal, acquired mines with proven coal reserves or FSA to meet at least 50 percent of the normative requirement for at least 5 years. APRL did not have any arrangement for the domestic coal at the time of the bid. The FSA dated 25.6.2009 for imported coal was the only firm arrangement with APRL. Besides that, it had MoU dated 20.3.2008, with the Government of Rajasthan concerning domestic coal. The allocation of coal was by the Government of India. Under the SHAKTI Policy in January 2018, the coal was allocated to APRL. APRL had sought for domestic coal escalation, which was allowed as a concession; however, this did not change the fact that the qualification was based on imported coal. In the Board Meeting of Rajasthan Rajya Vidyut Prasaran Nigam Limited held on 3.12.2009, the following resolution was passed: 3. The L-1 bidder, M/s. Adani Power Rajasthan Ltd., has committed to provide 1200 MW power at the rates mentioned at (1) above irrespective of the availability of domestic coal, by meeting the coal requirements from imported or what....
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.... It was evaluated as such, and the PPA also records the same. In para 2 of the bid with respect to coal, the bid of APRL was premised on the domestic coal. It is apparent that APRL relied upon MoU entered into with the Government of Rajasthan for development of the Kawai Power Project and other projects, and the Government assured its support for allocation of the captive coal block or coal linkage. An arrangement of FSA relating to imported coal for at least 50 percent of the total requirement was relied upon; however, the bid was premised and accepted on domestic coal, which did not change the bid's nature. A query was made by the Rajasthan DISCOMS on 7.9.2009 from APRL to indicate whether the bid should be evaluated on domestic coal or imported coal. It was made clear by APRL in its letter dated 12.9.2009 quoted above, that bid should be evaluated on the basis of domestic coal tie-up, and an undertaking was given that domestic coal escalations would be acceptable to it during the term of the PPA. In the LoI dated 17.12.2009, the offer was accepted, and escalations thereof on domestic coal was based on the commitment that the quoted rates would be applicable even in case of c....
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....admitted that non-availability of domestic coal from the Central Government would put the case of APRL within the scope of change in law. Rajasthan DISCOMS before the RERC admitted that the bid was based on domestic coal, non-availability of which entitles APRL to claim compensation under the change in law as provided in Article 10 of the PPA. 43. It was argued that incorrect admissions made could not have been relied upon. It could not be said to be incorrect and stated factually correct position in view of the aforesaid material and order of the RERC. 44. Apart from that, an eligibility to get coal linkage under the SHAKTI Policy was based upon the fact that the Generators, who were not within the coal linkage and their PPAs were based on domestic linkage coal, were eligible for grant of coal linkage. In case, the PPA was not based on domestic coal, the case of APRL would not have been recommended to include the Kawai Project under 4660 MW capacity to receive domestic coal under special dispensation. 45. It is apparent that the concurrent findings recorded by the RERC, as well as the APTEL, in this regard, do not suffer from any infirmity or perversity, and they are bind....
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....ument cannot be accepted as bidding was not based on dual fuel, but was evaluated on domestic coal. There was no such stipulation that evaluation of bidding was done on domestic basis; the tariff was to be worked out in the aforesaid ratio of 60:40 per cent of imported coal and domestic coal respectively. Apart from that, we find from the order of the APTEL, that change in law provision would be limited to a shortfall in the supply of domestic linkage coal. The finding recorded by the APTEL is extracted hereunder: 12.5 In the instant case, we have found in the previous paragraphs that Adani Rajasthan's bid was premised on domestic coal on the basis of the 100% domestic coal supply assurance contained in NCDP 2007. Since SHAKTI Policy and the FSA executed thereunder still do not meet the assurance of 100% supply of domestic coal to Adani Rajasthan, it would follow that Adani Rajasthan would need to be compensated for any shortfall in supply of domestic linkage coal even post grant of coal linkage under the SHAKTI Policy. Rajasthan DISCOMS have not disputed that the introduction of SHAKTI Policy constitutes a Change in Law under the PPA. Their contention is that any shor....
