Article Type: Article

India unplugged

As the country grapples with the dual realities of Digital India and being the ‘internet shutdown capital of the world’, Amar Sundram analyses a recent Supreme Court judgment challenging blackout actions in Kashmir.

The Narendra Modi government has repeatedly emphasized the need for furthering the ease of doing business for India’s business community. The efforts have yielded results as the latest Doing Business Report, 2020, released by the World Bank in October 2019, has India ranked 63rd out of 190 countries.

One of the key ways, as stated in the Digital India mission, is to let citizens and businesses apply for licences, certificates and permits online rather than visiting government offices. Digital India was launched in mid-2015 with much fanfare, and an ambitious goal of creating a digitally empowered society and knowledge economy.

While there has been a push to move government services online, the internet was shut down by authorities 106 times in 2019, citing public order concerns. A leading newspaper in India published an article in December 2019 headlined: “India is the internet shutdown capital of the world”.

The impact on businesses has been felt, with a 2018 report by the Indian Council for Research on International Economic Relations estimating that, between 2012 and 2017, India lost about US$3 billion due to mobile internet and broadband shutdowns. Similarly, a telecom industry association representative estimated that the losses had increased to ₹24.5 million (US$340,000) per hour as at the end of 2019.

On the other hand, the e-commerce market in India is expected to grow to US$200 billion by 2026, making it the fastest and most exciting channel for commercial transactions. One of the big push factors for the wide penetration of e-commerce is Digital India and the wide penetration of internet services in remote areas. Life today without the internet would be almost unthinkable. Not only are sectors like banking, tourism, education, healthcare, travel and online food services heavily dependent on internet services, but socially our daily lives are increasingly linked to the internet.

This brings us to a problem – on the one hand there is a need to have internet services for the people and the development of the economy, while, on the other hand, there are frequent curbs on internet services impacting social and economic life.

Fiscal Changes Adopted By The Finance Ministry Of India In Lieu Of The Covid-19 Outbreak

The World Health Organisation (WHO) declared COVID-19 as a “pandemic” on March 11, 2020

A pandemic is defined by WHO as “an epidemic occurring worldwide, or over a very wide area, crossing international boundaries and usually affecting a large number of people.”

 In view of the above, and the lockdown imposed throughout the country, the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman on  March 24,  2020 announced several important relief measures  specially related to income tax, GST and other statutory compliances.

The following measures (Taxation only) are announced and confirmed by The Taxation And Other Laws (Relaxation Of Certain Provisions) Ordinance, 2020 dated 31.03.20:

  1. Direct Taxes
  • Income Tax Act
  • The due date for filing Income Tax Returns (“ITR”) for the Financial Year 2018-19 has been extended to the June 30, 2020.
  • The due date for issuance of notices, filings, compliances, availing benefits under the following acts where the time limit is expiring between March 20, 2020 to June 29, 2020 have been extended to the June 30 2020: The Income Tax Act, 1961; The Wealth Tax Act, 1957; The Benami Transaction (Prohibition) Act, 1988; The Black Money Act; The Security Transaction Tax; and The Commodity Transaction Tax.
  • Interest rates on delayed payments of advance tax have been reduced from 12% to 9%.
  • No extension has been provided on deposit of TDS. However, interest rates payable on the delayed payment has been reduced from 18% to 9%. This reduction is temporary and the same will only be valid till June 30, 2020.
  • Last date for Investment related deduction under section 80, 54, 54B, 54EC etc extended to June 30, 2020.
  • Deadline for linking Aadhar and PAN Card has been extended to June 30, 2020 from March 31, 2020.
  • Investments/Constructions/purchases for claiming roll over benefit/deduction in respect to capital gains under section 54 to 54G of the Income Tax Act has been extended to June 30, 2020.
  • The date for commencement of operation for the SEZ units for claiming deduction under deduction 10AA of the Income Tax Act has been extended to June 30,2020 for the units which received necessary approval by March,31,2020.
  • The Direct Tax Vivaad se Vishwaas Scheme Act, 2020
  • The deadline for availing the benefits under the Scheme has been extended to June 30, 2020 vide an amendment to Section 3 of the said Act.
  1. Indirect Tax
  • Goods and Service Tax
  • An enabling section 168A has been inserted in the CGST Act, 2017 empowering the Government to extend due dates for various compliances.
  • The due date for filing the GSTR-3B for March, April and May have been extended till the June 30, 2020- Notification no. 15/2020 – Central Tax dated 23 March 2020 has already been issued in relation to the extension of due date for filing annual return for FY 2018-19.
  • Deadline for availing the composition scheme, which enables taxpayers with less than an annual turnover of INR 1.5 crore to pay Goods and Services Tax at a fixed rate, has been extended to June 30, 2020.
  • Sabka Vishwas Scheme i.e. the scheme which was introduced with an aim to resolve and conclude disputes pertaining to the erstwhile indirect tax regime which was earlier extended to March 31, 2020 has now been extended to June 30, 2020. No interest would be levied irrespective of amount involved pertaining to the said scheme.

  • Customs & Service Tax Act
  • The last date for filing appeal, refund application or any other documents under the Central Excise Act,1944 and the rules made thereunder from March 20, 2020 to June 29, 2020 has been extended to June 30, 2020.
  • The last date for filing of appeal etc. relating to Service Tax which is from March 20, 2020 to June 29, 2020 has been extended to June 30, 2020.
  • For companies with an annual turnover of less than INR 5 Crores, no interest, late fee or penalty will be charged. However, for companies with a turnover higher than INR 5 Crore, interest at the rate of 9% would be charged from 15 days after the due date. The rate of interest is concessionary as the current rate of interest at 18%.
  • Customs clearance would operate 24×7 till June 30, 2020. Further, the due date for issuing of notices, notifications, sanctions, claiming refund and any other document under the Customs Act and other allied laws has been extended to the June 30, 2020.

  • Central Excise Act
  • The due date for filing the annual return for the financial year 2018-19 has been extended to June 30, 2020 from March 31, 2020.
  • The last date for furnishing the Central Excise returns due in March, April and May has been extended to June 30,2020.

  1. Pm Cares Fund
  • A special fund called as Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) has been set up for providing relief to the persons affected from the outbreak of the COVID-19.
  • Accordingly S.10(23C)(i) and S.80G(2)(a) of Income Tax Act have been amended to include the said fund.
  • The donation made to the PM Cares Fund shall be eligible for 100% deduction under section 80G of the Income Tax Act, without any limit.
  • Donation made up to June 30, 2020 shall also be eligible for deduction from income of financial year 2019-20.
  • Any person including corporate paying concessional tax on income of financial year 2020-21 under new regime can make donation to PM Cares Fund upto June 30, 2020 and can claim deduction under section 80G against income of financial year 2019-20 and shall also not lose his eligibility to pay tax in concessional taxation regime for income of financial year 2020-21.

Apart from the above the Hon’ble Supreme Court of India (SC) has announced that from March 16, 2020, the SC will be hearing only urgent matters. Similar restrictions have been announced by various courts, including the Hon’ble Bombay High Court, Hon’ble Delhi High Court, Hon’ble Karnataka High Court, National Company Law Tribunal, district courts in Karnataka and other tribunals.

Our View

There is an alarmingly high degree of uncertainty looming amidst the countrywide lockdown which has already deeply impacted the businesses. Due to the lockdown there are difficulties being faced by the taxpayers in meeting the compliance requirement under the Income-tax laws, also there is an impact on Goods and Service Tax collection. In this scenario the extension has helped in providing adequate time for compiling the details to ensure qualitative filing of information.

Sailent features of the amendment to the IBC Code

Author by Faranaaz G Karbhari

Introduction:

On March 13, 2020, the Insolvency and Bankruptcy Code (Amendment) Bill, 2020, which  was passed by both the houses of the Parliament, received the President’s assent to become a law in the form of the Insolvency and Bankruptcy Code (Amendment) Act, 2020 (“Amendment Act”). The Amendment Act aims to streamline the Corporate Insolvency Resolution Process (“CIRP”) and provide protection to new owners of a loan defaulter company against prosecution for misdeeds of previous owners. By way of the Act, The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 was also repealed.

