This issue of LexCognito, which in Latin means 'awareness about law', seeks to provide you an insight into significant legal and regulatory developments that have taken place very recently in India.

Date: 24 August 2021
Power Ministry proposes to allow Power Generating Companies to sell electricity to third parties on discoms’ default
As part of its effort to reduce burden and enhance liquidity of distribution licensee (Discoms) which in turn may reduce retail tariff for consumers, the Ministry of Power has proposed amendment to the Electricity (late payment Surcharge) Rules, 2021, and has sought comments on the draft amendment rules (Click Here to Read) by 18.09.2021.

As per the proposal, if a Discom, has any payment, including late payment surcharge, outstanding after expiry of 7 months from due date of payment as per power purchase agreement (PPA), then notwithstanding anything contained in the PPA, a generating company can sell the power to any consumer or licensee or exchange, for the period of default. However, the power generating company will retain its claim on the payment of fixed charges or capacity charges from the Discom, after giving a notice of 15 days. Such claim shall be reconciled on annual basis and shall be limited to only under recovery of the fixed or capacity charges.

In addition to the above, the proposal lays down order of payment and adjustment towards late payment surcharge, whereby all payment by the Discoms to generating companies will be adjusted towards procurement of power starting from the oldest procurement to the latest on first in and first out basis. The payment shall be first adjusted towards late payment surcharge before adjustment towards procurement of power.

Chrilegal Comment: The power purchase agreements are generally made very tight by the Discoms to ensure availability of the earmarked capacity to themselves and it becomes difficult for generating companies to negotiate terms to cover risk of non-payment in a bid to bag a good rate for their power. The statutory right for generating companies to stop power supply to defaulters and supply to third parties will enable them to ensure its regular payment stream and retention of claim over fixed charges will help them in recovering their costs. This will boost investment in power generation business as the power to do a third party sale under power arrangements with Discoms may make projects more commercially viable.
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Chambers of Rajan & Indraneel 
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Chambers of Rajan & Indraneel is a premier full service law firm headquartered at New Delhi, India. The Firm represents amalgamation of vast experiences and practices of two eminent lawyers. Indranil Ghosh is highly reputed as a disputes lawyer. He was a senior partner and head of litigation practice in one of the oldest Indian law firm Fox Mandal for several decades before setting up his own practice. Rajan D Gupta is a rank holder Chartered Accountant turned Corporate Lawyer. He is also a licensed Insolvency Resolution Professional. He has been associated with internationally renowned big law firms in past and has held senior level positions in firms like PwC, Fox Mandal, Khaitan & Co. and SRGR Law, etc. before starting the Firm.

We have a team of experienced Lawyers, Chartered Accountants, Company Secretaries and Insolvency Resolution Professionals with access to network of high quality experienced lawyers in all major commercial cities of India.

The Firm offers a wide range of expert legal services in the areas of corporate and commercial laws and specializes in representing major foreign and domestic corporations with diverse business interests in India. The Firm is professionally equipped to handle large sized and complex corporate transactions like Mergers & Acquisitions, Corporate Restructuring, Joint Ventures, Inbound & Outbound Investments, Private Equity and Venture Capital Investment Transactions, Real Estate Transactions, Infrastructure Projects, Project Finance, Power Projects, Non-Conventional Energy Projects, Highways & Road Projects and Corporate Taxation as well as GST, etc. The Firm also offers proven capabilities in litigation and dispute resolution practice areas, especially in handling international and domestic arbitrations as well as litigation in Supreme Court, various High Courts of India and various judicial and quasi-judicial tribunals/forums including at National Client Law Tribunal, Appellate Tribunals, Tax Tribunals, Competition Commission, Electricity Tribunal, Telecom Disputes Tribunal, Designated Authorities and other adjudicatory bodies.

We have set up a Japan Business Desk (JBD) in order to serve our Japanese clients in a better way. The endeavour of JBD is to act as a bridge between our professionals and clients from Japan so as to ensure that there are no barriers as to linguistic and cultural differences. This will indeed facilitate Japanese corporates doing business in India. 
This newsletter contains general information available in public domain at the time of its preparation. It is intended as a general news update and is not intended to be comprehensive nor to provide specific business, financial, investment, legal, tax or other professional advice or opinion or services. This newsletter is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business. Before making any decision or taking any action that may affect you or your business, you should consult a qualified professional adviser and refer to the source pronouncement/documents on which this business alert is based. It is also expressly clarified that this newsletter is neither a solicitation nor an invitation of any sort whatsoever or a source of advertising from our firm or any of its partners or lawyers or other professionals to create any adviser-client relationship. Whilst every effort has been made to ensure the accuracy of the information contained in this news alert, this cannot be guaranteed, and neither our firm nor any related person/entity shall have any liability to any person or entity that relies on the information contained in this publication. Any such reliance is solely at the user's risk.
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