M/s ABReL SPV 2 Limited, a subsidiary of Aditya Birla Renewables Limited, filed a petition before the Gujarat Electricity Regulatory Commission under Section 86 of the Electricity Act, 2003, and Article 9 of the Power Purchase Agreement (PPA) dated 30 January 2021. The petitioner sought a declaration that the imposition of 40% Basic Customs Duty (BCD) on imported solar PV modules from 1 April 2022 and the increase in Goods and Services Tax (GST) from 5% to 12% on various solar equipment from 1 October 2021 constituted “Change in Law” events as per the PPA. They requested compensation for the additional costs incurred, along with carrying costs.
The 120 MW solar PV project, awarded at a tariff of ₹1.99 per kWh through competitive bidding, was impacted by these policy changes after financial closure was planned. The company cited official notifications from the Ministry of Finance and MNRE that introduced these duties and taxes. They argued that the changes occurred after the bid deadline of 28 September 2020 and thus qualify as unforeseen legal changes impacting project costs.
According to their calculation, the company incurred a total additional capital cost of ₹197.54 crore due to increased GST on Balance of System (BOS) equipment, GST on modules, and the newly introduced BCD, along with Social Welfare Surcharge and applicable GST. These costs were broken down into ₹9.61 crore due to higher GST on BOS, ₹23.37 crore due to increased GST on modules, and ₹164.55 crore due to BCD, SWS, and related GST.
The petitioner further submitted that these increased costs led to a cumulative tariff impact of 82.31 paise per unit, calculated in accordance with Article 9.2.2 of the PPA. They sought this increase to restore them to the same financial position they would have been in had the policy not changed. They also claimed carrying costs of ₹3.65 crore due to delays and financing burdens from the higher upfront duties and taxes.
The petitioner supported their claim by submitting detailed breakdowns of GST calculations on BOS and modules, customs duty computations, demurrage charges incurred, and correspondence with Gujarat Urja Vikas Nigam Limited (GUVNL). Despite various meetings and letters, GUVNL did not provide written confirmation to treat the duty and tax increases as a Change in Law and directed the petitioner to approach the Commission.
GUVNL, in its written reply, argued that the PPA’s Change in Law provisions are specific and limited, excluding GST from its scope and applying only to taxes levied directly on the generation or sale of electricity. They emphasized the sanctity of the contract and referenced prior court rulings supporting a narrow interpretation of such clauses.
The Commission is now expected to decide whether the BCD and GST changes indeed qualify as a Change in Law under the PPA and whether the petitioner is entitled to the claimed compensation and tariff revision.