Salient Features:
  • Insolvency commencement date:

The proviso to Section 5(12) of the Insolvency and Bankruptcy Code (“Code”) has been deleted thereby making it clear that the insolvency commencement date would be the date of admission of an application for initiating CIRP by the National Company Law Tribunal (“NCLT”) under Sections 7/ 9 or 10, as the case may be.

Earlier, the proviso to Section 5(12) (which was inserted in the Code with effect from 6th June 2018) states that where the interim resolution professional (“IRP”) is not appointed in the admission order, the insolvency commencement date shall be the date on which such IRP is appointed by the Adjudicating Authority.

  • Prescribing a threshold for initiating Resolution Process:

Section 7 of the Code has been amended to the extent that a threshold for initiating Resolution Process for a certain category of financial creditors has been put in place. The Proviso’s 1 and 2 to this section elucidates that the financial creditors who are allottees under a real estate project; and financial creditors falling in the category of creditors referred to in Section 21(6A) (a) and (b), may initiate CIRP against the corporate debtor before the adjudicating authority by filing a joint application comprising of not less than 100 such allottees under the same real estate project or not less than 10% of the total number of such allottees under the same real estate project, whichever is less.

  • Corporate debtors allowed to initiate CIRP against other Corporate debtors

By way of the Amendment Act, explanation II has been added to Section 11 of the Code which states  that corporate debtor as referred to in clauses (a) to (d) of Section 11 of the Code will now be permitted to initiate CIRP against other corporate debtor’s, which was not allowed earlier.

  • No suspension/ termination of licenses, permits etc. issued by the Government, during moratorium

An explanation to Section 14 of the Code has been inserted in order to clarify that a license, permit, registration, etc. given by the Central Government or any other authority shall not be suspended or terminated on the grounds of insolvency, subject to there being no default in payment of current dues arising for the use or continuation of the license, permit, etc. during the moratorium period.

The changes have been made again for keeping the thrust of going concern and to maximise the value of a corporate debtor.

  • Continuance of supply of goods/ serviced critical to Corporate Debtor

It is common knowledge that as per Section 14(2) of the Code, the supply of essential goods or services to the corporate debtor could not be terminated or interrupted during moratorium. With the new amendment, sub-section (2A) has been inserted which states that where the IRP/ IRP considers the supply of goods/ services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated or interrupted during moratorium, except where the corporate debtor has not paid dues arising from supply during moratorium.

  • Appointment and tenure of IRP

Earlier, the Adjudicating Authority had to appoint an IRP within 14 days from insolvency commencement date. In light of the amended Section 16(1), the IRP must be appointed on the date which the insolvency has commenced, itself.

  • Liability for prior offences

A new section namely, Section 32A has been inserted by way of the Act which provides that the corporate debtor will not be liable for an offence committed prior to the commencement of CIRP from the date the resolution plan is approved by the Adjudicating Authority. However, the approved resolution plan must result in change in the management or control of the corporate debtor as prescribed in Section 32A. The said Section further discharges the corporate debtor from any prosecution that has been instituted against it during the CIRP on the approval of the resolution plan, however, the officer who is default in case of a company and a designated partner in case of an LLP shall continue to be liable for any such offence committed by the corporate debtor. In respect to such scenario, this Section also safeguards the property of the corporate debtor from actions such as attachment, seizure, retention or confiscation of such property.

Conclusion

In the years since the act came into force and with the changing times and scenario there has been a need felt to give priority in repayment to last mile funding  to corporate debtors to prevent insolvency i.e in case the company goes into corporate insolvency resolution process or liquidation. The amendment was necessary in order to prevent potential abuse of the Code by certain classes of financial creditors. The amendment also provides immunity against prosecution of the corporate debtor, action against the property of the corporate debtor and the successful resolution applicant subject to fulfilment of certain conditions. The amended act was needed in order to fill the critical gaps in the corporate insolvency framework. The act seeks to remove bottlenecks and streamline the corporate insolvency resolution process.

Legalising trade in Cryptocurrency

Author by Faranaaz G Karbhari

While disposing of the Civil Writ Petition in the case of IAMAI v RBI, Supreme Court on March 4, 2020 set aside the ban which the Reserve Bank of India’s (RBI) had put on financial institutions providing banking services to cryptocurrency businesses. Although the said judgment, according to which the RBI’s measure violated Article 19 (1) (g) for virtual currency exchanges, has nonetheless cheered the industry but contains a multiple red flag.

Bitcoin is the preeminent cryptocurrency and first to be used widely. However, hundreds of cryptocurrencies exist, and more spring into being every month. Cryptocurrencies use cryptographic protocols, or extremely complex code systems that encrypt sensitive data transfers, to secure their units of exchange. Cryptocurrency developers build these protocols on advanced mathematics and computer engineering principles that render them virtually impossible to break, and thus to duplicate or counterfeit the protected currencies. These protocols also mask the identities of cryptocurrency users, making transactions and fund flows difficult to attribute to specific individuals or groups.

One can generate bitcoins or other cryptocurrencies by solving problems available in the blockchain network. Once the problem is solved a new block is added and bitcoins are generated accordingly. Generally CGMiner and GUIMiner software/s are used for mining. The person or group of persons that solves the problem are called miners who can sell the bitcoins to end users either directly or through exchanges such as Zebpay and Unocoin. The end user can use bitcoins as a medium of exchange just like a currency by sending a transaction request to another user who agrees and proceeds with the transaction. The blockchain verifies the transaction via the global network, transferring the value from one user to the next and inserting cryptographic checks and verification at many levels (nodes). Since Bitcoin is not recognised as a legal tender in India, this process cannot be realised. However, Bitcoin trading which is not yet illegal has gained momentum and exponential growth of its price. The Current value of one Bitcoin is INR 5,76,848.18.

Here the primary issue is regarding the legal sanction of the virtual currency by stringent regulations and combating the crimes that would be triggered out of it. Many countries have regulated bitcoin operations like some parts of USA, Australia and Canada among others. Recently, Supreme Court in Dwaipayan Bhoumik v Union of India has directed the Central Government to clarify the legality of bitcoin in India.

Legal Issues

Bitcoins regulation would create several encumbrances in the following forms. Firstly, determining the nature of the bitcoins could be a problem for RBI would contend that it should come under it by virtue of it being a currency whereas SEBI would contend that it is a security. Secondly, the functional definition of Bitcoin or the wallet would not come under the ambit of IT Act 2000. Thirdly, even if a separate statue is enacted, provisions to combat crimes of distinct nature would cause problem. Bitcoins could be a lucrative tool to commit cyber offences like money laundering, drug trafficking, terror funding, tax evasion, kidnapping and ransomware attacks and theft of bitcoins from wallets of end users. In Slovenia hackers stole bitcoins worth 64 million dollars from a mining company. Similarly, in India, bitcoins fraud in relation to miners have tremendously increased. However, the greatest challenge would arise with respect to imputation of criminal liability when a crime illustrated below would commence.

Moreover, due to the irreversible nature of the transaction the bitcoins could not be retrieved. Thus there would be a problem of jurisdictional determination firstly, due to the anonymous nature of the transaction where it would be very difficult to trace the flow of bitcoins from one jurisdiction to another. Secondly, the cumbersome process of the Code of Criminal Procedure section 166A and 166B would further delay the process of investigation. Fourthly, it would affect the computation of tax structure. There could be two possibilities, one taxation of miners who have generated bitcoins which might not fall under Section 55 of the Income Tax Act. 1961(generating bitcoins might not come under the ambit of cost of acquisition) and secondly of those who hold it as an investment instrument (whether long term capital Gain tax or short term). Finally, given the lack of technologically skilled investigating officers in the police department and lack of infrastructure in relation to cyber offences, imputation of criminal liability would further become problematic in the following manner.

RBI Ban Cryptocurrency

As part of the proceedings, the RBI accepted the fact that it never implemented a ban on Bitcoin but rather “instructed” banks to simply refrain from dealing with cryptocurrency exchanges

The RBI has maintained that owing to ‘significant spurt in the valuation of many virtual currencies and rapid growth in initial coin offerings’, virtual currencies were not safe for use. It had, in 2013, cautioned ‘users, holders, and traders of virtual currencies, including bitcoins, about the potential financial, operational, legal, customer protection, and security-related risks that they were exposing themselves to’. The RBI had on April 6, 2018, said it had repeatedly ‘cautioned users, holders, and traders of virtual currencies, including bitcoins, regarding various risks associated in dealing with such virtual currencies. As a follow-up to those warnings, it had barred all entities which are regulated by the RBI from either dealing in virtual currencies or providing services to those dealing in such currencies.

