Tuesday, May 31, 2016

Imposition of Penalty by the CCI: Is it Justified?

[The following guest post is contributed by Tarun Mathur, who is a Manager at Ernst & Young, LLP (Mumbai) and has earlier worked with the Competition Commission of India in its Combination Division. Views are personal.]

Recently in an order (Notice given by Piramal Enterprises Limited (PEL) (C-2015/02/249)) dated May 2, 2016, the Competition Commission of India (CCI) imposed a penalty of INR 50 Million on PEL for:

(a)        not filing the combination notification for its pre-approval; and

(b)       consummating the combinations transaction without its approval

as required under the the Competition Act, 2002 (Competition Act) and the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations).

The PEL order is an interesting read on various aspects of competition laws as is applicable and as understood by the CCI.  Unless challenged before the Competition Appellate Tribunal (COMPAT) by PEL, this interpretation will remain the law of the land.

In my view, the issues and finding contained in this order need further clarification as they go to the root of the basic nuances of competition law in India. It is not clear if PEL has preferred (or will be preferring) an appeal against this order.

Background

PEL acquired (a) 9.96 % stake in Shriram Transport Finance Company in May 2013 from the stock exchange by way of a contract note (STFC Transaction); (b) 20% equity stake (directly and indirectly) in Shriram Capital Limited (SCL), pursuant to the execution of an agreement in April 2014 (SCL Transaction); and (c) 9.99 % stake in Shriram City Union Finance Limited in June 2014, pursuant to a preferential allotment (SCUF Transaction).

The CCI took suo moto cognizance of the above three transactions and asked PEL to explain why no combination notification was filed with the CCI for its approval. In a turn of events, PEL filed the Form II combination notification with the CCI and the CCI approved of the combination vide its order dated May 26, 2015, while simultaneously initiating the proceeding for levying of penalty under Section 43A of the Competition Act (which deals with the power of the CCI to impose penalty for non-furnishing of information on combinations). This post discusses in brief the penalty levying order by the CCI.

The CCI Order in brief

I have briefly highlighted the important aspects discussed in the PEL order below:

1.   Wrongful interpretation of ‘control’ by the Parties: Since the conception of Combination Regulations in 2011, competition law practitioners are being constantly plagued by the possible interpretation of expressions ‘control’, ‘ordinarily not likely’,  ‘acquisition of sole or joint control’, ‘solely as an investment’ etc., by the CCI. However, much clarity (I must say at the expense of various parties to a combination transaction) have come from the decisions / orders of the CCI over a period of five years and for the time being has been laid to rest by the recent amendment (in January 2016) of  the Combination Regulations.

In the instant case, PEL had admitted that it had committed an error and had wrongfully interpreted the definition of ‘control’ and it ought to have filed the combination notification, which it failed to do so. However, there was no mala fide intent to evade the compliances required under the Competition Act. 

The acquisition of 20% stake in SCL, including some affirmative rights such as: (a) approval of the appointment of the chief executive officer and the chief financial officer of SCL; (b) alteration of charter documents; (c) determining the business plan and annual budget; (d) appointment or removal of auditors; and (e) commencement of any new business line by SCL tantamount to acquisition of ‘control’ and therefore becomes a notifiable transaction (although the transaction does not hit the limit of 25% shares/ voting rights as prescribed under item 1 of Schedule I of Combination Regulations (categories of transactions not likely to have appreciable adverse effect on competition in India). However, according to the CCI, the presence of certain affirmative rights such as those listed above gives rise to the presumption that the acquirer has de facto control over the target enterprise (a stand that the CCI has adopted in several previous orders). Therefore, such transactions are not eligible for exemption under Regulation 4 read with Schedule I of the Combination Regulations).

2.   What an enterprise writes in its annual reports / other reports and speaks through its representatives is important: Seemingly, it appears that each of the STFC Transaction and the SCUF Transactions are separate stand-alone transactions and are independent of the SCL Transaction. The statements made in the annual reports about these three transactions give the impression that, somehow in the overall scheme of things, these transactions are inter-connected and strategic in nature. In my humble submission, howsoever the word ‘strategic’ is interpreted or viewed in the context of facts and circumstances, the core essence remains that these three transactions are independent of each other and have almost nothing in common and are completely different in terms of transaction documents, rationale, mode of transfer, business and entities involved and timing of each transaction.

3.   EU concept of inter—connectedness incorporated into Indian competition laws: Another interesting feature of PEL order is the acceptance of European Union laws, namely here, European Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (2008/C 95/01)  (EU Merger Control Rules) for interpretation of competition laws in India.

