Renewable Energy Projects Get Huge Relief Amidst COVID 19: An Expert Opinion by Girish Rawat, Partner, Dhir & Dhir Associates
New Delhi: The Indian solar industry is heavily dependent on imports for meeting its requirement of the solar modules and solar cells of which around 80 percent is sourced from a single country i.e. China and the remaining 15 percent is sourced from South-east Asian countries like Malaysia, Vietnam, Taiwan, Thailand, and South Korea.
The Indian solar industry is heavily dependent on imports for meeting its requirement of the solar modules and solar cells of which around 80 percent is sourced from a single country i.e. China and the remaining 15 percent is sourced from South-east Asian countries like Malaysia, Vietnam, Taiwan, Thailand, and South Korea.
The spread of COVID-19 in China and other countries has posed an imminent challenge to the expansive clean energy target set by the Country. It has also caused the factories to shut down and disruption of the supply chain, which is likely to impact the on-time completion of the solar IPP projects in India. Typically, all solar IPPs contracts (including the PPAs) have penalty clauses for the delay in completion of the project, which will have to be paid by the IPPs as most of the existing insurances do not cover COVID 19. To put things into perspective, it is estimated that around 12GW of solar projects are expected to be completed by the year-end in India, of which around 10GW supply is dependent on China.
In a major relief to the Indian renewable energy industry and to address the above concerns, the Ministry of New & Renewable Energy, Government of India (“MNRE”) vide its Office Memorandum dated 20.03.2020 has inter-alia directed SECI, NTPC or other concerned renewable energy implementing agencies of MNRE (“Implementing Agencies”) to treat delay on account of disruption of the supply chains due to spread of coronavirus in China or any other country as Force Majeure and to grant appropriate time-extension in Scheduled Commissioning Date (“SCOD”) of the IPP projects as per Force Majeure Clause in the respective IPPs contracts, based on supporting evidence/documents produced by IPPs.
“India was looking at a very aspiration 2022 to meet the set targets as far as the renewable energy sector is concerned. COVID 19 has brought in an all-new set of challenges amidst others like land acquisition, grid unavailability, permitting, supply chain and financing of projects. However, MNRE’s announcement is not only a relief but a very positive catalyst to reboot the spirits within the sector once the nation has moved beyond the current situation,” said Girish Rawat, Partner, Dhir & Dhir Associates.
The IPPs claiming such disruption of the supply chains due to the spread of coronavirus in China or any other countries and desirous of time extension are required to make a formal application to the Implementing Agencies giving all documentary evidence(s) in support of their claim. The Implementing Agencies are required to examine such claims objectively and grant an appropriate extension of time after satisfying itself that the claimants were affected due to disruption of the supply chains due to the spread of coronavirus in China or any other country in the period for which extension of time has been claimed. While granting such relief, the Implementing Agencies are required to ensure that no double relief is granted due to overlapping periods extension granted for reasons eligible for such relief.
MNRE has further requested the State Renewable Energy Departments (including agencies under Power/ Energy Departments of States dealing in renewable energy) to treat delay on account of disruption of the supply chains due to spread of coronavirus in China or any other country, like Force Majeure and issue their instructions on the subject.
About Dhir & Dhir Associates
Dhir & Dhir Associates is a full-service law firm, founded in 1993, to serve as a single-window legal service provider in a dynamic commercial environment. The firm’s areas of practice include Corporate Restructuring & Insolvency, Antitrust & Competition, Aviation, Defence and Aerospace Laws, Banking & Finance, Capital Markets & Securities, Corporate & Commercial Advisory, Cross Border Transactions, IT, E-commerce & Outsourcing, Dispute Resolution & Arbitration, Telecommunication, Real Estate, Infrastructure & Energy, Aviation, Pharmaceuticals, Employment, Environment, Criminal Litigation, Governance Risk & Compliance, Intellectual Property Rights, Joint Venture, M&A, and Private Equity.
The firm has offices in New Delhi, Mumbai and Hyderabad; along with a representative office in Japan.