New Filters: Energy (including nuclear energy, oil & gas, hydrogen & renewable energy)

If you are not happy with the results, please do another search

JSA Prism | Climate Change | July 2024

Please click here to download the Prism as a PDF.

New scheme guidelines for funding of testing facilities and support for standards development for green hydrogen

The Ministry of New and Renewable Energy, Government of India (“MNRE”) had launched National Green Hydrogen Mission (“Mission”) in January 2023. One of the important components of the Mission is to provide support for the development of quality and performance testing facilities and infrastructure to validate and certify technology used in the green hydrogen value chain.

In line with this initiative, the MNRE on July 4, 2024, notified scheme guidelines for funding of testing facilities, infrastructure and institutional support for development of standards and regulatory framework (“Scheme”) with a budgetary outlay of INR 200,00,00,000 (Indian Rupees two hundred crore) till financial year 2025-2026 (“Total Financial Support”). The objective of the Scheme is, inter alia, to create new facilities to test, validate and certify the components, technologies and processes being used in the green hydrogen value chain as well as identify gaps in the existing testing facilities.

Funding support and focus of the Scheme

Under the Scheme, financial support will be provided for setting up of new testing facilities/ infrastructure as well as upgradation of existing testing facilities.

The Scheme also intends to create and disseminate technology knowledge and experience. The Scheme is available to both public and private players. Further, necessary guidelines will be introduced to protect any intellectual property rights such as publications, patents, registered designs or trademarks, arising from the projects funded under this Scheme.

Implementation of the Scheme

The National Institute of Solar Energy is the Scheme Implementing Agency (“SIA”) for the Scheme. Additionally, a Steering Committee (“SC”), set up under the chairpersonship of the Secretary, MNRE and a Project Appraisal Committee (“PAC”) will be set up to oversee the projects allowed to avail the benefits under the Scheme.
For extending the benefits of the Scheme, the SIA will invite/call for proposals (“CfP”) for the testing facilities in consultation with MNRE.

Funding and disbursement

The following financial support will be made available under the Scheme:
- For Government Entities: MNRE will fund 100% of the capital cost for equipment, as well as commissioning and installation of equipment.
- For Non-Government Entities: MNRE will fund upto 70% of the capital cost for testing equipment, as well as commissioning and installation of equipment.
Support for operational expenses: Upto 15% of the Total Financial Support has been allotted for providing support for operational expenses spread over up to a period of 4 (four) years, from the date of completion of the project.
The funds for the project will be released in 3 (three) installments in the following manner:

- 20% at the time of selection;
- 70% as per the Project milestones specified in the CfP; and
- 10% upon completion of the Project.

SIA or MNRE may inspect and verify the project before the release of the installments. MNRE will monitor the expenditure of funds and for this SIA will be responsible for issuing utilisation certificates as per the provisions of General Finance Rules, 2017.

Project timelines

Project timeline: New facilities should be completed in 18 (eighteen) months from the date of sanction provided by MNRE. In cases where testing and certification projects are required to be upgraded, the project is to be completed within 12 (twelve) months. SIA may provide an extension of upto 6 (six) months, with the approval of the SC, without imposing any penalty. However, in case of any delay in completion beyond the extension period is subject to the approval of MNRE, and suitable penalties will be imposed as specified in the CfP.

Project completion: Upon completion of the project, SIA will issue a Project Completion Report (“PCR”) to MNRE through PAC, in the prescribed format. The PCR is required to contain technical aspects of the project, challenges encountered during the implementation and the outcome of the project. It should also contain recommendations for future projects.

Conclusion

The Schseme and the funding support proposed is a lucrative step towards fostering and enhancing participation from the private and government entities for setting up test facilities in the green hydrogen sector. Such financial support will help in faster adoption of green hydrogen and will further the development and standardisation of green hydrogen value chain components and processes. Moreover, the Scheme will also help in developing a data repository which will help in the development of future policy and testing standards.

This Prism has been prepared by:

Venkatesh Raman Prasad
Partner

Ashish Suman
Partner

Ashwin Nayar
Principal Associate

Shruti Maheshwari
Associate

For more details, please contact [email protected]

Tags Climate Change, Green Hydrogen, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates

JSA Prism | Power | June 2024

Please click here to download the Prism as a PDF.

Guidelines issued to streamline the determination and payment of compensation for transmission line right of way

With the aim of expediting construction of transmission lines and ensuring fair compensation, the Ministry of Power, Government of India (“MoP”) vide notification dated June 14, 2024, has issued new guidelines for payment of right of way (“RoW”) compensation for laying transmission lines[1], including those in urban areas (“Guidelines”)[2]. These Guidelines supersede the earlier guidelines issued by MoP on October 15, 2015, June 16, 2020, and June 27, 2023.

