Rajasthan orders SECI and RUVNL to pay compensation to Palimarwar following law changes

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A Tata Power project in the Indian state of Rajasthan. Credit: Tata Power

The Rajasthan Electricity Regulatory Commission (RERC) has ordered the Solar Energy Corporation of India (SECI) and Rajasthan Urja Vikas Nigam Limited (RUVNL) to pay compensation to Palimarwar Solar House, after changes to Indian law increased the company’s operating expenses.

In April 2021, Palimarwar’s bids to construct two 20MW solar plants in Barmer, in the northern state of Rajasthan, were accepted by the SECI, a government body. However, in February, the government had changed laws regarding customs duties, which came into effect for the 2021 financial year, and Palimarwar alleged that this suddenly increased the operating costs of its projects, and that it should not be responsible for paying these additional costs.

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The legal reformation removed an exemption from customs duty for items of machinery involved in the solar sector, and increased the customs duty on solar inverters from 5% to 20%. Palimarwar alleged that these changes increased the cost of importing solar components and machinery necessary for the Barmer projects by 17.3%, the equivalent to INR74.66 lakh (US$9,029).

Under the terms of the Barmer tenders, the SECI will purchase power from the projects, and sell it on to RUVNL, the trading arm of the Rajasthan government. The RERC oversees and regulates the electricity sector of India’s northern state of Rajasthan, and ultimately ruled in favour of Palimarwar, ordering the SECI and RUVNL to collectively pay Palimarwar the additional costs incurred by the changes to the law.

The bodies will pay Palimarwar in instalments for the next 15 years, with the first payment to be made on 6 October this year.

“The commission observes that the reconciliation process has been completed, as per the directions of the commission and under the guidance of SECI which was acting as nodal agency, in fair and transparent manner,” said the RERC in its judgement on the case. “All the parties are agree on the reconciled amount – INR74.66 lakh – to be allowed to the petitioner on account of change in law events.

“Thus, the issue regarding the claim on account of change in law is settled and disposed of as unanimously agreed by all parties.”

The two Barmer projects have added to a growing solar portfolio for Palimarwar, which already operated a 10MW project in Rajasthan. The commissioning of these projects, despite the legal hurdles, are the latest developments in a growing solar sector in India, which last month saw Adani raise US$394 million for 10GW of solar manufacturing capacity, and CleanMax commission a 400MW combined wind and solar project.

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