India Issues Instructions For Pass Through Option

• Indian Ministry of Power has issued guidelines for CERC to ensure quick implementation of a 'pass through option' for power generating companies
• The affected party, generating companies, are a worried with the time taken to pursue the pass through option that leads to severe cash flow problems to the generating companies, according to the ministry
• This will address the issue, as well as, ensure sustainability of the electricity market in the larger public interest

Taking cognizance of the problems faced by power generating companies in ensuring timely implementation of a 'pass-through' option for their projects, the Indian Ministry of Power has issued instructions to quicken the process.

In a letter addressed to the Central Electricity Regulatory Commission (CERC), the ministry has acknowledged the problems faced by generating companies. It reads, "The difficulty is mainly because of considerable time being consumed in the approval process resulting into severe cash flow problems to the generating companies. This has also resulted in stress in the power sector."

It has clarified the following points in its letter:

• Even if it is not mentioned specifically in the PPA, any change in domestic duties. Levies, cess and taxes imposed at state or central level, may be treated as pass through.
• The commission will determine the per unit impact under change in law
• Order for pass through giving the calculation for per unit impact will be issued within 30 days of filing of petition
• Impact of change in law will be effective from the date of change in law
• If CERC has already passed an order to allow pass through of changes under change in law, it will apply to all cases ipso facto and no additional petition would need to be filed in this regard.

These measures, according to the ministry, will ensure sustainability of the electricity market in the larger public interest, and also address the issue.

Background

Indian solar power project developers had been worried when the government started investigating q safeguard duty petition against imported solar cells at the behest of domestic solar products manufacturers (see ISMA Calls For Safeguard Duty On Imported Cells). It then brought in a 'pass through option' to relieve the fears of developers that would allow them to pass through any change in law that occurs after the award of bids.

However, such measures have done little to cheer up the developer community that sees several years of legal fight to avail the provision. Mercom India Research lauds the initiative, yet says more clarity is needed to set the process and its timely implementation.

Meanwhile, the Orissa High Court will take up the case against safeguard duty imposition for the next hearing scheduled for September 19, 2018. The high court had put a temporary stay on it (see Court Pauses India's Safeguard Duty).