Reasons for the curb by RBI

  • Losses caused due to hacking, malware attacks, compromise of access credentials, loss of passwords etc. Since there is no authorized central agency to govern it, there could be the loss of e-wallet which could cause the permanent loss of virtual currencies stored in such e-wallets.
  • Price volatility of virtual currencies could lead to potential loss to the customers for the reason value of virtual currency is the result of speculation. For instance in the past cryptocurrencies turned into rage in 2014 when the price of Bitcoin (the most well known currency) escalated USD 1,000. While the rally ended soon after, the frenzy continued when the prices of the Bitcoin went past USD 10,000 in the month of December 2017. Retail investors, uninformed of the dangers, started converging on virtual currencies exchanges in the nation, making volumes to rise in December 2017 and January 2018.
  • Use of such virtual currencies could lead to money laundering, tax evasion and fraud due to the untraceable nature and difficulty in evaluating the taxability of the transaction. RBI also cited media reports which claim that dealing in such virtual currencies could lead to illicit activities. One can use it to buy and sell drugs or weapons.
  • There are also legal and financial risks associated with dealing in virtual currencies to the investors as the legal status of the exchange platforms established in several jurisdictions is not clear. Apart from the price volatility, numerous unregulated cryptocurrency exchanges started mushrooming in the nation, putting investors to great dangers.

Supreme Court’s Decision on Cryptocurrency

The Supreme Court lifted the ban imposed by the Reserve Bank of India (RBI) on virtual currency trading, including cryptocurrencies. on the “ground of proportionality”.

“When the consistent stand of RBI is that they have not banned virtual currencies and when the government of India is unable to take a call despite several committees coming up with several proposals, including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate,”

The RBI’s core defence included arguments claiming that cryptocurrencies pose a huge threat to the nation’s monetary system and overall stability. Additionally, the RBI also stated that digital currencies were being used mainly by bad actors for money laundering, tax evasion, financing of terrorism-related activities, and so on. Lastly, the RBI’s legal counsel argued that crypto should be banned simply because a number of high-profile finance experts and economists such as Warren Buffet are against it.

The Court held that the RBI’s circular, which prevented regulated entities from providing banking services to those engaged in the trading or facilitating the trading in VCs, was liable to be set aside on the “ground of proportionality”.

When the consistent stand of RBI is that they have not banned VCs and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate”, the Court observed.

The Court took note of three factors while setting aside the circular:

  1. RBI has not so far found, in the past 5 years or more, the activities of Virtual Currency exchanges to have actually impacted adversely, the way the entities regulated by RBI function.
  2. The consistent stand taken by RBI up to and including in their reply dated September 4, 2019 is that RBI has not prohibited Virtual Currencies in the country and
  3. Even the Inter-Ministerial Committee constituted on November 2, 2017, which initially recommended a specific legal framework including the introduction of a new law namely, Crypto-token Regulation Bill 2018, was of the opinion that a ban might be an extreme tool and that the same objectives can be achieved through regulatory measures.
  4. The court also referred to cryptocurrencies as a “by-product” of blockchain technology and said the government could separate the two.

Conclusion

Clarity is, however, it is much awaited to be seen how vulnerable is the future of crypto currency in India, given the judgment of Supreme Court with red flags together with a draft bill, released on Feb 28, 2020 banning the use of cryptocurrency as legal tender in India. The said draft bill prohibits mining, buying, holding, selling, dealing in, issuance, disposal or use of cryptocurrency.

Interplay of polity, policy on infrastructure development

Authored by Shreshth Sharma, Partner along with Molshree Bhatnagar, Principal Associate, HSA Advocates

Governed by its constitution and derivative laws, a country speaks through its policies. Sound economic and regulatory policy creation coupled with effective implementation encourages investor confidence and forms the fundamental basis of attracting large volume and consistent investment. This is even more essential in the power sector, which is characterized by capital intensive requirements, the need for long-term cash flow and substantial gestation periods.

Policy uncertainty has without a doubt adversely impacted the country’s stressed power capacity which was reported in 2018 as being 40,130 MW, with 24,405 MW having been commissioned and 15,725 MW under construction. Of late, sanctity of contracts has emerged as a significant contributor to the sectoral headwinds, as witnessed most noticeably in the spate of unilateral tariff reductions by the government of Andhra Pradesh (AP), which tried to reduce the solar and wind tariffs of already executed and operative power-purchase agreements. This attempt was ultimately quashed by the Andhra Pradesh High Court, which held that the government cannot intervene in tariff matters. The case is presently being appealed on the limited issue of a single judge directing AP distribution companies (discoms) to approach the state regulator to seek revision in concluded tariffs, while in the meantime directing that interim payments be made. Similarly, the new Maharashtra government has declared its intention to review the 508.17 km Mumbai–Ahmedabad high speed rail corridor, which is technically owned and financed by the government of Japan.

Such rollbacks are in direct conflict with the declaration made by the central government in 2018–19 that top-level policymakers must ensure that policy actions are predictable, consistent and reduce ambiguity and arbitrariness in their implementation. The Supreme Court in the case of Mahabir Auto Stores and Ors v Indian Oil Corporation and Ors held that “every state action must be informed by reason and it follows that an act uninformed by reason, is arbitrary”. Also, in the case of State of Tamil Nadu & Ors v K. Shyam Sundar and Ors, the Supreme Court held that the state cannot change its stand merely because another political party has come into power, unless the earlier action is contrary to statute, unreasonable or against public interest. It is indeed unfortunate that these and other decisions of the Supreme Court escaped the attention of the decision makers and their advisers.

Projects entailing long gestation periods must have certainty, which gives comfort to financial institutions including public sector banks. Inevitably, failure of debt service leads to haircuts in resolution within or outside the Insolvency and Bankruptcy Code, 2016 (code). Such resolution processes can also deal with regulatory hurdles such as in the case of the acquisition of the Prayagraj Power Generation Company Limited, a 1,980 MW thermal power project in Uttar Pradesh, declared a non-performing asset by its lenders. This led to the first resolution process undertaken by the State Bank of India and other lenders under the umbrella of Reserve Bank of India guidelines outside the code, setting a precedent for the larger industry. In this instance, the Appellate Tribunal for Electricity (APTEL) granted relief to the bidders, ruling that tariffs forming the basis for the auction could not be altered pursuant to the bidding process. Lending certainty to similarly placed resolution processes, the Supreme Court refused the leave to appeal against the decision of APTEL.

With the target of a USD 5 trillion economy and a planned infrastructure investment worth INR 102 trillion (USD 1.42 trillion) over the next five years, the government must ensure that its policy framework is predictable and offers the promise of no changes over its horizon period. Using as an analogy the principle of attornment in which a change of land ownership does not give the new owner as landlord any additional rights over an existing tenant, including termination of the lease, policies and contracts should be drafted to acknowledge and accept continuity and certainty in the future. Further, the administration involved in policy assessment and decision-making must be sensitive to the need to abide by its own decisions and their legal repercussions. A dictatorial fiat reneging on a policy or binding contract will unsettle the banking and financial sector, in turn risking public money.

A state characterized by frequent policy U-turns must be prepared for disengagement and a lack of faith on the part of its investors. It may be that the aggrieved have rights of legal action, as happened in the case of the AP government, but time-consuming litigation and little or no return on investments aggravated by chronic uncertainty will not outweigh a promise well kept.

Source: India Business Law Journal

Relaxation to NBFCs for taking action under the SARFAESI Act: Bane or Boon?

Author by Abhirup Dasgupta

Section 2(m)(iv) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) empowers the Central Government to issue a notification, specifying any non-banking financial company (NBFC) as a “financial institution” for the purpose of the SARFAESI Act. The result of the notification is that once a NBFC is notified as a “financial institution”, the said NBFC, subject to fulfilling other conditions, becomes eligible to take action for recovery of debts under the SARFAESI Act.