In terms of EU Merger Control Rules (at para 50):

“If two or more transactions (each of them bringing about an acquisition of control) take place within a two-year period between the same persons or undertakings, they shall be qualified as a single concentration, irrespective of whether or not those transactions relate to parts of the same business or concern the same sector... It is sufficient if the transactions, although not carried out between the same companies, are carried out between companies belonging to the same respective groups.”

By this logic, three acquisitions by PEL of equity shares of companies belonging to the Shriram Group, carried out within a two year period, were considered as inter-related transactions.

4.   Time-limit before the CCI can initiate suo-moto inquiry: Proviso to Section 20(1) of the Competition Act provides that the CCI does not have any suo moto power to inquire into a combination transaction in which one year has passed since the transaction was given effect to.

In the instant case, according to the CCI, STFC Transaction, SCL Transaction and SCUF Transaction are inter-connected transactions and since the SCUF Transaction was given effect to in June 2014 and the CCI inquired about these transactions in October 2014, the CCI is well within its power to inquire into such transactions.  If this logic is followed, then any further acquisition of any other Shriram Group entity in future by PEL (howsoever unconnected to the first three transactions (by June 2016)) will prolong the jurisdiction/ power of the CCI to inquire in to transaction and leaves the question open as to whether the parties will be required to file a new combination notification or not (even if the new transaction is in itself a non-notifiable transaction).

5.   Mitigation factors for imposition of penalty: In terms of Section 43A of the Competition Act, the CCI can levy a maximum penalty of one per cent of the combined value of worldwide assets of the combination. However, while determining the quantum of penalty, among other things, the CCI undertakes an analysis of certain mitigating factors. In the PEL order, while penalizing PEL INR 50 Million, it took into consideration, mitigating factors such as (a) lack of any mala fides intent; (b) no prior competition law violation; and (c) continuous co-operation with CCI through the process (from combination notification filing to this order) on part of PEL. However, there is no specific list / guidelines for the enterprises to ascertain what mitigating factors CCI will consider for quantification of penalty amount.

Further, what made it penalize PEL for INR 50 Million and  not INR 1 or for that matter INR 1.025 Billion (maximum penalty of 1 % of the combined value of worldwide assets of the combination) is not altogether clear. I believe now is the right time for CCI to fulfil the demand of the business community of coming up with some sort of guidelines / notification for calculation of penalties for antitrust violations. It can even do so by medium of its decisional practice.

Epilogue

On the basis of reading of several orders passed by the CCI, in my view it is rather clear that further contribution is desirable in the field (especially in its interpretation, analysis and appreciable adverse effect assessment of transactions) as to the predictability of the provisions of competition laws. CCI’s orders (including the PEL order) leave wide gaps as to the interpretation of competition laws, which give rise to a great deal of uncertainty. CCI in its formative years ought to strive to create world-class standards and a body of competition law jurisprudence, which stands the test of time and scrutiny by the appellate courts.


- Tarun Mathur

Monday, May 30, 2016

SEBI’s Regime on Wilful Defaulters

Earlier this year, the Securities and Exchange Board of India (SEBI) had issued a discussion paper that proposed tight curbs against wilful defaulters from accessing the capital markets. We had commented on the discussion paper in previous posts (here and here). Pursuant to the consultation process, SEBI last week issued amendments to various regulations in order to operationalize such curbs. Under the new regime, wilful defaulters who are declared as such through the process stipulated by the Reserve Bank of India (RBI) would not be in a position to access the capital markets or otherwise act as market intermediaries. This establishes a connection between the banking system and the capital markets. In other words, any person who is a wilful defaulter under the banking system would effectively be kept out of the capital markets through mechanisms akin to a cross-default.

A person is categorized as a wilful defaulter by a bank or financial institution or consortium in accordance with the relevant guidelines issued by the RBI for the purpose. It also includes a company whose promoter or director is recognized as a wilful defaulter.

SEBI has implemented the new regime by amending various regulations as follows:

1.         Primary Markets: A company is prevented from issuing equity shares to the public if it or any of its promoters or directors is a wilful defaulter. A company is prevented from issuing convertible securities to the public if it is in default of payment of interest or principal for a period of more than six months in respect of debt instruments it has issued to the public.

            A company that falls within the category of wilful defaulter may, however, proceed with a rights issue so long as appropriate disclosures are made regarding the circumstances in which it has been declared a wilful defaulter. Moreover, the promoters cannot renounce their rights in favour of outsiders. Similarly, a preferential allotment of securities is permissible if it is accompanied with appropriate disclosures.

2.         Market for Corporate Control: Wilful defaulters are prevented from taking control of a company. Hence, they can neither make a takeover offer nor can they acquire such number of shares that would trigger a mandatory offer requirement. By way of exception, a wilful defaulter can make a competing offer, presumably a method that enables such a person to defend its position in a company that is the subject matter of a takeover offer for acquisition of control.

