Newsletter | October 2017
Infra News
 

India will have 50,000 km highways network in 2 years: Government

The highways network in the country will be of 50,000 kilometres. The state-owned National Highway Authority of India (NHAI) has constructed nearly 30,000 km world-class national highways, the Ministry of Road Transport and Highways. NHAI, under the Ministry of Road Transport and Highways, has another 20,000 km scheduled for completion in the next couple of years. The sustained growth will ensure that Indian national highways network will measure approximately 50,000 km of highways. More

NHIDCL to pump in Rs 15000 crore in Arunachal Pradesh

National Highways & Infrastructure Development Corporation Limited (NHIDCL) will invest close to Rs 15000 crore in Arunachal Pradesh. More

Maharashtra to begin work on Rs 1 trillion infra projects this year

Chief Minister Devendra Fadnavis said Maharashtra hopes to kickstart infrastructure projects entailing investment of Rs 1 lakh crore this year. "We hope to start works on projects worth Rs 1 lakh crore this year," Fadnavis said at an IACC event without elaborating on specific projects. He said infrastructure projects worth Rs 5.96 lakh crore have been planned in Maharashtra, which has earned the state honours from the NITI Aayog for being the leader in infrastructure creation. More

Monetisation of 75 projects via TOT to fetch Rs 35,600cr: ICRA (formerly Investment Information and Credit Rating Agency of India Limited)

The government's decision to monetise 75 road project through toll-operate-transfer (TOT) route is expected to fetch around Rs 35,600 crore, said ICRA. Last year, the Cabinet Committee on Economic Affairs (CCEA) authorised the NHAI to monetise public-funded national highway projects which are operational and are generating toll revenues after the commercial operations date (COD) through the TOT model. More

Government approves Rs 1,423-crore road project in Andhra Pradesh

A Rs 1,423-crore highway project in Andhra Pradesh, part of the high density Kolkata-Chennai traffic corridor has received Cabinet approval. "The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has given its approval for development of six-laning of Narasannapeta-Ranastalam section of National Highway (NH)-16 (old NH-5) in Andhra Pradesh," an official statement said. More

FM Arun Jaitley tells French businesses to invest in Indian infrastructure

Union Finance Minister Arun Jaitley invited French businesses to invest in Indian infrastructure, including highways, railways, ports and airports. "Market mechanisms and rule of law determine transparent and honest decision-making in new India," Jatiley told a delegation of French business leaders led by P. Gattaz, President of Movement of the Enterprises of France, the largest employer federation in that country. More

Global investors express keen interest in DMIC project

Global investors are expressing keen interest in the Delhi Mumbai Industrial Corridor (DMIC) on account of fast progress in the project, a top government official has said. In the annual general meeting (AGM), the chairman of DMIC Development Corporation, Ramesh Abhishek, told shareholders that rapid progress is happening in phase I of the project. More

PM Narendra Modi lays foundation stone of Rs 5,925 highway projects in Gujarat

Prime Minister Narendra Modi has recently laid the foundation stone of national highways projects worth Rs 5,825 crore in Gujarat. The other projects for which foundation will be laid include 4 laning of 116.24 km of Porbandar-Dwarka section of NH-51 at a cost of Rs 1600 crore, 2/4 laning of 93.56 km of Gadu-Porbandar section of NH-51 at a cost of Rs 370 crore and 6 laning of 201.31 km Ahmedabad-Rajkot section of NH-47 and NH-27 at a cost of Rs 2893 crore." More

Japan teams up with India for Northeast, to extend Rs 2,239-crore loans

A memorandum of understanding to set up India Japan Act East Forum with an aim to marry India’s Act East Policy with Japan’s Free and Open Asia-Pacific strategy in the backdrop of China’s One Belt One Road initiative is among the major agreements signed during Japanese Prime Minister Shinzo Abe’s visit to India for the 12th Indo-Japan annual summit, experts said. The forum will enhance connectivity and promote developmental projects in India’s Northeast region. More

Narendra Modi steps in to boost smart cities, urges states for early rollout

The Centre has asked states to focus on impactful and public-private-partnership based smart city projects. Ministry of housing and urban affairs, the nodal ministry for Smart Cities Mission has identified 261 impactful ventures worth Rs 31,000 crore and PPP projects worth Rs 32,000 crore for the states to work on. More

India, Japan to team up to get more flexible LNG deals

India will work with Japan to make long-term liquefied natural gas (LNG) import deals more affordable for its price-sensitive consumers and to secure better prices and concessions from suppliers. The arrangement will help state-run GAIL India Ltd swap a part of its 5.8 million tonnes of LNG booked with firms from the United States with that of Japan’s contracted volumes in Asia and elsewhere. More

Renewables to help meet 40% of India’s power needs by 2030: power minister

Power Minister R. K. Singh said no business opportunity was as big as the one that renewable energy presents and that prices of equipment would further come down. Despite India’s energy needs likely to double over the next 6-7 years going by the current rate of economic growth, the nation will meet two-fifths of its electricity needs with renewable sources by 2030, power and renewable energy minister R.K. Singh said. More