States/ union territories may adopt these guidelines in their entirety or issue their own modified guidelines. However, in the absence of guidelines issued by the state governments, these Guidelines will apply for determining compensation.

Key Highlights

The compensation under the Guidelines applies only to high-voltage transmission lines (i.e., 66 kV (sixty-six kilovolt) and above). It does not apply to sub-transmission lines or distribution lines (i.e., below 66 kV (sixty-six kilovolt) voltage level).
Compensation under these Guidelines is in addition to the compensation for normal crop and tree damages which are determined in accordance with other central and state laws.
The District Magistrate or District Collector or Deputy Commissioner, as determined, will be the authority for determining compensation.
Compensation will ordinarily be based on the circle rate, guideline value, rates of the land in terms of the respective stamp act legislation, except where the market rate exceeds such rates. In such case, the land value will be determined based on the prevailing market rate, as ascertained by the District Magistrate/District Collector/Deputy Commissioner in the manner as specified by the respective state government.
Compensation will include: –
1. Tower Base: 200% of the land value for the area occupied by the tower base i.e., area enclosed by the 4 (four) legs of the tower at ground level, plus an additional 1 (one) meter extension on each side.
2. RoW Corridor: 30% of the land value under the Row Corridor, in terms of the Central Electricity Authority (Technical Standards for construction of Electrical Plants and Electric Lines) Regulations, 2022 (Schedule VII). No construction activity is permitted within the RoW of the transmission line.

States/ union territories are permitted to decide a higher rate depending on the area and urgency of the works.

Where owners have been offered or have accepted an alternate mode of compensation by the concerned corporation/municipality under Transfer of Development Rights (TDR) policy of the state/union territory, the licensee /utility shall deposit the tower base and RoW corridor compensation amounts with the corporation/ municipality, local development authority or the state government concerned.
Technologies to optimize space in RoW constrained areas are recommended, including steel pole structures, narrow-based lattice towers, and more.
A detailed standard operating procedure for landowner identification, compensation payment, and grievance resolution is included to ensure transparency and efficiency.
Compensation is to be paid upfront and one-time, preferably through digital methods like AEPS and UPI.

Conclusion

These guidelines aim to expedite the construction of transmission lines while ensuring fair and timely compensation to landowners, addressing potential land value diminution due to overhead lines or underground cables.

This Prism has been prepared by:

Abhishek Munot
Partner

Malcolm Desai
Principal Associate

Purvi Shrivastava
Associate

For more details, please contact [email protected]

[1] Under Sections 67 and 68 of the Electricity Act, 2003 read with Sections 10 and 16 of the Indian Telegraph Act, 1885.

[2] MoP F. No. 3/4/2016 – Trans – Part (4)

Tags Government of India, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Ministry of Power

JSA Prism | Climate Change | June 2024

Please click here to download the Prism as a PDF.

Draft disclosure framework on climate-related financial risks, 2024

Climate change is increasingly recognized globally as a significant financial risk for banks and financial institutions, posing threats to the soundness and resilience of the overall financial system. Recognising the need for a better, consistent, and comparable disclosure framework for preventing mispricing of assets and misallocation of capital, the Reserve Bank of India (“RBI”) has proposed the ‘Draft Disclosure framework on Climate-related Financial Risks, 2024’ (“Disclosure Framework”) to establish a standard mandatory disclosure framework for regulated entities (“REs”).

Scope of Application

The Disclosure Framework applies to REs i.e., scheduled commercial banks (“SCBs”)[1], Tier-IV Primary (Urban) Co-operative Banks (“UCBs”), All-India Financial Institutions (“AIFIs”)[2], and top and upper layer Non-Banking Financial Companies (“NBFCs”).

These entities, collectively referred to as ‘RE’ in the Disclosure Framework, are required to disclose information specified in the Disclosure Framework on a standalone basis.

Adoption of the disclosure framework is voluntary for REs not listed above.

Foreign banks operating in India are also required to make disclosures specific to their operations in India.