3.         Debt Securities and Preference Shares: Wilful defaulters are prohibited from making a public issue of debt securities or of non-convertible redeemable preference shares if they are restrained, prohibited or debarred by SEBI from accessing the capital markets, or if they are a wilful defaulter in respect of the relevant securities for a period of more than six months.

4.         Intermediaries: Persons who are categorized as wilful defaulters would be disqualified from acting as intermediaries in the capital markets, and they would not be granted registration by SEBI.


As discussed in the previous posts (linked above), this move would have a deterrent effect on borrowers who borrow monies from banks and financial institutions. On the other hand, it may also be considered an overkill because by default the new regime disentitles wilful defaulters from accessing the capital markets even though that may be necessary for a restructuring or revival of the business. In that sense, SEBI has adopted a uniform approach by banning all entities as opposed to permitting some on a case-by-case basis. This may have the effect of adversely affecting shareholders or lenders of a wilful defaulter who may not be able to improve their position in the company by accessing the capital markets. In its zeal to target the promoter or directors who are labeled wilful defaulters, this development may result in adverse consequences on other stakeholders who may be innocent.

Friday, May 27, 2016

RBI Permits Deferment of Consideration and Escrow Mechanism Under Automatic Route

[The following post is contributed by Abhishek Dubey who is a Managing Associate with BMR Legal, Delhi. The views expressed here are personal.]

In continuation of its policy to rationalize the existing regime under the Foreign Exchange Management Act and to promote the ease of doing business, the Reserve Bank of India (RBI) has amended the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 to permit, under the automatic route, deferment of purchase consideration and escrow mechanism in share purchase transactions involving foreign investment. Under the earlier regime, deferment of purchase consideration was not permitted and escrow mechanism was permitted (with several restrictions) under the automatic route for a maximum period of only six months. The amendment regulations have been notified in the official gazette and are effective from May 20, 2016. The amendment regulations can be accessed here.

The text of the newly introduced Regulation 10A is reproduced below:

“10A. In case of transfer of shares between a resident buyer and a non-resident seller or vice-versa, not more than twenty five per cent of the total consideration can be paid by the buyer on a deferred basis within a period not exceeding eighteen months from the date of the transfer agreement. For this purpose, if so agreed between the buyer and the seller, an escrow arrangement may be made between the buyer and the seller for an amount not more than twenty five per cent of the total consideration for a period not exceeding eighteen months from the date of the transfer agreement or if the total consideration is paid by the buyer to the seller, the seller may furnish an indemnity for an amount not more than twenty five per cent of the total consideration for a period not exceeding eighteen months from the date of the payment of the full consideration:

Provided the total consideration finally paid for the shares must be compliant with the applicable pricing guidelines.”

The amendment regulations seek to introduce the following:

(i)   Deferment of Purchase Consideration: The amendment regulations permit deferment of purchase consideration in share purchase transactions involving foreign investment (both inbound and outbound) for a maximum period of 18 months from the date of the definitive agreements. The amount of the consideration that is sought to be deferred under the share purchase agreement shall not be more than 25% of the total consideration.

(ii)  Escrow Arrangement: The buyer and the seller can enter into an escrow agreement and open an escrow account in India for depositing the deferred consideration. The escrow amount shall not exceed 25% of the total consideration and the duration of the escrow account shall not be more than 18 months from the date of the share purchase agreement.

The flexibility conferred by the RBI of having an escrow account will provide significant comfort to the buyer in securing its indemnity rights and having an effective remedy against the seller for breach of warranties. Further, hold-back of consideration by the buyer in the escrow may give impetus to a trend of ‘post-closing purchase price adjustment’ in the Indian M&A space.

It is to be noted that the reference date for commencement of the 18 month period for escrow arrangement as well as for deferred consideration mechanism is the date of the share purchase agreement. The date of the share purchase agreement is referred to as the “execution” date which is different from the date of “closing” when the seller transfers the shares to the buyer and buyer transfers the consideration to the seller. The time gap between execution date and closing date may range from 60 days to 180 days and even more in large transactions requiring approvals from regulators (CCI / FIPB / DGCA). Therefore, the effective life span of the escrow account or effective period of deferment consideration would depend on the time gap between execution of the share purchase agreement and closing of the transaction – it can be full 18 months only in transactions that sign and close simultaneously. 

(iii) Seller Indemnity: The amendment regulation provides that if the seller has received full consideration from the buyer, the seller may provide an indemnity to the buyer for a maximum period of 18 months from the date of payment of full purchase consideration. The indemnity could be of a maximum amount of 25% of the total purchase consideration.