Acting in furtherance of the abovementioned, on February 24, 2020, the Central government issued a Notification vide S.O. 856(E) thereby relaxing the eligibility criteria for NBFCs for taking action for enforcement of security interest under the SARFAESI Act. By way of the Notification, a NBFC having assets worth INR 100 Crore and above would be entitled for enforcement of security interest under the SARFAESI Act in cases where the secured debt is at least INR 50 Lakh.

Prior to February 24, 2020, in accordance with the previous notifications by the Central Government, if an NBFC had an asset size of INR 500 Crore and more and where the loan size was of INR 1 Crore and more, the NBFC was eligible to recover its debt under the SARFAESI ACT. The present notification relaxes this eligibility criteria.

This move by the Central Government would definitely be welcomed by NBFCs at a time when the financial sector is aggrieved by the increasing number of defaults by borrowers. At the same time, this would lead to an increase in litigation before the Debts Recovery Tribunals, which are already stressed due to the tremendous workload and because of which there is pendency of proceedings. While rights have been conferred to a larger pool of NBFCs to enforce their security interest under the SARFAESI Act, these NBFCs have not been given any powers to file suits for recovery before the Debts Recovery Tribunal under the Recovery of Debts and Bankruptcy Act, 1993. Consequently, there exists a dark cloud around the timely implementation of such recovery action by NBFCs before the Debts Recovery Tribunals.

The timelines for under the SARFAESI Act are similar to the timelines under the Insolvency and Bankruptcy Code, 2016 (IBC). Classification of an account as a Non-Performing Asset (90 days), issuing a demand notice and reply and rejoinder thereto (75 days), possession and sale of asset (at least 30 days) and thereafter disposal of a challenge to the action (60 days to 120 days) may almost end up taking as much time as resolution of a corporate debtor under the IBC. Moreover, the timelines under the SARFAESI especially regarding disposal of challenge to the SARFAESI action by the Debts Recovery Tribunal are only directory and not mandatory.

It therefore seems that the relaxation in the eligibility criteria for NBFCs is a double-edged sword and its true effect would only be seen with time.

Data protection – Does india want to be the big state

Authored by Vatsal Gaur, Associate Partner, HSA Advocates

India continues to prove to the world that the State needs to act like a parent for her subjects (data). Good parenting is ideally a result of the parent having lived a life full of rich experience and an ability to master life trajectory. With the democracy still young, and dwindling economic parameters over the last three quarters, the locus standi seems weak. Any attempt to monopolise data, on the pretext of due functioning, is an unfounded approach to monetise the now overused ‘demographic dividend’ of young population.

The recent WhatsApp breach gave further succour to push for a Data State. This was done as the government introduced a draft of the Personal Data Protection Bill (PDP) in Parliament on December 11, 2019. The bill was referred to a joint select parliamentary committee. If the current PDP is anything to go by, there are several opportunity costs. The PDP allows for the processing of personal data for the provision of any ‘service’ or ‘benefit’ provided by the State. In contrast, another provision leaves room to define what constitutes ‘reasonable purposes’ for non-consensual processing of data.

PDP does not have a focus like GDPR, where there is at least onus on the data processor to establish how non-consensual data processing must outweigh the data subject’s fundamental right. Ordinary rules governing judicial review on State action will, therefore, become the default rule for enforcing privacy breaches. However, since the Data Protection Authority (DPA) isn’t under obligation to provide reasoned orders before processing data, the grounds of such judicial challenge will be limited. PDP shall, thus, dilute the Puttaswamy judgment on the right to privacy. A suggestion could be to adopt the GDPR framework to allow subjects to object against data processing by the state in certain situations. The current PDP only allows the right to erasure and call for factual incorrectness of data, but doesn’t provide an outright ability for citizens to object to non-consensual data sharing.

Interestingly, since the technology itself is not sacrosanct and is liable to be manipulated, in case of factually inaccurate data sharing, the State could potentially land in embarrassing situations unless an additional layer of legitimacy is in place. Thus, it is important to staff the DPA not just by appointing retired judges and bureaucrats but also seasoned technology veterans. An intensive boot camp for potential training of candidates is not a far-fetched idea. The Central Government reserves its right to issue binding instructions to the DPA severely compromises the independence, calling the need for an overarching ombudsman structure using established principles of administrative law.

The data localisation requirement under the PDP (although eased from the previous version of the bill) is still not challenge-free. For instance, sensitive personal data (SPD) and personal data would usually be stored as a mixed set, and de-identification may be an arduous exercise. Similarly, leaving the definition of ‘critical personal data’ open to the government, in the absence of legislative guidelines, seems like excessive delegation. Third-party transfers of SPD are required to be approved by the DPA, which could reduce agility in fast-paced innovation, especially blockchain and distributed ledger technology (DLT). An exception for real-time data transmission using DLT should be considered. Similarly, while the sandbox introduced in the PDP is laudable, one needs to take care of the selection criteria of companies. The chances of government owned enterprises competing with private players cannot be excluded. Therefore a ‘neutral’ and well-implemented selection procedure will be imperative.

The government retaining the right to seek anonymised data from data fiduciaries, although patently innocuous, leaves room for enough data sets to be generated which would otherwise not be available to the government. Deanonymisation of data is not entirely off-limits. Further, the blanket right to exclude the applicability of the PDP to State agencies in the interest of ‘sovereignty’, ‘integrity’ or ‘public order’ does place the State on a different footing as far as ownership and processing of data is concerned.

Does India want to be the Big Data State after all, and what is so peculiar about her data subjects that call for them being treated like wayward children? We can only read between the lines for now!

Source: The Financial Express

Brief summary of Rajasthan Solar Energy Policy, 2019

  1. With the aim to keep pace with the changing needs of the Solar Energy Sector and vision of becoming a major contributing State for achieving the national target of 100 GW capacity of solar energy by 2022 as a part of global commitment, the State Government of Rajasthan has notified the Rajasthan Solar Energy Policy, 2019 (Solar Energy Policy, 2019) on December 14, 2019. The Solar Energy Policy 2019 comes into operation from December 14, 2019 and also visions to promote new technologies in solar energy generation and storage to make solar energy more cost competitive and reliable.
  2. Solar Energy Policy, 2019 has been issued with the target to install 30,000 MW Solar Power Projects up to 2024-25 in the State of Rajasthan for sale of power to distribution companies (DISCOMs) and for captive consumption, within and outside the state. In order to achieve its objective, the Solar Energy Policy bears in mind the need for upgradation of transmission and distribution infrastructure. The capacity of 30,000 MW has been deployed under the following segments:
  • 24,000 MW has been allotted to Utility/Grid Scale Solar Parks;
  • 4000 MW to Distribution Generation;
  • 1000 MW to each Solar Rooftop and Solar Pumps.

It is also the endeavor of Solar Energy Policy, 2019 for sale of power by solar power generators to parties other than Rajasthan DISCOMs (within and outside the State). Rajasthan Renewable Energy Corporation Limited (RREC) has been appointed as the nodal agency for registration, approval and development of solar parks. It has also been entrusted with selection of projects by competitive bidding, government land allotment, facilitating approvals including power evacuation and execution of PPA / WBA with Rajasthan DISCOMs/ RVPN/NVVN/RUVNL/SECI among such other.

Salient features of the Solar Energy Policy, 2019

  1. The Solar Energy Policy, 2019 has the following key segments:-
  • Installation of Rooftop PV Solar Power Systems with Net Metering;
  • Decentralized Grid Connected Solar Power Projects;
  • Off-grid solar applications;
  • Utility grid power projects;
  • Development of solar parks;
  • Registration and approvals;
  • Incentives/ facilities available to Solar Power Projects;
  • Approval Mechanism.

Re: Installation of Rooftop PV Solar Power Systems with Net Metering

  1. The State Government will endeavour to develop 33 district headquarters as ‘Green Energy Cities’ in next 5 years by installing 300 MW of Solar Rooftop Systems in the following manner:
  • By promoting setting up of grid connected Rooftop PV Solar Power Plants under Net metering[1] DISCOMs to allow Solar Rooftop capacity addition up to 50% of the capacity of distribution transformer of the area.
  • Rooftop Solar Power Plants can be set up on Government Building on RESCO[2]
  • Rooftop consumers will be provided subsidies/incentives as per the guidelines of MNRE/State Government.
  • Benefits, such as banking facility and payment of surplus energy by DISCOMs under Net-metering Scheme as applicable to domestic consumers, will also be applicable to Government-Offices, Schools, Colleges, Hospitals and any other Government buildings notified by State Government under the Net Metering Scheme.
  • Maximum time period for execution of various activities in respect of Solar Rooftop Systems under Net Metering by DISCOMs will be as under:

 

S No.