Key Areas of Disclosure

The Disclosure Framework is structured around 4 (four) thematic pillars of disclosure:

Governance: REs are required to detail governance processes, controls, and procedures for identifying, assessing, managing, and overseeing climate-related financial risks and opportunities. This includes disclosing the board of director’s oversight and senior management’s role in addressing these risks.[3]
Strategy: REs must outline their strategy for managing climate-related financial risks and opportunities, including identifying risks over different time horizons, assessing impacts on business and financial planning, and ensuring strategy resilience across various climate scenarios.[4]
Risk Management: The framework emphasizes detailing processes to identify, assess, prioritize, and monitor climate-related financial risks and opportunities. REs should disclose how these processes integrate into the overall risk management framework.[5]
Metrics and Targets: REs are expected to disclose performance metrics related to climate-related financial risks and opportunities, such as greenhouse gas emissions and associated risks, targets set to manage these risks, and progress against those targets.[6]

REs are required to disclose, at a minimum, the detailed key disclosures as provided in Annexure – I to the Disclosure Framework. Key disclosures are categorised into 2 (two) sections: baseline disclosure and enhanced disclosures. While SCBs, AIFIs, and NBFCs are mandated to report both baseline and enhanced disclosures, UCBs are only obligated to report baseline disclosures. However, UCBs have the option to voluntarily provide enhanced disclosures, if they choose to do so.

Implementation Timeline

The commencement timeline for disclosures is staggered and varies for different types of entities, with SCBs, AIFIs, and NBFCs starting from FY 2025-26 for Governance, Strategy, and Risk Management, and FY 2027-28 for Metrics and Targets. UCBs are required to begin disclosures from FY 2026-27 onwards for Governance, Strategy, and Risk Management, and FY 2028-29 for Metrics and Targets.[7]

Oversight and Validation

Furthermore, the disclosed information will undergo internal control assessments and review by the board of directors or a board committee. It is mandatory for REs to include these disclosures as part of their financial results/statements on their websites to ensure transparency and accountability.[8]

Analysis

The Disclosure Framework underscores the growing need to address climate-related financial risks within the financial sector. However, it’s worth noting that currently, there is no singular law consolidating Environmental, Social, and Governance (“ESG”) compliances. For instance, the Securities and Exchange Board of India (“SEBI”) has implemented reporting requirements for top 1000 (one thousand) listed entities through the Business Responsibility and Sustainability Report (“BRSR”) as part of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

While the BRSR primarily targets listed entities, the Disclosure Framework extends their purview to a banks and financial institutions. Unlike the BRSR, which focuses on the disclosure of various ESG-related aspects, the Disclosure Framework specifically emphasizes the disclosure of potential climate-related challenges. Moreover, the Disclosure Framework provides REs the opportunity to identify and integrate potential climate-related risks into their credit decisions.

This focused approach of the Disclosure Framework reflects the urgent need to mitigate the impact of climate change on the Indian financial sector.

This Prism has been prepared by:

Soumitra Majumdar
Partner

Megha Arora
Partner

Abhishek Rohatgi
Associate

For more details, please contact [email protected]

[1] The Disclosure Framework excludes Local Area Banks, Payments Banks and Regional Rural Banks from the category of SCBs.

[2] The Disclosure Framework includes EXIM Bank, NABARD, NaBFID, NHB and SIDBI in the category of AIFIs.

[3] Para 7.1 of the Disclosure Framework.

[4] Para 7.2 of the Disclosure Framework.

[5] Para 7.3 of the Disclosure Framework.

[6] Para 7.4 of the Disclosure Framework.

[7] Para 8 of the Disclosure Framework.

[8] Para 9 of the Disclosure Framework.

Tags Climate Change, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, RBI

JSA Prism | Energy | June 2024

JSA successfully represented T.P. Kirnali Limited (a group company of Tata Power) before Maharashtra Electricity Regulatory Commission, in obtaining Change in Law compensation granted due to increase in rate of goods and services tax and basic customs duty

By an order dated May 21, 2024 (“Order”, the Hon’ble Maharashtra Electricity Regulatory Commission (“MERC”) in Case No. 244/AD/2022 held that T.P Kirnali Limited was impacted due to increase in rate of goods and services tax (“GST”) and basic customs duty (“BCD”) and is accordingly entitled for a total compensation of INR 15,48,00,000 (Indian Rupees fifteen crore forty-eight lakh) along with carrying cost.

Brief Facts

In order to meet Solar Renewable Purchase Obligation requirement, Maharashtra State Electricity Distribution Company Limited (“MSEDCL”) issued a request for selection for procurement of 500 MW (five hundred megawatt) of solar power from Intra-State Grid Connected Solar Plant (Phase-V), on a long-term basis, under a competitive bidding process. Tata Power Renewable Energy Ltd. (“TPREL”) was selected for supplying 100 MW (one hundred megawatt) solar power at the tariff of INR 2.90/kWh (Indian Rupees two paise ninety per kilowatt hour). Accordingly, TPREL set up T.P. Kirnali Limited (“Kirnali”) as a wholly owned special purpose vehicle for supplying power to MSEDCL. A power purchase agreement (“PPA”) was executed between Kirnali and MSEDCL on September 16, 2020.

