Who will bear the costs of saving Great Indian Bustard?
I. Facts
A. Few environmentalists approached Supreme Court in a writ petition for issuance of certain directions to save existence of two species of birds namely Great Indian Bustard (“GIB”) and the Lesser Florican (M.K. Ranjitsingh and Ors. Vs. UoI and Ors., Writ Petition №838 of 2019). These environmentalists i.e. the Petitioners submitted that these birds have disappeared from 90 percent of habitat except from certain parts of Rajasthan and Gujarat and need to be protected. To protect these birds from extinction, Petitioners requested Supreme Court for issuance of direction to appropriate authorities to not allow installation of overhead lines in priority and potential habitat as identified by the Wildlife Institute of India (“GIB Habitat Region”). They also prayed that no further permission be granted for construction of windmills and installation of solar infrastructure in GIB Habitat Region.
B. Supreme Court relying upon the sustainable development principle refused to accept prayer of the Petitioners concerning prohibition of development of solar and wind assets in the GIB Habitat Region. However, it recognised that the overhead lines are the primary reason for extinction of these birds and therefore, issued following directions (“SC Directions”):
i. On an immediate basis, divertors to be hung on all existing overhead powerlines;
ii. All existing overhead low voltage powerlines should be converted into underground powerlines within one year from the date of the order;
iii. All existing overhead high voltage powerlines should be converted into underground powerlines within one year from the date of the order, However, in cases where developers find that there are issues relating to feasibility, the matter shall be referred to the Supreme Court appointed Committee with all relevant material and particulars. The committee will assess the matter and arrive at a conclusion as to whether the underground powerline is feasible or not. Developers will be required to proceed on the findings (It is interesting that SC at para 14–15 appears to suggest that one can refer high voltage level matter only to the Committee, however at para 17–18 it does not make any difference between low voltage and high voltage for reference);
iv. For future projects, underground cable line should be laid down and in cases of difficulty, matter should be referred to the Committee.
II. Consequences
This order will not only impact timeline for the construction of the projects, it will also have impact on the Project Cost.
III. Mitigation Measures
A. Supreme Court’s View
National Solar Energy Federation of India (“NSEFI”) argued at length about negative consequences of the prayer sought by the Petitioners. Supreme Court did not appreciate the submissions of NSEFI and held that parties should rely on contractual provisions for mitigation of costs. Supreme Court observed the following:
“In cases where the power generators are required to bear the additional amount adding to the cost of production, it would be open to regulate the manner in which the cost would be mitigated in accordance with contractual terms. Irrespective of the cost factor the priority shall be to save the near extinct birds.”
The Supreme Court has made it very clear that it is upon the developers to find the mitigation measures. For future projects, developers will have to necessarily factor impact of this order in their bid. Moot question is, what about the awarded projects. Answer to this query will require assessment of the contractual documents.
B. Contractual Relief
i. Change in Law
Can developers rely on the Change in Law clause of the Power Purchase Agreement (PPA) /Transmission Services Agreement (TSA) to claim reimbursement of the costs incurred due compliance of the SC Directions. Change in Law Clause differs from agreement to agreement. I will rely on Change in Law clause given in SECI PPA to assess whether developer will be able to claim increased cost under Change in Law provisions.
SECI PPA suggests that if developer is required to undertake any additional expenses due to Change in any Law and that change occurs post Effective Date (Effective Date can be Bid Submission Date or PPA execution date, varies from PPA to PPA) then such developer can claim such additional expenses. Definition of Law covers orders of the Supreme Court. However, it also needs to be demonstrated that the conditions imposed by the Supreme Court are new conditions and were not in effect prior to the pronouncement of the Supreme Court Order.
Appropriate Commission will have to evaluate binding nature of following notifications/directions while adjudicating Change in Law Claim of developers-
a) Minutes of the Meeting of the Forest Advisory Committee, Government of India dated 10.11.2016 wherein Committee recommended for undergrounding of cables, installation of diverters etc.;
b) Ministry of Forest, Environment and Climate Change’s report to National Green Tribunal;
c) National Green Tribunal’s order dated 22.12.2020 wherein it directed undergrounding of all new powerlines;
d) CERC’s order dated 08.01.2020 in petition number 126/MP/2019 wherein CERC had occasion to evaluate direction issued by DCF, Jaisalmer to Fatehgarh Badla Transmission Limited to re-route the transmission line because the proposed route was a breeding ground for the GIB. CERC acknowledged this event as a change in law. Facts of this order will be one of the submission from DISCOM to argue existence of the restrictive conditions prior to the Supreme Court Judgment.
CERC should not have any difficulty in declaring such part of SC Directions which can be demonstrated by developers as a new biding requirement (and this will require assessment of existing CERC orders/MoFECC’s directions/ NGT’s order). For example, NGT in the month of December 2020 had directed developers to lay underground power cables for all future projects. If any developers have submitted bid post December 2020, whether they will be able to claim Change in Law or not, requires further consideration.
ii. Change in Law in absence of Change in Law Clause in PPA
There are certain PPAs which do not contain Change in Law clause. CERC in Petition Number 159-MP-2017 had relied on Section 70 of the Indian Contract Act to provide change in law relief in absence of the specific change in law clause in the PPA. Parties can still claim reimbursement provided they satisfy principles enumerated hereinabove.