 Activity

Maximum time period
1. Issuance of NOC 7 days from receipt of application
2. Solar & Net Meter Testing 7 days from depositing of meters
3. Execution of Net Metering Agreement 3 days from submission of draft agreement
4. Commissioning/Connection of Rooftop system 3 days from receipt of application
  1. Solar Rooftop Systems can also be set up under Gross Metering[3] Scheme as per the guidelines prescribed by the State Government/Government of India. The entire generated power will be supplied to DISCOMs at a tariff determined by RERC. Solar Rooftop Systems up to 1 MW capacity will be allowed under this Scheme.

Re: Decentralized Grid Connected Solar Power Projects

  1. The State to promote setting up of decentralized solar power projects with a minimum and maximum capacity of 0.5 MW and 3 MW respectively in the premises and vicinity of 33 kV Grid Sub-Stations for sale of power to DISCOMs. Substations for such solar power projects will be selected by RUVNL/DISCOMs. Further, tariff for these projects will be determined through tariff based competitive bidding process / guidelines of State Government/ Government of India.

Re: Off-grid solar applications 

  1. The State Government will promote and incentivize off-grid solar applications, including hybrid system as per MNRE guidelines to meet various electrical and thermal energy requirements for domestic and commercial use. The State will also promote setting up of solar power plants by persons for sale of power to consumers through its own distribution system/local solar grid, setting up of stand-alone solar systems to provide electricity to households in remote Villages /Hamlets (Dhanis) and further promote installation of Solar PV Pumps for pressure irrigation systems.

Re: Utility Grid Power Projects

Through the Solar Energy Policy 2019, various categories of projects have been provisioned along with their respective terms including exemption / levy of certain charges, levies and duties. The said categories are set out herein below with brief description :-           

  1. Solar Power Projects in Rajasthan for sale of power to DISCOMs of Rajasthan:

Promoting setting up of solar power projects for sale of power through competitive bidding process:

  • To fulfil Renewable Purchase Obligation (RPO) target fixed by RERC.
  • DISCOMs/RUVNL may purchase solar power beyond RPO limit and avail benefit of REC in terms of CERC Regulations/ NLDC guidelines.
  1. Solar Power Projects sanctioned under guidelines/schemes of MNRE:

Promoting setting up of Solar Power Projects under the Guidelines/Schemes of MNRE or Solar Power Projects allocated through competitive bidding by/for other State Utilities/Entities.

  1. Solar Power Projects for captive use:

The State will promote setting up of solar power projects for captive use as under:

  • Solar Power Projects within premises of a consumer of Rajasthan:
Capacity Up to Contract Demand of the Consumer
Transmission and Wheeling Charges Not applicable
Banking As per Clause 16.3[4]
Electricity Duty Exempted as per Clause 16.4[5]
Additional Surcharge Not applicable
Cross Subsidy Surcharge Not applicable
Contribution towards Rajasthan Renewable Energy Development Fund Not applicable
  • Solar Power Projects outside the premises of consumer of Rajasthan:
Capacity Up to Contract Demand of the Consumer
Transmission and Wheeling Charges As per Clause 16.5[6]
Banking As per Clause 16.3
Electricity Duty Exempted as per Clause 16.4
Additional Surcharge Not applicable
Cross Subsidy Surcharge Not applicable
Contribution towards Rajasthan Renewable Energy Development Fund Not applicable

 

  • Solar Power Projects set up in the State for captive use outside Rajasthan through open access:
Capacity As per requirement of the Consumer
Transmission and Wheeling Charges As per RERC Regulations
Banking Not applicable
Electricity Duty Not applicable
Additional Surcharge Not applicable
Cross Subsidy Surcharge Not applicable
Contribution towards Rajasthan Renewable Energy Development Fund As per Clause 22

 

  1. Grid connected Solar Power Projects for Third Party Sale:

The State will promote setting up of solar power projects for third party sale within/ outside the State as under:

  • Solar Power Projects within premises of consumer of Rajasthan (Under RESCO Mode):
Capacity Up to Contract Demand of the Consumer
Tariff As mutually agreed
Transmission and Wheeling Charges Not applicable
Banking As per Clause 16.3
Electricity Duty As per GoR orders
Additional Surcharge As per RERC Regulations
Cross Subsidy Surcharge Not applicable
Contribution towards Rajasthan Renewable Energy Development Fund As per Clause 22

 

  • Solar Power Projects set up for sale of power within State through open access:
Generating Plant Capacity Any capacity projects
Sale to the Consumer Up to Contract Demand of the Consumer
Tariff As mutually agreed
Transmission and Wheeling Charges As per Clause 16.5
Banking As per Clause 16.3
Electricity Duty As per GoR orders
Additional Surcharge As per RERC Regulations
Cross Subsidy Surcharge Not applicable
Contribution towards Rajasthan Renewable Energy Development Fund As per Clause 22[7]

 

  • Solar Power Projects set up for sale of power outside State through open access/power exchange:
Generating Plant Capacity Any capacity projects
Tariff As mutually agreed
Transmission and Wheeling Charges As per RERC Regulations
Banking Not applicable
Electricity Duty Not applicable
Additional Surcharge Not applicable
Cross Subsidy Surcharge Not applicable
Contribution towards Rajasthan Renewable Energy Development Fund As per Clause 22

 

  1. Solar Power Projects with Storage Systems:

To reduce the variability of output of solar power injected into the grid and ensure firm power for a particular period, promotion of Solar Power Projects with storage systems in form of Battery Storage, Pumped Hydro Storage or any other grid interactive Storage System is envisaged. Initially, power up to the capacity of 5% of RPO target in MW (Solar & Non-Solar combined) from Solar Power Projects with Storage Systems (including Wind and Wind-Solar Hybrid Power Projects with Storage Systems), will be procured by Rajasthan DISCOMs at a tariff discovered through competitive bidding, in addition to the RPO target.

Solar Energy Policy, 2019 provides that “The minimum rated energy capacity of an Energy Storage System (ESS) shall be equal to ‘X/2’ MWh, where ‘X’ is the installed capacity of the Project in MW. For example, in case the installed capacity of a Project is 50 MW, then minimum energy rating of the ESS installed shall be 25 MWh.”

Re: Development of Solar Parks

  1. A special purpose vehicle (SPV) being Rajasthan Solarpark Development Company Ltd., in the form of a subsidiary company of RREC, has been established for development of infrastructure and management of Solar Parks. RREC will develop Solar Parks in Rajasthan on its own or through any other SPV which may be created as required.
  2. State will promote development of Solar Parks by Private Sector. The Private Sector Solar Power Park Developer (SPPD) will:
  • Submit an application in the prescribed online format to RREC for development of Solar Park;
  • Application shall accompany a non-refundable Registration charge @ INR 10,000/ MW + GST subject to maximum of INR 10 Lac + GST for each Solar Park;
  • RREC will complete the processing of Registration application within a period of 30 days.
  1. SPPD shall create common infrastructure facilities for development of Solar Parks such as:
  • creation of power evacuation systems,
  • development of roads,
  • lights, water supply systems,
  • other administrative support systems.
  1. Land conversion not required in accordance with the provisions of Rajasthan Tenancy Act 1955 and Rajasthan Land Revenue Act 1956 and the rules made thereunder for the development of Solar Park on Private Agriculture Land. Allotment of Government land to Private Sector Solar Power Park Developer(s) for development of Solar Park(s) will be considered on recommendation of RREC.
  2. The State will promote development of Solar Parks in Joint Venture with private developers by investing up to 50% equity or any other percentage of equity participation as decided by the state government. The cost of land allotted by state government would be part of its equity participation in the Joint Venture Company. The State Government will separately formulate guidelines regarding selection of partner for the formation of Joint Venture Companies in a transparent manner for the purpose of development of Solar Park.
  3. The State Government on its own or through any other agency designated by it will promote setting up of Ultra Mega Renewable Energy Power Park (UMREPP) in Joint Venture with Central Public Sector Undertakings.
  4. Pursuing the aim to shift to clean and green transport. the State will promote the use of Renewable energy for charging of Electric Vehicles (EV) in the following manner:
  • The Charging Infrastructure will be developed as per the guidelines and standards issued by Ministry of Power and Central Electricity Authority.
  • Government land will be allotted at 50% concessional rate for first 500 Renewable Energy based EV Charging Stations installed within 5 years from the date of commencement of this policy.
  • The charging station service providers may set up renewable energy generation plants within their premises for captive use, and may also draw renewable power through open access from generation plants located within the State to avail the benefits as provided under clause 16 of this policy.