For setting up the project, 2 (two) separate contracts (viz. Supply Contract and Civil Works/ Service Contract) were executed between Kirnali and Tata Power Solar Systems Ltd. (“TPSSL”). At the time of the submission of the bid, the taxes payable were as follows:

BCD was payable at the rate of 5% on import of solar inverters and other items. Additionally, a social welfare surcharge (“SWS”) at the rate of 10% was payable on the BCD amount. Thereafter, GST at the rate of 8.9% was payable on BCD and SWS.
A composite GST (i.e. Central GST, State GST and Integrated SGT) at the rate of 8.9% was payable on Supply and Civil Works/ Service Contracts for setting up of solar power plants [i.e., 5% on 70% (i.e. 3.5%) of the consolidated taxable value of the Supply Contract and Civil Works/ Service Contract and 18% on the remaining 30% (i.e. 5.4%) of the consolidated taxable value of the Supply Contract and Civil Works/ Service Contract].
After the bid-submission date, the Ministry of Finance, Government of India vide notification dated February 1, 2021, increased BCD from 5% to 20% on the import of solar inverters and other items like connectors etc. (i.e after cutoff date of February 28, 2020). The said notification was effective from February 2, 2021. Due to the increase in the rate of BCD, Kirnali was also impacted towards payment of SWS at the rate of 10% and GST at the rate of 8.9% payable on the increased rate of BCD.
On September 30, 2021, the Ministry of Finance on the recommendations of the GST Council issued notifications thereby increasing the rate of GST from 8.9% to 13.8%. These notifications dated February 1, 2021 and September 30, 2021 took place after the bid submission date (i.e. February 28, 2020) and hence qualified as Changes in Law for which Kirnali was entitled for compensation.

Relevant Issues

Whether notifications dated February 1, 2021 and September 30, 2021 amount to Change in Law?
Whether Kirnali is entitled to claim Change in Law considering its undertaking dated September 9, 2021, given to MSEDCL?
Whether Change in Law can be claimed for invoices raised post commissioning?
Whether MSEDCL’s claim of safeguard duty compensation is maintainable?

Findings of MERC

MERC has held the following:

Kirnali is entitled for Change in Law compensation on account of increase in GST and BCD.[1]
Any Change in Law relief would be governed by provisions of the PPA and is to be decided by MERC. A developer’s undertaking to not claim increase in project cost or upward revision of tariff for period of extension of Scheduled Commercial Operation Date (“SCOD”), pursuant to the office memorandums dated May 12, 2021 and June 29, 2021 issued by the Ministry of New and Renewable Energy (“MNRE”), cannot be held against the developer. MNRE in its subsequent office memorandums dated September 15, 2021, and November 3, 2021 has clarified that such undertaking is limited to developer not claiming termination of PPA or increase in project cost for reasons other than Change in Law for the period of extension granted.[2]
Invoices towards supply of service raised post commissioning of project are also eligible for Change in Law relief, provided such invoice are raised within 30 (thirty) days from the date of supply of such service.[3]
MSEDCL’s claim of Safeguard Duty cannot be allowed since the developer has not financially gained due to non-levy of Safeguard Duty. Notification No. 1 of 2018 dated July 30, 2018, clearly provided that there would be no Safeguard Duty after July 29, 2020. In the present case, commissioning of the project would have been beyond July 29, 2020, for which no Safeguard Duty was applicable. This was factored into the bid accordingly.
Carrying cost is allowed at the rate of 1.25% plus SBI MCLR per annum on the compensation amount from the date of payment till date of the Order.[4]
MSEDCL to choose between payment of compensation on lumpsum or per unit basis. This decision is to be communicated to the developer within a month of the Order.[5]

Conclusion

MERC in a progressive Order rightly followed the settled jurisprudence on Change in Law compensation by granting relief for impact on account of increase in GST and BCD. It disregarded extraneous submissions of MSEDCL to restrict compensation due to the developer. Kirnali’s undertaking dated September 9, 2021, was also rightly not held against its claim of Change in Law, since such undertaking only came in context of specific MNRE office memorandums. The undertakings required by these office memorandums have later been clarified to not be in context of Change in Law. In a progressive measure, MSEDCL has been afforded the opportunity at the outset to elect between lumpsum payment or a staggered payout should MSEDCL choose to save on carrying cost.

