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PSERC Rejects Solar Company’s Plea for Compensation Over CGST Hike on Solar Cells

The Punjab State Electricity Regulatory Commission (PSERC) has dismissed a petition filed by SAEL Solar Solutions, a solar power company, seeking compensation to offset the financial impact of the increased Central Goods and Services Tax (CGST) on solar cells. The company had argued that the tax hike from 5% to 12% constituted a ‘change in law’ under its power purchase agreement (PPA) with the Punjab State Power Corporation (PSPCL).

SAEL Solar Solutions had entered into a PPA with PSPCL on June 21, 2022, to supply 50 MW of solar power at a tariff of Rs2.65 per unit. The company claimed that the increase in CGST on solar cells, effective from October 2021, had escalated project costs, qualifying as a ‘change in law’ under the PPA. According to the agreement, a ‘change in law’ occurs when any event increases or decreases project costs, and the affected party must notify the other within 60 days of the event. SAEL issued a ‘change in law’ notice to PSPCL in November 2022, seeking compensation for the additional financial burden. The company also requested carrying costs due to increased capital expenditure, which raised debt and equity requirements. However, PSPCL opposed the plea, arguing that the notice was untimely and lacked sufficient details.

Commission’s Findings

PSERC ruled that the CGST rate change, announced in September 2021, preceded the e-reverse auction process conducted on October 22, 2021, and the subsequent PPA signing in June 2022. Therefore, the tax hike could not be considered a ‘change in law’ under the PPA.

The Commission also noted that SAEL’s notice to PSPCL was issued beyond the 60-day window from the PPA signing date and failed to provide adequate details or documentary evidence regarding the impact of the tax change on project costs.

Additionally, PSERC rejected SAEL’s request for carrying costs and interest, stating that the petitioner had not met the necessary conditions for such claims.