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....en to facilitate the implementation of the Kawai Project for getting the coal block from the Central Government or coal from any other source for the project. Once the Government of Rajasthan entered into MoU dated 20.3.2008, containing Article 2.2 quoted above, it was incumbent upon the State of Rajasthan to provide coal from any other source for the project, in case the Central Government could not allot coal linkage/coal block. The Central Government had even written to the Government of Rajasthan to provide coal to APRL from the coal mine, but due to paucity, it could not be supplied to APRL. Thus, there was a failure on the part of the Government of Rajasthan to provide coal from any other source. The NCDP of 2007 prevailed as law 7 days prior to the bid with respect to the supply of coal, the cut-off date of the bid was 30.7.2009. It was provided in Clauses 2.1 and 2.2 of NCDP of 2007 dated 18.10.2007 that 100 per cent of the quantity as per the normative requirement of the consumers would be considered for supply of coal through FSA by CIL. Para 5.2 of the NCDP of 2007 provided that for power utilities, including Independent Power Producers (IPPs) and Captive Power Plants, c....
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....date, i.e., 7 days before submission of the bid. In Energy Watchdog also, similar was the position. Though the application was submitted, coal linkage was not provided, and then there was a change in law in terms of the NCDP of 2013. This Court held that the benefit of change in law w.e.f. 2013 was available. The PPA was based upon the domestic coal, and its availability was based upon NCDP of 2007. The application was filed before submitting the bid. The application for linkage was filed in terms of the agreement when the bid was premised and accepted, and the agreement was entered into on the basis of domestic coal, the change in law of 2007 in 2013 has to be applied. Thus, the submission raised that even in the absence of any LoA or FSA granted to APRL by CIL, there was an impact of change of law on the PPA on account of NCDP of 2013. 53. It was argued that there was no domestic coal linkage under which supply was cut down due to any law, and APRL was not allocated coal block, and its bid was premised on the imported coal. In Energy Watchdog, it was opined that only changes in Indian law could be considered under the PPA and not in foreign law. In NCDP dated 26.7.2013, the NC....
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....ut-off date for applicability of law was 7 days prior to the bid deadline and change in law provision of Article 10 of the PPA in question is similar to Article 13 of the PPA in Energy Watchdog. Article 10 is extracted hereunder: 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: * 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 cha....
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....ar. 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 aff....
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....of SLC(LT) on 31.05.2013. The main thrust of Adani Rajasthan's arguments is that even before the amendment of 2013 in NCDP 2007, the decision taken by SLC(LT) in May 2013 amounts to a Change in Law event under the PPA. The 2013 amendment to NCDP 2007 may be seen as a continuum of the SLC(LT)'s decision in May 2013 since it was Coal India's inability to meet the committed/assured coal supply that prompted the Ministry of Coal to issue the amendment to NCDP in July 2013, based on the CCEA decision in June 2013. The CCEA decision of June 2013 directed as follows: The Cabinet Committee on Economic Affairs (CCEA) today approved the following mechanism for supply of coal to power producers: (i) Coal India Ltd. (CIL) to sign Fuel Supply Agreements (FSA) for a total capacity of 78000 MW including cases of tapering linkage, which are likely to be commissioned by 31.03.2015. Actual coal supplies would however commence when long term Power Purchase agreements (PPAs) are tied up. (ii) Taking into account the overall domestic availability and actual requirements, FSAs to be signed for domestic coal quantity of 65 percent, 65 percent, 67 percent and 75 perc....
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....ose of change in law is to restore through monthly tariff payment to the extent contemplated that the affected party is placed in the same economic position as if such a change in law has not occurred. As monthly tariff was worked out on domestic law, the requirement is to compensate on that basis due to change in law. The same is based on the principle of restitution. In Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL), it was laid down by this Court thus: 10. Article 13.2 is an in-built restitutionary principle which compensates the party affected by such change in law and which must restore, through monthly tariff payments, the affected party to the same economic position as if such change in law has not occurred. This would mean that by this Clause a fiction is created, and the party has to be put in the same economic position as if such change in law has not occurred i.e. the party must be given the benefit of restitution as understood in civil law. Article 13.2, however, goes on to divide such restitution into two separate periods. The first period is the "construction period" in which increase/decrease of capital cost of the project in the tariff is to be governed ....