The JSA team was represented by:

Kunal Kaul
Partner

Samikrith Rao
Senior Associate

The prism is prepared by:

Abhishek Munot
Partner

Kunal Kaul
Partner

Samikrith Rao
Senior Associate

For more details, please contact [email protected]

[1] para 16-16.11 @ Pg. 16-21

[2] Para 20.3 @ Pg. 23

[3] Para 19-19.5 @ Pgs. 21-22

[4] Para 22.5 @ Pg. 26

[5] Para 23-24 @ Pgs. 26-27

Tags Energy, JSA, Leading Law Firm, Leading Lawyers

JSA represents Aditya Birla Renewable Energy Limited in its project contracts for 551.25 MW wind power projects in Rajasthan’s Barmer district and Gujarat’s Bhuj district.

JSA represented Aditya Birla Renewable Energy Limited, the renewable energy arm of the Aditya Birla Group, in its project contracts for setting-up 551.25 MW wind power projects across locations in the Barmer district of Rajasthan and the Bhuj district of Gujarat.

Under the terms of the agreements finalised with Suzlon, one of India’s largest renewable energy solutions providers, Suzlon will supply the wind turbines and execute the project, including erection and commissioning, in Rajasthan, while Suzlon will supply and supervise the commissioning of the project in Gujarat. Suzlon will also undertake comprehensive operations and maintenance services post-commissioning at both the sites.

Our Transaction Team Comprised Partner – Megha Arora, Associate – Abhishek Rohatgi

Tags Green Energy, JSA, Leading Law Firm, Leading Lawyers

JSA Prism | Energy | June 2024

Please click here to download the Prism as a PDF.

The developer of a SEZ cannot ipso facto be conferred the status of a deemed distribution licensee under the Electricity Act, without scrutiny or application

In a landmark judgment, the Hon’ble Supreme Court of India (“Supreme Court”) in M/s. Sundew Properties Limited v. Telangana State Electricity Regulatory Commission & Anr.[1], has harmoniously interpreted the provisions of the Electricity Act, 2003 (“Electricity Act”) and the Special Economic Zone Act, 2005 (“SEZ Act”) to hold that: (a) A developer of a special economic zone (“SEZ”) is a deemed distribution licensee under the Electricity Act, however, such recognition does not specifically exempt it from making an application for ‘recognition’ as a deemed distribution licensee; (b) 6^th proviso to Section 14 of the Electricity Act and consequently Distribution of Electricity Licence (Additional Requirements of Capital Adequacy, Creditworthiness and Code of Conduct) Rules, 2005 (“2005 Rules”) are not applicable to a developer of SEZ; (c) State Electricity Regulatory Commissions are not empowered to impose extraneous conditions of meeting capital adequacy and/or creditworthiness before recognising a developer of a SEZ as a deemed distribution licensee under the Electricity Act.

Brief Facts

On March 3, 2010, the Ministry of Commerce and Industry, Government of India (“MoCI”) by its Notification No. SO 528(E) (“2010 Notification”) introduced a proviso to Section 14(b) of the Electricity Act, granting SEZ developers the status of deemed distribution licensees under the Electricity Act.
Pursuant to the 2010 Notification, M/s. Sundew Properties Limited (“Appellant”) (a ‘developer’ under the SEZ Act) approached the Andhra Pradesh Electricity Regulatory Commission seeking ‘recognition’ as a deemed distribution licensee under the Electricity Act. Upon the Andhra Pradesh Reorganization Act, 2014 coming into force, the application of the Appellant was transferred to the Telangana State Electricity Regulatory Commission (“TSERC”).
On February 15, 2016, the TSERC passed an order identifying and accorded the status of a deemed licensee to the Appellant. However, the grant of status was made conditional upon the Appellant satisfying the requirements under the 2005 Rules read with the Andhra Pradesh Electricity Regulatory Commission (Distribution Licence) Regulations, 2013 (“2013 Regulations”). Consequently, the promoters of the Appellant were directed to infuse an additional capital of INR 26,90,00,000 (Indian Rupees twenty-six crore ninety lakh) into its Power Distribution business.
Aggrieved by TSERC’s Order, the Appellant filed Appeal No. 3 of 2017 before the Appellate Tribunal for Electricity (“APTEL”). On September 27, 2019, APTEL dismissed the Appellant’s Appeal. Accordingly, the Civil Appeal was filed before the Supreme Court.

Issue

The issues before the Supreme Court were to adjudicate:

whether the designation of an entity as a SEZ developer by the 2010 Notification ipso facto qualifies the entity to be a deemed distribution licensee, obviating the need for an application under Section 14 of the Electricity Act?
whether Regulation 12 of the 2013 Regulations, and by implication Rule 3(2) of the 2005 Rules, apply to a SEZ developer recognized as a deemed distribution licensee under the proviso to Section 14(b) of the Electricity Act read with Regulation 13 of the 2013 Regulations?

