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Unpacking The ₹30 Lakh Bank Guarantee Dispute In The Quest For 300 Mw Wind Energy Access

By - King Stubb & Kasiva on December 16, 2023

Introduction:

In a decision dated December 6, 2023[1], the wind energy sector witnessed a noteworthy development, shedding light on the complexities experienced by stakeholders. Sitac Kabini Renewables Private Limited (SKRPL) filed a petition under Section 79(1)(f) of the Electricity Act, 2003[2] seeking adjudication of a dispute arising from the revocation of Long-Term Open Access (LTOA) by Power Grid Corporation of India Limited (PGCIL). The dispute revolves around the petitioner’s failure to submit a timely Bank Guarantee, a requisite under the Long-Term Access Agreement.

Key Points:

Sitac Kabini Renewables won a bid from Solar Energy Corporation of India (SECI) for a 300 MW ISTS-connected Wind Power Project. Initially intending to connect to the Existing Bhuj GSS, complications led to a shift in the delivery point to Bhuj-II PS (GIS) (New). Despite these uncertainties, the petitioner secured Stage II Connectivity and Long-Term Access (LTA) at Bhuj-II PS.

However, the dispute escalated as the petitioner faced challenges in obtaining clarity on the location of the new substation, and its failure to furnish a bank guarantee of ₹15 Crores, as mandated by Connectivity Regulations, led to a notice from the respondent, giving a 7-day window for submission. Failing to comply within this period threatened the revocation of the LTA.

In response, SKRPL sought an extension for the submission of the construction phase bank guarantee. The turning point in the dispute came when the LTA was revoked on June 3, 2019, followed by the invocation of the ABG on June 27, 2019.

Undeterred, the petitioner filed a fresh application for LTOA on 28.12.2019, granted on 19.02.2020, along with a new Long-Term Access Agreement. The petitioner sought a refund of the Application Bank Guarantee of ₹30 lakh, conceding other prayers.

PGCIL argued that the petitioner’s non-compliance led to the revocation, emphasizing the critical nature of the timely submission of the LTAA Bank Guarantee. The petitioner, however, pointed to uncertainties arising from changes in the delivery point and delays in regulatory processes.

The regulatory framework, including the Connectivity Regulations 2009 and Detailed Procedure, delineates conditions for encashing the Application Bank Guarantee. Citing a Commission order dated 30.12.2019, the petitioner sought relaxation, but the Commission noted distinctions between the cases.

In its decision, the Commission rejected the petitioner’s request for a refund, underlining the clarity in the regulatory framework regarding conditions for encashment. Failure to furnish the LTAA Bank Guarantee within the stipulated period resulted in the revocation of LTA and encashment of the Application Bank Guarantee.

Conclusion:

This case illuminates the challenges faced by renewable energy projects in navigating the set of rules and regulations. These guidelines, often seen as the guardian of industry standards, require careful following of established procedures and timelines. As we anticipate further developments in this sector, it highlights the balance between ambition, regulation, and the ever-evolving landscape of sustainable energy.


[1] https://cercind.gov.in/2023/orders/277-MP-2019.pdf

[2] https://cercind.gov.in/Act-with-amendment.pdf.


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