Terming lockdown as Force Majeure under PPA’s; withdraw PSPCL’s payment obligation-CM to Power Minister
Kanwar Inder Singh/ royalpatiala.in/ Chandigarh
Terming the imposition of lockdown as a clear case of Force Majeure under the PPAs, Punjab Chief Minister Captain Amarinder Singh on Monday urged the Union Power Ministry to withdraw the obligation on PSPCL to pay capacity charges.
The Punjab State Power Corporation Limited (PSPCL) is unable to schedule the energy due to Force Majeure situation, that has arisen due to low demand in view of COVID-19 in the state, said the Chief Minister in a letter to Union Minister of State (Independent Charge) for Power Raj Kumar Singh.
“The imposition of the lockdown qualifies as Force Majeure under the Power Purchase Agreements (PPAs) in as much as it prevents the performance of the obligation on the part of the procurer, including PSPCL, of scheduling the power from the generator, as events and circumstances are beyond the control of the PSPCL as these could not be avoided by them under any circumstances even with exercise of prudent utility practices,” said the Chief Minister, citing other central government orders terming Covid-19 pandemic as Force Majeur.
Citing the nationwide lockdown in place since March 24, 2020, Captain Amarinder said,” Due to imposition of restrictions on the operations of all kinds of establishments, barring those providing essential services, the demand for power has resultantly been severely reduced.” The current scenario is influenced by factors beyond the control of the state Discom PSPCL, he said, adding that the current events “have rendered scheduling of power from state IPPs and Central Sector Power projects by PSPCL, impossible and impracticable.”
Seeking immediate withdrawal of the April 6 directions of the Power Ministry stating that ‘the obligation to pay for capacity charges as per PPA shall continue, as does the obligation to pay for the transmission charges’, the Chief Minister said that taking cognizance of the prevailing circumstances, PSPCL had, in fact, “rightly served notices to the Generators for Force Majeure situation regarding curtailing of power vide which it had been conveyed that PSPCL shall not be able to avail the power from the Generators, and will not be paying the capacity charges for the period during which power has not been scheduled.”
It is notable that the Department of Expenditure Procurement Policy Division, Ministry of Finance, Govt. of India had declared Covid-19 a Force Majeur on February 19, 2020. Further, pointed out Captain Amarinder, “the Government of India using its powers under section 107 of Electricity Act vide its order of March 28, 2020, in view of emergent situation, had directed Central Electricity Regulatory Commission to specify a reduced rate of late payment surcharge (LPS) for payments which become delayed during the period from March 24,2020 to June 30, 2020, to generating companies and licensees treating the restrictions placed by Central Government vide its order of March 24, 2020 to contain COVID-19 as an event of Force Majeure.”
About Force Majeure
Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure.
April, 27,2020