Re: Registration and Approvals of Solar Power Projects

  1. RREC being the nodal agency will register all projects installed in State through an online application. Each Developer/ Power Producer will deposit non-refundable registration charge with RREC as under:
S No. Project Capacity Rate[8]
1. For Project ≤10 MW capacity INR 50,000/- per MW
2. For Projects > 10 MW and ≤ 50 MW capacity INR 5 lac per project
3. For Projects > 50 MW and ≤ 100 MW

capacity

 INR 10 lac per project
4. For Projects > 100 MW capacity INR 30 lac per project
  1. Importantly, Solar Power Projects registered prior to Solar Energy Policy, 2019 and three years before the commencement of Solar Energy Policy, 2019(for which project developer has not applied for in-principle clearance), the registration of such projects shall be allowed to be re-validated within 6 months from December 14, 2019 by depositing INR 5,000 per MW with applicable GST. In absence of the same, registration of such projects shall be deemed to have been cancelled. Further, such revalidated Projects will be required to apply for in-principle clearance within 1 year from the date of re-validation, failing which the registration shall be deemed to be cancelled.
  2. Solar Power Projects registered under the Rajasthan Solar Energy Policy, 2014 in the period of three years prior to the date of commencement of this Policy, shall be deemed to be registered under this Policy with the same registration number allotted earlier, and, the power producers of such projects shall have to apply for in-principle clearance within 3 years from the date of original registration or within 1 year from the date of commencement of this Policy whichever is later, failing which the registration shall be deemed to be cancelled.
  3. The installation of Solar Power Plants not registered with RREC and without prior approval of competent authority as per policy provisions will be liable to be disconnected from the Grid. The developer/power producer will be required to submit certificate of registration of project with RREC to the Sub-Registrar or any other officer authorized by the Government for the registration of sale/lease deed of the land.
  4. No registration will be required for Solar Power projects connected to Low Tension grid under Net/Gross Metering Scheme.
  5. Developer/Power Producer can transfer its registered capacity or part thereof to its ‘holding’, ‘subsidiary’, ‘fellow subsidiary’ or ‘ultimate holding’ company with the prior approval of RREC on payment of an amount equal to 50% of the Registration Charge. However, the provisions of clause 14.5[9] & 14.6[10] shall be applicable to the transferee.

Allotment of land:

  1. Government land will be allotted to Solar Park /Solar Power Project as per the provisions of Rajasthan Land Revenue (Allotment of land for setting up of Power Plant based on Renewable Energy Sources) Rules, 2007, as amended from time to time. Solar Power Park Developer shall be allowed to sub-lease the allotted land as per the aforesaid rules.
  1. RREC will recommend, on case to case basis, to the concerned District Collector for allotment of government land only on submission of cash security deposit of INR. 5 Lac per MW by demand draft/RTGS in favour of RREC, Jaipur. The security deposit will be refunded to the developer in proportion to the commissioned capacity of the project on written request of applicant. The security deposit shall be forfeited in case the allotted land is not used within the specified period as per allotment rules. If land is not allotted, security deposit will be refunded on the written request of the applicant.
  1. For setting up of Solar Power Plants based on different technologies, maximum land area which can be allotted to the Developer/Solar Power Producer will be as under:
S No. Technology Maximum area which can be allotted
(i) SPV on Crystalline Technology. 2.0 Hectare/MW
(ii) SPV on Crystalline Technology with tracker 3.0 Hectare/MW
(iii) SPV on Thin Film/Amorphous

Technology with or without tracker

 3.5 Hectare/MW
(iv) Solar Thermal (CSP)- Parabolic

Trough / Tower/Other Technology with or without storage

 a) Up to PLF of 21%: 3.5

Hectare/MW

b) For every 1% increase in PLF,

0.15 Hectare/MW additional

land will be allotted.

For the solar power projects with storage system, additional land will be allotted as per the rules prescribed by the Revenue Department, GoR.

Re: Incentives/ facilities available to Solar Power Projects:

  1. Transmission and Wheeling Charges: For Solar Power Projects set up for captive use/third party sale within State after the commencement of this policy and up to March 2023 or for a capacity of 500 MW (Solar, Wind & Wind-Solar Hybrid, with or without storage, taken together) whichever is earlier, the transmission and wheeling charges will be levied as under:-
  • For Solar Power Project set up outside the premises of consumer of Rajasthan and Solar Power Projects set up for sale of power within State through open access:- @ 50 % of normal transmission and wheeling charges for a period of 7 years from date of commissioning of the project.
  • For Solar Power Project with Storage Systems for Captive use/Third Party Sale:- @ 25 % of normal transmission and wheeling charges for a period of 7 years from date of commissioning of the project.
  • For Solar Power Project set up by charging station service providers for captive use:- @ 100 % exemption in normal transmission and wheeling charges for a period of 10 years from date of establishing of Electric Vehicle (EV) charging station.
  • The above provisions will be applicable for an individual plant capacity of maximum 25 MW.

Re: Approval Mechanism

  1. In-principle clearance and final approval will be granted by State Level Screening Committee (SLSC) / State Level Empowered Committee (SLEC) as the case may be. The land allottee will have to apply for in-principle clearance of the project within three months from the date of signing of lease deed of the allotted Government land. If Solar Power Producer fails to apply for in-principle clearance within the time prescribed, RREC will recommend for cancellation of allotment of Government land with the approval of SLSC.
  2. Following categories of the project will be governed by the provisions of the bid document and will not require in-principle clearance from SLSC:
  • Decentralized Grid Connected Solar Power Projects;
  • Solar Power Projects in Rajasthan for sale of power to DISCOMs of Rajasthan;
  • Solar Power Projects sanctioned under guidelines/schemes of MNRE;
  • Solar Power Projects with Storage Systems for sale of power at a tariff discovered through competitive bidding to Rajasthan DISCOMs.

SLSC after evaluating criteria such as DPR, Financial capability of power producer (set out in detail @ Annexure A-1 of the Solar Energy Policy, 2019 ), availability of land, power evacuation system, documentary evidence of PPA or an undertaking in case of sale to third party through open access among such other will provide in-principle clearance for the following categories of the projects:

  • Solar Power Projects for captive use;
  • Grid connected Solar Power Projects for Third Party Sale;
  • Solar Power Projects with Storage Systems for Captive use/Third Party Sale;
  • For Solar Power Project set up by charging station service providers for captive use.

Security Deposits:

  1. For the projects approved by SLSC the Developer / Power Producer will be required to deposit security amount of Rs. 10 lac / MW through Bank Guarantee / Cash within 1 month without interest and within 3 months with 9% interest. Developer / Power Producer who has submitted the project security within prescribed time period shall apply for final approval within 6 months from date of issue of in-principle clearance, failing which the in-principle clearance shall be deemed to be cancelled without any notice.

Power Purchase Agreements / Power Sale Agreement:

  1. For Projects sanctioned under:
  • Decentralized Grid Connected Solar Power Projects;
  • Solar Power Projects in Rajasthan for sale of power to DISCOMs of Rajasthan;
  • Solar Power Projects sanctioned under guidelines/schemes of MNRE;
  • Solar Power Projects with Storage Systems for sale of power at a tariff discovered through competitive bidding to Rajasthan DISCOMs;

PPA / PSA will be executed as per the provisions of the Bid Document.

  1. For Projects sanctioned under:
  • Solar Power Projects outside the premises of consumer of Rajasthan;
  • Solar Power Projects set up in the State for captive use outside Rajasthan through open access;
  • Solar Power Projects set up for sale of power within State through open access;
  • Solar Power Projects set up for sale of power outside State through open access/power exchange

Developer / Power Producer shall execute WBA with DISCOMs Where transmission system of RVPN is also used then power producer will execute sperate Transmission Agreement with RVPN.