Findings

The Supreme Court noted that:

Provisos to Section 14 of the Electricity Act distinguish between entities that are ipso facto deemed distribution licensees and those that merely declared as deemed licensees without clarity on the necessity of making an application to obtain a licence. Thus, entities not explicitly exempted are required to make an application to the appropriate commission.
The 2010 Notification confers ‘deemed licensee’ status on SEZ developers through proviso to Section 14(b) but does not explicitly exempt them from the requirement to obtain a license. Thus, the legislative intent is that the developer of SEZ should obtain a license by making an application in terms of Regulation 13. TSERC is empowered to scrutinize these applications in accordance with the law, to the limited extent of provisions applicable to deemed licensees. Verification and acceptance recognize their status as deemed licensees.
Status of an SEZ developer as a deemed licensee emanates from the 2010 Notification, which introduced the proviso to Section 14(b). Reading anything beyond this would defeat the very purpose of the proviso and the concept of deemed license. Therefore, the sixth proviso to Section 14 does not apply to deemed licensees, and, therefore, the 2005 Rules do not apply to the Appellant.
Regulation 12 of the 2013 Regulations pertains solely to regular distribution licensees as defined under Regulation 2(h), and not to deemed licensees. ‘Reading up’ Regulation 12 to expand its ambit to include within it deemed licensees, especially when the Electricity Act does not stipulate any such inclusion, runs counter to the proviso to clause (b) of Section 14 of the Electricity Act. This would be impermissible.
Hence, the condition stipulated in Rule 3(2) of the 2005 Rules, as imposed by the TSERC with a direction to infuse additional capital of INR 26,90,00,000 (Indian Rupees twenty-six crore ninety lakh), is not justified and contrary to the statutory scheme.

Conclusion

The Supreme Court’s Judgment puts to rest a decades old controversy of Electricity Regulatory Commissions applying additional regulatory stipulations while identifying deemed distribution licensees. The judgment clarifies the role of Regulatory Commissions in identifying such deemed licensees and the scrutiny required while processing such applications.

It provides an impetus to expeditious operationalizing of distribution licensee status by SEZ developers, and therefore providing a choice of supplier to consumers in SEZs. In Telangana and Andhra Pradesh, no SEZ had operationalized their deemed distribution licensee status due to this overhang, which now stands resolved. SEZ developers (and the units in such SEZs) now gain a significant competitive edge since the incumbent non-SEZ distribution licensee’s tariff is typically higher.

Before the Supreme Court, the JSA team was represented by:

Abhishek Munot
Partner

Kunal Kaul
Partner

Malcolm Desai
Principal Associate

Samikrith Rao Puskuri
Senior Associate

This Prism has been prepared along with:

Aditya Ajay
Senior Associate

Simran Kohli
Associate

For more details, please contact [email protected]

[1] Civil Appeal No. 8978/2019, dated May 17, 2024.

Tags Electricity Act, Energy, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Supreme Court

JSA Prism | Climate Change | June 2024

Please click here to download the Prism as PDF.

Exemption for Renewable Energy plants located inside special economic zone or export-oriented units supplying power exclusively for production of Green Hydrogen

The Ministry of New and Renewable Energy (“MNRE”), vide 2 (two) office memorandums each dated May 27, 2024, has issued exemptions for renewable energy (“RE”) plants located inside a special economic zone (“SEZ”) or export oriented unit (“EOU”) and supplying power exclusively for production plants of green hydrogen (or its derivatives), which are located inside a SEZ or set up as an EOU (either the same or different SEZ/EOU) from purview of the following:
- the Approved List of Models and Manufacturers (“ALMM”) for Solar PV Modules, issued by MNRE under the Approved Models and Manufacturers of Solar Photovoltaic Modules (Requirements for Compulsory Registration) Order, 2019, including all clarifications/amendments and guidelines thereunder; and
- the Revised List of Models and Manufacturers (“RLMM”) for Wind Turbine Models, issued by MNRE under the Guidelines for Development of Onshore Wind Power Projects issued vide F.No.66/183/2016-WE dated October 22, 2016, including all clarifications/amendments and procedures thereunder.
The ALMM mandate requires solar project developers to purchase modules from an approved list, serving as a non-tariff measure to promote domestic manufacturing. Similarly, the RLMM provides a list of type and quality certified wind turbine models eligible for installation in the country.
These exemptions are intended to facilitate the swift deployment of renewable energy infrastructure, which is essential for the production of green hydrogen and its derivatives within SEZ/EOU. Further, these exemptions will apply to the RE plants to be commissioned before December 31, 2030, to supply power to plants for production of green hydrogen and its derivatives

Conclusion

From an industry perspective, these exemptions represent a significant and welcome action by the MNRE. By removing the requirement for RE plants within SEZs or EOUs to adhere to the ALMM for solar PV modules and the RLMM for wind turbine models, the MNRE has effectively lowered barriers to the rapid deployment of renewable energy infrastructure critical for green hydrogen production. This move is expected to result in reduced costs for green hydrogen producers, as they will have greater flexibility in sourcing power. Consequently, these producers can access more competitively priced options, thereby enhancing their ability to produce green hydrogen and its derivatives economically. Overall, this initiative not only supports the industry’s growth but also aligns with India’s broader renewable energy and sustainability goals.

