An arbitration panel headed by former chief justice of India RM Lodha has started the process of hearing into recovery of liquidated damages to the tune of Rs 951 crore from the Sterlite group-promoted 1,980-megawatt supercritical thermal power plant in Talwandi Sabo.
More than two years after Punjab State Power Corporation Limited (PSPCL) approached Punjab State Electricity Regulatory Commission (PSERC) to make the recovery, the
panel will start hearing the matter on September 5. Other members in the panel are retired chief justice of Rajasthan high court Anil Dev Singh and Central Electricity Authority former member Ravinder Singh.
As per the power purchase agreement (PPA) with the promoters of the thermal plant, the first unit of 660 MW was to be commissioned by August 31, 2013, second by December 31, 2013, and third by April 30, 2014. As commissioning of all units got delayed, PSPCL imposed Rs 317 crore liquidated damages for each unit, taking the total to Rs 951 crore.
Liquidated damages are decided during the formation of a contract for the injured party to collect as compensation upon a specific breach.
PSPCL banking on agreement
The promoters, however, took the plea that PSPCL has incurred no losses, so damages are not maintainable. The power utility, in turn, is banking on the PPA, which says delay in commissioning will invite damages.
Justifying the amount — that could install a generation capacity of about 200 MW — PSPCL said it has incurred the losses due to non-availability of power as promised by the promoter.
Also, as per the PPA, if the company fails to pay the amount of liquidated damages within 10 days of expiry of one year from the scheduled date of commissioning, then PSPCL is entitled to recover the amount by invoking the performance of guarantee of Rs 150 crore and the balance to be paid by the firm.
Power utility had objected to arbitrator
On a petition by PSPCL, PSERC in October 2014 ordered to refer the matter to an arbitrator under a provision of the Electricity Act 2003, as the amount was large.
The power utility, however, insisted the matter be adjudicated by the commission itself and filed a petition with the Appellate Tribunal for Electricity (APTEL). The tribunal vindicated PSERC’s stand and ordered the matter be referred to an arbitration panel having experienced judicial minds.
Aam Aadmi Party (AAP) leader Chander Suta Dogra, who recently presented a white paper on the power sector, alleged referring the matter to an arbitrator is a means to delay recovery. “The provisions of law are being exploited to benefit the power plant,” she said.
PSPCL director, generation, MR Parihaar said: “We have furnished all documents to the panel and we want early decision on the matter.”