  1. PPA / WBA will be allowed to be assigned in part or full to other parties being subject to:
  • Completion of the project and its connectivity to the grid;
  • Consent of RREC & RVPN / DISCOMs and related parties;
  • On payment of INR 2.00 lac per application to RREC (+ GST);
  • Importantly, when financed by Financial Institute / Lender, the name of such Financial Institute / Lender may be included in the PPA on request of Developer / Power Producer.

Rajasthan Renewable Energy Development Fund (RREDF):

  1. Solar Energy Policy, 2019 reasons that owing to wind and solar power being unpredictable and variable in nature, the same requires up-gradation of transmission and distribution infrastructure of the power utilities leading to increase in system level cost of the RE injected into the grid. Such increased cost has to be borne by the state utilities and the Government in various forms, mainly as expenditure for development of large power system infrastructure for grid management, other supporting infrastructure and facilitation works for the stakeholders.
  1. In view of the above, RREDF will be raised in the following manner:
  • In case of Solar Power Project set up in Rajasthan for sale of power to parties other than DISCOMs of Rajasthan, a contribution towards RREDF shall be made by the power producer, from the date of commissioning, as under:
S No. Period Rate[11] of Contribution
1. Projects commissioned up to 31.03.2024 INR. 2.00 lac/MW/year
2. Projects commissioned from 01.04.2024 to

31.03.2025

 INR 3.00 lac/MW/year
3. Projects commissioned from 01.04.2025 to

31.03.2026

 INR. 4.00 lac/MW/year
4. Projects commissioned on/after 01.04.2026 INR 5.00 lac/MW/year
  1. RREDF shall be levied on the projects which will be commissioned on or after the commencement of this policy and for the entire life-cycle of the project, from the date of commissioning, however, for the projects against which bids have been submitted prior to commencement of this policy, the contribution towards RREDF shall be @ INR 1 Lac/MW/Year for entire life cycle of the project.
  2. RREDF is not applicable on Solar Power Projects commissioned on or after the date of commencement of this Policy, for sale of power to DISCOMs of Rajasthan either directly or through any other Agency/Trader. However, such Projects commissioned before the date of commencement of this Policy for sale of power to DISCOMs of Rajasthan through any Agency/Trader will continue to pay the contribution towards RREDF @ INR 1 Lac/ MW /Year for the remaining life of the Project. There will be no requirement of contribution towards RREDF for the Solar Power Projects commissioned on or after the date of commencement of this Policy for captive consumption within State.
  1. Solar Power Producer shall deposit the contribution towards RREDF by April 30 in every financial year without interest and up to 30th June with interest @ 9% per annum. If it is not deposited up to June 30, then RVPN/DISCOM or any other Central/State Govt. entity will take suitable action, such as but not limited to recovery of dues from the power bill of the Power Producer or disconnection from Grid till the deposition of dues with interest, on recommendation of RREC.

Time frame for completion of the Project:

  1. The time schedule for completion of Solar Power Projects under Decentralized Grid Connected Solar Power Projects, Solar Power Projects in Rajasthan for sale of power to DISCOMs of Rajasthan, Solar Power Projects sanctioned under guidelines/schemes of MNRE and Solar Power Projects with Storage Systems for sale of power at a tariff discovered through competitive bidding to Rajasthan DISCOMs will be governed by provisions of bid document and Power Purchase Agreement.
  1. The time schedule for completion for the Solar Power Projects, sanctioned under Solar Power Projects for captive use, Grid connected Solar Power Projects for Third Party Sale, Solar Power Projects with Storage Systems for Captive use/Third Party Sale and for Solar Power Project set up by charging station service providers for captive use will be as under:
Type of Projects Time Schedule for completion
SPVs:
Up to 20 MW capacity Within 15 months from the date of final approval
More than 20 MW and up

to 50 MW capacity

 Within 18 months from the date of final approval
More than 50 MW capacity Within 24 months from the date of final approval
CSP:
Up to 25 MW capacity Within 24 months from the date of final approval
More than 25 MW and up

to 100 MW capacity

 Within 36 months from the date of final approval
More than 100 MW and up

to 200 MW capacity

 Within 42 months from the date of final approval
More than 200 MW

capacity

 Within 48 months from the date of final approval

Provided that extension in time schedule may be granted by RREC on case to case basis                after depositing penalty amount along with applicable GST as under:

 

S No. Period of Delay Penalty on un-commissioned capacity
i. For delay up to 1 month INR 25,000 per MW
ii. For delay up to 3 months INR 50,000 per MW
iii. For delay up to 6 months INR 1,00,000 per MW
iv. For delay up to 9 months INR 1,50,000 per MW
v. For delay up to 15 months INR 2,00,000 per MW

In case of delays beyond 15 months SLEC on its satisfaction, regarding commissioning     of the project, may provide further extension by imposing a penalty @ INR 2,000 per day     per MW for each day beyond the period of 15 months, this penalty for each day of delay     would be over and above the penalty of INR 2,00,000 per MW for the delay up to 15 months.

Manufacturing of Solar Energy Equipment:

  1. In order to promote manufacturing solar energy equipment in the State, certain benefits in the form of concessions have been offered including land allotment at 50% concessional rate, exemption of 100% stamp duty, full exemption in electricity duty for 10 years, investment subsidy in SGST among other such concessions.

Development of Power Evacuation System in Renewable Energy Potential Area:

[1] “Net Metering” means the methodology under which electricity generated by the Rooftop/ Ground mounted Solar PV System set up in the premises of a consumer under the CAPEX/ RESCO mode is primarily for self-consumption, and the surplus generated electricity, if any, is delivered to the distribution licensee which will be off-set against the electricity supplied by the distribution licensee to the consumer during the billing cycle.

[2] “RESCO” means the methodology in which entire investment is to be incurred by a company/individual other than the consumer for setting up of the solar power project in the consumer premises and the consumer pays for the electricity generated from such solar power project at mutually agreed tariff to such investor company/ individual.

[3] Gross Metering means methodology under which the entire electricity generated by the Rooftop/ Ground mounted Solar PV System set up in the premises of the consumer is delivered to the distribution system of the Licensee.

[4]As per Clause 16.3, Banking of energy at the drawl end within the State shall be permitted for the Captive Consumption and 3rd Party Sale on yearly basis. Banking charges shall be adjusted in kind @ 10 % of the energy delivered at the point of drawl. The banking year shall be from April to March. However, drawl of banked energy will not be allowed during peak hours as determined by DISCOMs. The unutilized banked energy at the end of year shall lapse.

[5]  As per Clause 16.4, The electricity consumed by the Power Producer for captive use within state under clause 7.1, 10.3.1, 10.3.2, 11.4 & 13(iv) will be exempted from payment of Electricity Duty for 7 years from COD.

[6] As stated in Para 28

[7] Clause 22 provisions Rajasthan Renewable Energy Development Fund (RREDF) and the contribution to be made by the solar power generator towards this fund in case of sale of power to parties other than Rajasthan DISCOMs. The same has been explained in the latter part of this summary.

[8] The GST and other charges, as applicable, shall be payable in addition to the registration charge. Registration will not confer any right on the Solar Power Producer and will not create any obligation on the part of RREC.

Rajasthan Electricity Regulatory Commission Suo-motu Order on Policy Directives

Brief Note on Rajasthan Electricity Regulatory Commission Suo-motu Order on Policy Directives issued by the State of Rajasthan with regard to Solar/Wind/Solar-Wind Hybrid Power Generation in the State

  • The State Government on 22.01.2020 had issued Policy Directives to the Rajasthan Electricity Regulatory Commission (“Commission” / “RERC”) u/s 108(1) of the Electricity Act,2003 (the Act) with regard to its prospective solar/wind/wind-solar hybrid policies 2019.
  • The Commission, treating the Policy Directives u/s 108 of the Act as a guidance (not mandatory) notices that certain directives of the State Government will be limited to certain generators / developers and will not cover the general consumers at large and has inter alia issued a suo-motu order in respect to the following:
  • Banking:

The Policy Directive states that the Banking to be allowed at consumption end for captive Consumption and third-party sale on yearly basis @ 10 % charges in kind of banked energy. The banking year will be from April to March. However, no drawl of banked energy will be allowed at peak hours as determined by DISCOMs and the unutilized banked energy will lapse at the end of the year.