This Prism has been prepared by:

Vishnu Sudarsan
Partner

Sugandha Somani Gopal
Partner

Asmita Maan
Associate

For more details, please contact [email protected]

Tags Climate Change, Green Hydrogen, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Renewable Energy

JSA Prism | Energy | May 2024

Please click here to download the Prism as PDF.

Supreme Court upholds the decision of APTEL directing that there is no statutory basis to levy additional reliability charge for uninterrupted power supply to bulk consumers.

The Hon’ble Supreme Court of India (“Supreme Court”), in Maharashtra State Electricity Distribution Company Limited v. M/s. JSW Steel Ltd. & Anr. (“Civil Appeal”)[1], has upheld the decision of the Appellate Tribunal for Electricity (“APTEL”) that the Maharashtra State Electricity Distribution Co. Ltd. (“Appellant”) had no statutory basis to impose an additional reliability charge for uninterrupted power supply to bulk consumers.

Brief Facts

In terms of the Tariff Order dated October 20, 2006, passed by the Maharashtra Electricity Regulatory Commission (“MERC”), the Appellant imposed an additional supply charge for uninterrupted power supply to its bulk consumers, including Respondent No. 1 / JSW Steel Ltd. (“JSW Steel”).
On June 20, 2008, MERC by its Tariff Order discontinued the imposition of additional supply charges and directed the Appellant to refund the additional supply charge collected during Financial Year (“FY”) 2006-07 and FY 2007-08 from bulk consumers. Pursuant to this, the Appellant preferred a petition before the MERC seeking approval for recovery of reliability charges for implementing ‘Zero Load Shedding’ in the Pen Circle area in Maharashtra.
On June 15, 2009, MERC by its order allowed the imposition of a reliability charge for the period June 16, 2009, till March 31, 2010, (“Order”) which was made payable by all the consumers in the Pen Circle area, including JSW Steel.
Aggrieved by the Order, JSW Steel challenged the said Order before APTEL in Appeal No. 135 of 2009. On December 14, 2009, APTEL by its Judgment inter alia set aside the Order. Subsequently, the Appellant challenged the Judgment of APTEL before the Supreme Court in the present Civil Appeal.
The Appellant contended that:
- The MERC has adequate powers to bring in schemes to improve the nature of Supply in a particular area in terms of Section 62(3) of the Electricity Act, 2003 (“Electricity Act”).
- Non-participation of JSW Steel in the public hearing held by MERC, despite consuming about 45% of the electricity in Pen Circle area, amounts to deemed consent given by JSW Steel to pay the reliability charges. Similar charges are being paid by the High Tension (“HT”) industrial consumers in other regions of Maharashtra.
JSW Steel contended that:
- JSW Steel, being a continuous process industry and a large-scale consumer, was not subjected to load shedding by the Appellant.
- JSW Steel was already paying higher tariffs compared to those for HT non-continuous process industries.

Issue

The issues before the Supreme Court were to adjudicate:

Whether imposition of reliability charge by the Appellant was legal?
Whether JSW Steel was liable to pay the reliability charge?
Whether JSW Steel, being affected by the levy of the reliability charge, had a right to appeal against MERC’s Order under Section 111 of the Electricity Act?

Findings

While upholding the decision of APTEL in favour of JSW Steel, the Supreme Court observed that:

There is no statutory basis, either under Section 62(3) of the Electricity Act or the Rules and Regulations framed thereunder by the MERC, which supports the levy of reliability charges. Thus, the Appellant did not have any statutory basis for imposition of reliability charge.
Vidharba Industries Association, of which JSW Steel is a member, had already objected to the imposition of the reliability supply charge, thereby representing the interest of JSW Steel.
Section 111 of the Electricity Act provides for a statutory appeal against an Order of the Appropriate Commission. JSW Steel, being directly affected by the levy of the reliability charge, was a “person aggrieved” within the purview of Section 111 of the Electricity Act and hence was entitled to challenge the legality of the Order passed by MERC.
Nothing in the Electricity Act suggests that a consumer who does not participate in the Appropriate Commission’s public hearing and is aggrieved by an order of the Appropriate Commission is disentitled to prefer an appeal.
JSW Steel, being a continuous process industry on express feeder, had paid a higher tariff during the period from July 2009 till April 2010 to get supply without load-shedding. Thus, JSW Steel had already paid a higher tariff for uninterrupted supply, negating the need for an additional reliability charge.