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....ry, Central Electricity Regulatory Commission, Chanderlok Building, Janpath, New Delhi Subject: Impact on tariff in the concluded PPAs due to shortage in domestic coal availability and consequent changes in NCDP. Ref. CERC's D.O. No. 10/5/2013-Statutory Advice/CERC dated 20-5-2013. Sir, In view of the demand for coal of power plants that were provided coal linkage by Govt. of India and CIL not signing any fuel supply agreement (FSA) after March 2009, several meetings at different levels in the Government were held to review the situation. In February 2012, it was decided that FSAs will be signed for full quantity of coal mentioned in the letter of assurance (LoAs) for a period of 20 years with a trigger level of 80% for levy of disincentive and 90% for levy of incentive. Subsequently, MoC indicated that CIL will not be able to supply domestic coal at 80% level of ACQ and coal will have to be imported by CIL to bridge the gap. The issue of increased cost of power due to import of coal/e-auction and its impact on the tariff of concluded PPAs were also discussed and CERC's advice sought. 2. After consideri....
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.... in the Gazette of India. Notwithstanding anything done or any action taken or purported to have been done or taken under the provisions of the Tariff Policy notified on 6-1-2006 and amendments made thereunder, shall, insofar as it is not inconsistent with this Policy, be deemed to have been done or taken under provisions of this revised policy. Clause 6.1 states: 6.1. Procurement of power As stipulated in Para 5.1, power procurement for future requirements should be through a transparent competitive bidding mechanism using the guidelines issued by the Central Government from time to time. These guidelines provide for procurement of electricity separately for base load requirements and for peak load requirements. This would facilitate setting up of generation capacities specifically for meeting such requirements. However, some of the competitively bid projects as per the guidelines dated 19-1-2005 have experienced difficulties in getting the required quantity of coal from Coal India Limited (CIL). In case of reduced quantity of domestic coal supplied by CIL, vis-�-vis the assured quantity or quantity indicated in let....
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....the PPA is clearly attracted that the change in law was in contemplation. Article 10 cannot be made redundant; the agreement is binding and must prevail. 64. The argument raised by Shri. C. Aryama Sundaram that carrying cost is a penal provision, cannot be accepted in view of the decision of this Court in Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL), in which with respect to carrying cost, it was held that carrying cost was payable in terms of restitution principle. The carrying cost is to be paid on the same basis as provided for other dues in the PPA. 65. It was argued that the RERC and the APTEL had not determined the amount. It is apparent that the principle has been worked out by the RERC as well as the APTEL. The quantification directions have been issued to Rajasthan DISCOMS to verify the documents submitted by APRL and make payment in terms of the judgment and order. Nothing further was required to be done by the RERC as well as the APTEL. 66. Considering the facts of this case and keeping in view that the RERC and APTEL have given concurrent findings in favour of the Respondent with regard to change in law, with which we also concur, we may now deal with the ....
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....day to day basis (and compounded with monthly rest) for each day of the delay. Therefore, there shall be huge liability of payment of Late Payment Surcharge upon the Appellants-Rajasthan DISCOMS. 67. With regard to the question of interest/late payment surcharge, we notice that the plea of change in law was initially raised by APRL in the year 2013. A case was also filed by APRL in the year 2013 itself raising its claim on such basis. However, the Appellants-Rajasthan DISCOMS did not allow the claim regarding change in law, because of which APRL was deprived of raising the bills with effect from the date of change in law in the year 2013. We are, thus, of the opinion that considering the totality of the facts of this case and in order to do complete justice and to reduce the liability of the Appellants-Rajasthan DISCOMS, payment of 2 per cent in excess of the applicable SBAR per annum with monthly rest would be on higher side. In our opinion, it would be appropriate to direct the Appellants-Rajasthan DISCOMS to pay interest/late payment surcharge as per applicable SBAR for the relevant years, which should not exceed 9 per cent per annum. It is also provided that instead of month....