PSERC Holds Pre-Existing PPAs Without a Change in Law Clause Bind the Parties, Dismisses Solar Generators’ Claim for Pass-Through of RCM-GST on Land Lease Rentals
By a common order dated 19.08.2026, the Punjab State Electricity Regulatory Commission (“State Commission”) has dismissed the Petitions filed by Vector Green Sunshine Pvt. Ltd. (“VGSPL”) and Anr. against Punjab State Power Corporation Limited (“PSPCL”) and Punjab Energy Development Agency (“PEDA”), holding that the Petitioners’ claim for additional payments or tariff adjustment on account of change in law events, is contrary to the agreed terms of the PPAs and is accordingly not maintainable.
By way of Petition Nos. 22 of 2026 and 23 of 2026, the Petitioners had sought, inter alia, a direction to PSPCL to pass through the additional expenditure incurred on account of GST payable under RCM on rent paid for land taken on lease from unregistered lessors, along with carrying cost/interest either under Regulation 23 of the CERC (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations, 2012 (“RE Tariff Regulations”), or as a Change in Law under the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021 (“CIL Rules”) or in the alternative, through exercise of the State Commission’s general regulatory powers.
Brief Background
The Petitioner was awarded Solar PV Power Projects by PEDA pursuant to a Request for Proposal (“RfP”) issued under the Government of Punjab’s NRSE Policy 2012 with the final tariff arrived at after adjustment of the discount offered by the Petitioners on the generic levelised tariffs determined by the State Commission under the RE Tariff Regulations.
Vide Notification dated 08.10.2024, MoF brought “service by way of renting any property other than residential dwelling” within the RCM. Consequent thereto, the Petitioners, having taken project land on lease from unregistered lessors, became liable to discharge GST at 18% under RCM on the lease rentals. The Petitioners issued Change in Law notices to PSPCL on 29.04.2025, which PSPCL disputed on the ground that the PPAs contained no Change in Law provision and that leasing, rather than purchasing, land was a commercial decision of the Petitioners.
1. Absence of a Change in Law clause in the PPAs
The Petitioners contended that since the PPAs contained no provision restricting or barring a Change in Law claim, they were entitled to relief. PSPCL’s case, on the other hand, was that the express tariff clause together with the absence of a Change in Law clause reflected the parties’ clear intention to freeze the tariff and allocate the risk of future statutory fiscal changes to the Petitioners.
Examining Article 2.1.1(ii) of the PPAs, which provides that “the tariff shall remain constant throughout the Tariff Period following the year of commissioning” and that “no additional payment shall on any account be payable by PSPCL” read with Article 29.1.0 (Entire Agreement) and Article 31.0.0 (No Party Deemed Drafter), the State Commission held that the PPAs stipulate that no additional payment is payable by PSPCL on any account. The State Commission accordingly held the Petitioners’ plea that the PPAs contain no restricting provision to be “misconceived and unsustainable” also noting that the model PPA containing this tariff provision formed part of the bidding documents.
2. Applicability of the CIL Rules, 2021 to pre-existing PPAs
The Petitioners argued that, in the absence of a Change in Law provision in the PPAs, the CIL Rules 2021, being statutory and having overriding effect would independently apply to the Notification dated 08.10.2024.
Relying on the Supreme Court’s judgment in Gujarat Urja Vikas Nigam Limited v. Renew WindEnergy (Rajkot) Private Limited (2023), which holds that where PPAs are “entered into in the exercise of equal bargaining power…within the framework of existing regulations…unless any later amendment expressly overrides existing contracts, the terms of such agreements bind the parties,” and as further explained by APTEL in M/s Rosa Power Supply Co. Ltd. v. UPPCL & UPERC (2025), the State Commission held that in the absence of any express provision in the CIL Rules stating that they would override existing PPAs, and given the specific stipulation in the present PPAs that no additional payment is payable by PSPCL, “the CIL Rules 2021 do not override the provisions of the PPAs in the present case and the existing PPAs shall remain fully applicable and binding upon the parties.”
3. Regulation 23 of the RE Tariff Regulations, 2012
The Petitioners contended that the pass-through of RCM-GST was allowable under Regulation 23 of the RE Tariff Regulations, which excludes taxes and duties from the tariff. PSPCL’s response was that Regulation 3 of the RE Tariff Regulations confines their application to tariffs determined under Section 62, whereas the Petitioners’ tariff was discovered by way of a discount offered on the generic tariff pursuant to a bidding process conducted by PEDA.
Referring to its own Suo-Motu Order dated 19.07.2012 in Petition No. 35 of 2012, the State Commission held that bidding on the basis of a discount to the generic ceiling tariff, as directed by the State Commission itself, squarely amounts to determination of tariff under Section 63, rejecting the Petitioners’ plea to the contrary. The State Commission further held, relying on the Statement of Objects and Reasons to the RE Tariff Regulations, that Regulation 23 does not extend to taxes such as excise duty, sales tax and other levies that already form part of the normative capital cost, of which land is an enumerated component and observed that since the Petitioners had themselves justified leasing land as being more economical and instrumental to bidding a lower tariff, permitting a subsequent claim for the consequential GST liability “would tantamount to vitiating the entire competitive process” to the detriment of other bidders who structured their bids differently.
4. Exercise of the State Commission’s general regulatory power
As an alternate prayer, the Petitioners sought exercise of the State Commission’s general regulatory power under Section 86 of the Electricity Act, 2003 read with Regulations 69 and 71 of the PSERC (Conduct of Business) Regulations, 2005, contending that the absence of any provision addressing a post-bid Change in Law event made this a fit case for such intervention.
The Sztate Commission held that Section 86(1)(e) of the Electricity Act does not envisage grant of enhanced tariff and that the “difficulty” contemplated under the power to remove difficulty is one arising in giving effect to the Regulations and not one arising from application of the Regulations, as held by APTEL in Ratnagiri Gas and Power Private Ltd. Distinguishing the Supreme Court’s ruling in PGCIL v. Madhya Pradesh Power Transmission Company Ltd. & Ors.(2025) as applicable only to a situation involving an “unprecedented event not covered by any guidelines, regulations or contractual provisions”, the State Commission held that the present case, by contrast, concerned PPAs that explicitly and unequivocally provided that no additional payment would be payable by PSPCL. Relying on the Supreme Court’s decision in Gujarat Urja Vikas Nigam Limited v. Solar Semiconductor Power Company (India) Private Limited and Others (2017), the State Commission held that its regulatory powers “cannot travel beyond its own procedure so as to alter the terms and conditions of the PPA” and cannot be invoked “to substantially alter the terms of the contract between the parties so as to prejudice the interest of the consumers ultimately.”
The State Commission accordingly dismissed the Petitioners’ claim seeking additional payments or tariff adjustment on account of the Central Notification dated 08.10.2024 as being contrary to the agreed terms of the PPAs.