 
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Previous Issues:
September 2017
August 2017
July 2017
June 2017
May 2017
April Part I 2017
April Part II 2017
March 2017
December 2016
November 2016
October 2016
September 2016
August 2016
April 2016
March 2016
February 2016

RENEGOTIATION OF COMPETITIVELY DETERMINED ELECTRICITY TARIFF

by Dinesh Pardasani, Partner and Shashwat Kumar, Associate Partner

The Electricity Act, 2003 (Act) provides for two regulatory processes to determine tariff of electricity sold to distribution companies (Discoms). In brief, tariff is determined by the appropriate electricity regulatory commission (Commission) in exercise of its powers under Section 62 of the Act or discovery of tariff through competitive bidding process under Section 63. In competitive bidding process, the tariff arrived at is adopted by the Commission as per Section 63 of the Act. The process under Section 63 has gained popularity with the government and Discoms since the time reverse auction process has been introduced. The reverse auction process (among other reasons) has resulted in steep fall in tariff and consequently, the Discoms are reluctant to honor their commitments to projects already awarded.

In the recent past, there have been numerous instances where Discoms are reneging on their obligation to sign PPAs at the tariff determined at an earlier stage, performing obligations under executed PPAs, or issuance of Letters of Intent (LOI), on the grounds that the tariff discovered recently are much lower than those determined earlier. Such situations have arisen in several States, including Uttar Pradesh, Karnataka, Andhra Pradesh, Gujarat, Tamil Nadu, and Jharkhand. In this article we have focused on the peculiar situation that has arisen in Jharkhand.

In the state of Jharkhand, an auction of 1200 MW of solar power projects was held in March 2016. Amongst projects offered at 45 different locations within the State, the winning bids ranged between Rs 5.08 to Rs 5.48 per kwH for projects above 25 MW. However, even as the bids were conducted and the tariff was discovered and the LOIs were issued, the Government kept delaying the signing of the PPAs. We understand that the reason was that the tariff discovered was too high compared to bids conducted in other States. Thereafter, the Jharkhand Government renegotiated tariff with the selected bidders of the auction and also reduced the capacity won by such selected bidders. As per news reports, we understand that now the matter had been resolved and a tariff of Rs. 4.95 per kwH for projects above 25 MW has been approved by the State Government. This act of the Jharkhand Government raises certain key legal questions – (a) Whether the State Government has the power to negotiate tariff which is arrived at through competitive bidding process?; (b) whether the Commission can adopt a tariff under Section 63 which has not been arrived at competitively but has been ‘approved’ by the State Government through a negotiation process?; and (c) whether the act of the Government has rendered the entire bidding process void ab initio.

The questions raised above must be answered in order to break from this worrying trend of Discoms blatantly reneging on their obligations. It also reflects complete disregard for the sanctity of bidding system and the electricity laws. Reverse auction is conducted for the discovery of the lowest price. Such price is based on the evaluation undertaken by the developers which is dependent on several factors like location of project, solar irradiance at such location, the credit worthiness of the buying entity, availability of land etc.

The Central Vigilance Commission guidelines state that there can be a negotiation with the lowest bidder, but only in exceptional circumstances where the state government is required to make a payment. There are apparently no exceptional circumstances for Discoms to negotiate. However, even if this is accepted for sake of argument, there is no provision under the Act allowing the Commission to adopt a tariff which has been negotiated by the Discoms, Commissions’ or State Government. Section 63 of the Act clearly states that the Commission is required to adopt the tariff which is arrived at through transparent process of bidding. Once the tariff determined under competitive bidding is negotiated, it is no longer a transparent process of bidding and there is no provision under the Act through which such tariff can be adopted by the Commission. The tariff which has been ‘approved’ by the Jharkhand Government has neither been determined under Section 62 nor has it been discovered through bidding process. Therefore, it cannot be adopted under Section 63.  

Given the above, in our view, if this event of renegotiation of tariff is challenged by any stakeholder, it will be difficult for the State government and procurer agency to justify the reduced tariff and consequent adoption by state commission. It will be interesting to see how the Ministry of New and Renewable Energy addresses this situation which has created uncertainty and instability in the renewable energy sector. Renegotiation of PPAs will cause lasting damage not only to the renewable sector, but investments in India as investors become cautious due to uncertainty in the current market scenario.

 
FIRM NEWS

Link Legal hosts knowledge sharing session on “Insolvency and Restructuring – Trends & Challenges” and “Paradigm Shift in Director’s Role - Regulatory & Adjudicatory Trends” in Gurugram

Link Legal India Law Services has been actively holding a series of workshops/events on various relevant topics both in India and outside as part of our “thought leadership” initiatives. We have developed a forum for exchange of information between professionals on active trends, regulatory changes and market conditions. More

 
 

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