MERC Rejects Textile Firm’s Plea for CUF Waiver, PPA Amendment

MERC (Maharashtra State Regulatory Commission) has quashed a petition filed by Sarla Performance Fibers Ltd. (SPFL) looking for removal of a penalty of Rs.1,14,00,000 (for FY 2019-2020 and 2020-2021) on it on a Power Purchase Agreement (PPA) on a wind power project with the state electric power distribution company MSEDCL. The firm was also hoping for amendment to its PPA with MSEDCL, where it anticipated that the capacity of the said project be reduced from the initial 6 MW to 4 MW. The firm was also keen that the MSEDCL withdraw the CUF penalty clause in the PPA.

The wind power project was won by SPFL via the competitive bidding route since MSEDCL had floated a tender for the procurement of 250 MW power. SPFL emerged as the successful bidder for it. It had won capacity worth 6 MW at Rs 2.51 per KWh. The other bidders were Inox Wind Infrastructure Services Ltd for 6 MW at Rs 2.52 per KWh and Essel Mining & Industries Limited for 75 MW at Rs 2.52 per KWh. Notably, Essel Mining & Industries had filed a similar petition that sought waiver of CUF penalty and amendment of PPA

MESDCL has made its stance clear on the petition and rejected it on the grounds that the provisions of a contract cannot be flouted. In the face of unforeseen events (such as the pandemic, which SPFL has cited in this case), a notice should have been issued by the firm with proposed remedial measures.

Under the PPA signed between SPFL and MSEDCL, SPFL was obligated to produce and maintain the declared CUF value within range of ±10% of declared CUF. However, the contract also stated that if SPFL failed to maintain CUF at this range, the MSEDCL is entitled for compensation as per the terms laid down by the PPA.