RERC observes in this regard:

  • That the banking facility for renewable energy projects was introduced in its earlier regulations.
  • Under the existing regulations, banking was allowed only for the captive consumer. However, according to the Policy Directive, the banking facility has been extended to the third-party sale also.
  • That the burden arising from implementation of the Policy Directive cannot be passed on to the general consumers. Therefore, the Commission has directed the DISCOMs to approach the state government for claiming financial support to make good the impact in their revenue consequential to the directions. (over and above the provisions of the existing Regulations.)
  • Exemption In Transmission And Wheeling Charges:

The Policy Directive provided that the transmission and wheeling charges to be levied for projects set up for captive or third-party sale within the state, after the Commencement of policies or up to March 2023, or for projects with a capacity of 500 MW (solar, wind and wind-solar hybrid, with or without storage) whichever is earlier, as follows:

  • For solar power projects set up for captive use and third-party sale– 50% of Normal transmission and wheeling charges for a period of 7 years from the commissioning of the project.
  • For solar power projects with a storage system and repowered wind projects set up for captive use and third-party sale –

25% of normal transmission and wheeling charges for a period of 7 years from the commissioning of the project.

  • For solar power projects set up for electric vehicle charging stations for captive use and third-party sale –

100% exemption in standard transmission and wheeling charges for a period of 10 years from the date of establishment of the Electric Vehicle (EV) charging station.

(the Policy Directive also provides the above provision to be applicable for individual plant capacity of maximum 25MW)

RERC has accordingly:

  • Directed the DISCOMs to claim subsidy as per Section 65 of the Act in line with the Commission’s Tariff Regulations of 2019 and initiate the provisions of exemption in transmission and wheeling charges in respect to the said State Policy Directive.
  • Power Projects With Storage System:

The Policy Directive had stated that power up to 5% of RPO targets in MW (solar & non-solar combined) would be procured from solar projects with storage systems by Rajasthan DISCOMs at a tariff discovered through competitive bidding besides their RPO target.

RERC has accordingly:

  • Directed the DISCOMs to implement the state government’s policy for projects with storage systems.
  • Roof Top Solar System:

The Policy Directive provided that under net metering, the DISCOMs will allow solar rooftop of up to 50% of the capacity of the distribution transformer. Further, benefits such as banking facility and payment of surplus energy by DISCOMs under net-metering applicable to domestic consumers will also apply to government buildings.

The Policy directive has also provided an enabling provision for Solar Rooftop Systems, that the same can be set up under the gross Metering Scheme as per the guidelines issued by the Government and the generated power to be supplied to DISCOMs at the tariff determined by RERC.  The Capacity of 1 MW of Solar rooftop System will be allowed under this scheme.

RERC has accordingly:

  • Noted that the existing RERC net metering regulations provide for a limit of 30% on the capacity of the distribution transformer for setting up a rooftop solar PV project. However, the Commission under the powers conferred under the Regulations 18 & 19 of the RERC Net- Metering Regulations, has increased the limit to 50% as stated in the Policy Directives. And the Commission emphasized that the limit of 50% should be adopted ensuring the technical feasibility and safety issues.
  • Taken note of the benefit of payment of surplus energy to the state government buildings like a domestic consumer and the provision for limiting the payment for surplus energy to the domestic consumer category having been recently incorporated through an amendment in the current RERC net metering regulations, directed the DISCOMs to file a petition indicating the requirement of change in regulations for the consideration of the Commission.
  • On the issue of gross metering, directed the DISCOMs to assess their needs for gross metering and then enter into a power purchase agreement (PPA).
  • The Commission has also stated that the State Government also consider prescribing appropriate guidelines as contemplated in the Policy directive. If required, the Discoms may also file a petition for determination of Tariff for sale of the power generated from the solar Rooftop Systems and supplying power to the Discoms under Gross Metering scheme envisaged under the directive.
  • The DISCOMs are further directed by RERC to give effect to the directives of the Government in view of directions given above. And also, the DISCOMs to conduct the impact assessment study of these government directives and furnish the report of impact assessment study to the Commission after the completion of one year. The Commission also asked the DISCOMs to submit the status of recovery of additional financial implications due to the government policy directives.

The evolving resolution of stressed assets

Authored by Ramya Hariharan, Partner along with Dipti Srivastava, Associate, HSA Advocates

The banking sector has been under tremendous stress in the past few years due to the increasing number of non-performing assets (NPA) caused among other things by the absence of a comprehensive bankruptcy regime. In 2016, the Insolvency and Bankruptcy Code, 2016, was enacted to provide a comprehensive framework for the resolution of NPAs. The recovery rate in 94 cases resolved through the code by fiscal year 2019 is 43%, compared to 26.5% under the previous regime. According to the World Bank, the code has helped India move up to 63rd place in its 2020 ease of doing business rankings. While the results are encouraging, unfamiliarity with the new law, slippage of timelines, frivolous litigation and a lack of infrastructure have hindered the implementation of the code.

Initially, the code provided that 270 days was the time limit for completion of the insolvency resolution process (CIRP). In 2017, the National Company Law Appellate Tribunal held in JK Jute Mills Company Limited v Surendra Trading Company that this limit was mandatory. However, the Supreme Court in the case of ArcelorMittal India Private Limited v Satish Kumar Gupta & Ors held that the period of time taken in litigation should be excluded from the time limit. The average timeline for cases resolved under the code is now 324 days. The code was therefore amended in August 2019 to provide mandatory completion of CIRP within 330 days including all legal proceedings. However, the court in November 2019, in Committee of Creditors of Essar Steel India Limited v Satish Kumar Gupta (the Essar case) struck down the word mandatory as arbitrary and held that in exceptional cases the timeline could be extended. For there to be timely resolution, this discretionary power must be exercised sparingly by tribunals.

Due to the infancy of the law, several conceptual issues are still evolving. This has led to litigation and inordinate delays. Issues such as the ranking of creditors, the legality of differential treatment of financial and operational creditors in a plan, the status of claims upon completion of CIRPs have frequently been the subject of challenge. These issues have now been clarified by the Supreme Court in the Essar case, which recognized the classification of creditors on the basis of security, and the differential treatment of financial and operational creditors. Further, it has been clarified that undecided claims do not survive the expiry of the CIRP. The role of the court in interpreting the code has helped create precedents in a still evolving law.

However, contradictory judgments across tribunals have affected resolution. One concern is the continuation of liabilities for offences committed under previous management after the CIRP. Bhushan Power is an example where the Enforcement Directorate attached the assets of the corporate debtor (CD) for past offences even after the plan of JSW Steel was approved. This concern should be addressed by the new section 32A introduced by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, which exonerates the CD of liability for past offences.

Delay in adjudication is also caused by the lack of infrastructure. As of September 2019, there were only 16 National Company Law Tribunal panels with 53 members handling 10,860 cases. In the case of Swiss Ribbons Private Limited & Anr v Union of India & Ors the Supreme Court directed that circuit benches of the appellate tribunal be established within six months. However, it is almost a year since the judgment was delivered and not one circuit bench has been established. Inadequate infrastructure has led to delay in the admission of cases for as long as a year instead of the 14 days contemplated under the code. Several CIRPs have been stalled by frivolous litigation instituted by former promoters, the Essar case being one. It took more than 600 days to resolve. Lack of adequate information about the CD, adequate information utilities and good resolution professionals are other challenges. Delay in resolution results in value destruction which has seen resolution applicants backing out.

The code has revolutionized the framework for the resolution of distressed assets. However, timely resolution continues to be a challenge. Of 12 large corporate accounts, only four have been resolved. Of 2,542 admitted cases, 1,497 CIRPs are ongoing and estimates are that it will take almost 30 months to clear current cases, exceeding the statutory timeline by over one and a half times. While the government has been proactive in implementing the code by introducing timely amendments, concerted efforts are required to improve the number and quality of judges, resolution professionals and information utilities in order to achieve the objective of timely resolution.

Source: India Business Law Journal