Conclusion

The Supreme Court by the Civil Appeal has re-affirmed the law laid down by APTEL that charges cannot be levied by Distribution Companies on its consumers without any statutory basis under the Electricity Act. Bulk / Industrial consumers are already subjected to higher tariffs which negate the need for the imposition of an additional reliability charge for implementing ‘Zero Load Shedding’.

This Prism has been prepared by:

Anupam Varma
Partner

Aditya Ajay
Senior Associate

Akshata Sharma
Associate

For more details, please contact [email protected]

[1] Civil Appeal No. 8413 of 2009, dated May 17, 2024.

Tags APTEL, Energy, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Supreme Court

ESG-focussed Reform for International Investment Agreements: A Potential Solution

Late last year, the UN Special Rapporteur on Human Rights and the Environment presented a scathing report to the UN General Assembly on investor-state dispute resolution (‘ISDS’) and its consequences for climate change and human rights. The report termed ISDS an ‘unjust, undemocratic and dysfunctional process’, which ‘perpetuates colonial extractivism and exacerbates inequality’.

While the report has met with some criticism (see here), the prevalent skepticism about ISDS, or for that matter towards international investment agreements (‘IIAs’) in general, is well-documented. This hostility has been fuelled in major part by the increasing ESG obligations of States. As States introduce more regulations to address key ESG issues, particularly climate change, labour and the environment, the conflict between such regulation and investor rights has become increasingly likely.

Please click here to read the full article by Anjali Anchayil, published in Oxford Business Blog.

Tags ESG, Human Rights, ISDS, JSA, Leading Law Firm, Leading Lawyers

US$ 450 million strategic investment in Hero Future Energies Group

JSA advised and assisted Hero Future Energies Global Limited (HFE Global) and Hero Future Energies Private Limited (HFE India) in relation to its private equity fund raise of US$ 450 Million (i.e. around INR 3600 crore) by global investment and private equity firm KKR (Kohlberg Kravis Roberts) in HFE Global. The transaction involved complex structuring and issues across UK and India jurisdictions.

Based in New York, KKR is one of the world’s largest global investment funds with more than US$ 500 billion of assets under its management, including investments in renewable energy sector in India.

HFE Group is focused on futuristic and clean energy and has presence in select international geographies around the world. IFC (World Bank) and Masdar are existing investor in HFE Group. Hero Future Energies is a leading independent power producer in India.

This investment will help HFE grow and expand its renewable energy capacity and capabilities in areas like solar, wind, battery storage, and green hydrogen, as well as into new markets over time. Further, this investment leverages KKR’s expertise in India and renewable energy. HFE’s clean energy solutions are crucial in assisting companies in decarbonizing as energy needs rise.

The transaction also required the filing of a merger notification with the Competition Commission of India and seeking necessary clarifications / permissions from the Reserve Bank of India.

Our Transaction Team Comprised Lead Partner – Manvinder Singh, Partner – Anant Mishra, Senior Associate – Parnik Saxena, and Associate – Pragya Pandey

Our Projects Advice Team Comprised Partner – Vishnu Sudarsan, Shashank Singh, andSiddhant Thakar.

Our Competition Team Comprised Partner – Vaibhav Choukse, Senior Associate – Nripi Jolly.

Tags Energy, Investment, JSA, Leading Law Firm, Leading Lawyers

New Filters: Energy (including nuclear energy, oil & gas, hydrogen & renewable energy)

New scheme guidelines for funding of testing facilities and support for standards development for green hydrogen

Guidelines issued to streamline the determination and payment of compensation for transmission line right of way

Draft disclosure framework on climate-related financial risks, 2024

JSA successfully represented T.P. Kirnali Limited (a group company of Tata Power) before Maharashtra Electricity Regulatory Commission, in obtaining Change in Law compensation granted due to increase in rate of goods and services tax and basic customs duty

Brief Facts

Relevant Issues

Findings of MERC

Conclusion

The developer of a SEZ cannot ipso facto be conferred the status of a deemed distribution licensee under the Electricity Act, without scrutiny or application

Exemption for Renewable Energy plants located inside special economic zone or export-oriented units supplying power exclusively for production of Green Hydrogen

Supreme Court upholds the decision of APTEL directing that there is no statutory basis to levy additional reliability charge for uninterrupted power supply to bulk consumers.

Deals & Matter Corner

Articles & Publications

JSA Live

Blogs

Disclaimer & Confirmation