The introduction of restrictions on subsets of indemnity is a potential cause of ambiguity because in the regime existing prior to this amendment there were no limits prescribed for indemnification time period or indemnification amount. The indemnification period is usually contractually agreed between the parties based on various factors such as the time period prescribed by the statute of limitation, the lookback period under taxation laws and practical considerations such as the time required by the buyer in discovering non-compliances after taking over the target or time probability of a claim arising. Similarly, the liability cap under the indemnification provisions is usually a fraction of or in certain transactions a factor of the total purchase consideration. Given that the objective of the amendment regulations is to rationalize the existing FEMA regime, the interpretation of this insertion needs to be seen.

It is to be noted that while the reference date for commencement of the 18-month period in case of deferred consideration and escrow account is the execution date of the share purchase agreement, that in case of seller indemnity is the date of closing of the transaction, i.e., the date when the seller receives the purchase consideration and transfers shares to the buyer. Therefore, the effective protection offered to the buyer by the amendment regulations is more in the case of seller indemnity in comparison with deferred consideration or escrow arrangement.

Conclusion

Deferred consideration mechanism and indemnity escrows are recognized features of M&A transactions worldwide. However, Indian definitive documents for cross-border transactions carried ambiguity in respect of these globally accepted risk allocation mechanisms until now. With the introduction of the flexibility of having deferred purchase consideration mechanism or an indemnity escrow account in Indian cross-border transactions, the RBI has taken a significant step not only towards buyer protection but also towards aligning the Indian M&A landscape with the regime prevalent in acquirer / investor states.  


- Abhishek Dubey

Draft Guidelines for Development of Onshore Wind Power Projects: A Preliminary Analysis

[The following guest post is contributed by Alimpan Banerjee, who is an Associate at Luthra and Luthra Law Offices, New Delhi. Views expressed are personal.]

The Ministry of New and Renewable Energy (“MNRE”) has recently released the Draft Guidelines for Development of Onshore Wind Power Projects (“Guidelines”) dated May 12, 2016 (available here). In this post, the author attempts to analyze some of the key provisions of the aforesaid Guidelines and their effects on the development and deployment of wind energy in India.

At the very onset it must be mentioned that these Guidelines come as a welcome change as the incumbent guidelines were issued way back in 1996 and had become obsolete given the rapid changes in technology and the large scale deployment of renewable energy witnessed in India lately. However, the Guidelines have evoked a mixed response from the industry and experts alike; in the light of the same, it becomes necessary to look closely at the fine print of the Guidelines and critically analyze the same. The salient provisions are discussed below.

1.         Site Selection and Feasibility

Site selection and the procurement of land is arguably one of the most crucial stages in the setting up of a wind power project and is usually passed on the EPC Contractor under the project contracts. Therefore, these Guidelines are relevant not only from the perspective of the project developers but also the various EPC contractors executing such projects.

Land procurement faces various regulatory and legal hurdles under the incumbent policy framework. These Guidelines seek to streamline and formalize the same through a set of uniform policy measures.

a)   Land Use Permission: Under the Guidelines, the obligation has been transferred to the project developers to ensure that the land can be legally used for the desired purposes. One would presume that this obligation extends only to project developers setting up projects on privately owned land.  Under the various state policies, developers intending to set up projects on Govt. or revenue land need to apply to the designated nodal agency, and on being accorded permission can proceed with the same. In such a situation, the act of receiving an approval from the designated nodal agency would substantiate the inference that the land can be used for the designated purpose, thereby discharging the developers of any further obligations.

        It is worthwhile to mention here that some states like Andhra Pradesh have done away with the mutation of land use requirement and such project land is accorded deemed to have Non-Agricultural status on the payment of applicable statutory fees.[i]

         Therefore, it will be fair to presume that the extant requirement to ensure that the land can be legally used for setting up wind power projects by obtaining the necessary permissions and approvals is only for developers setting up projects on privately owned land. However, a clarification in the Guidelines with respect to the same would be highly desirable.

b)       Availability of wind resource: The project developer is required to ensure the availability of wind resource at the site based on the various parameters measured for the purpose.

This is in continuation of the existing policies where for self-identified locations by developers they have to carry out a wind resource assessment study as per prescribed norms and then obtain a wind data validation report by the National Institute of Wind Energy (“NIWE”) for the project to progress. This again seems to be only applicable for private land identified by the developers, as the Govt. conducts a bidding process for allocation of land for wind power projects identified by it.

c)       Technically and commercially feasible grid connectivity: The developer is mandated to ensure that the grid connectivity is technically and commercially feasible at the selected site. Further, for establishment of the evacuation arrangement and grid connectivity the respective Electricity Regulatory Commission Order/Regulation will be applicable.

      Experts feel this provision is overly prescriptive and may dampen investor sentiment towards the sector as Developers usually have minimal to no control over grid availability. It unduly passes on the responsibilities of the Govt. with respect to grid connectivity on to the developers.[ii]

         It may be interesting to note here that as per the “Draft National Renewable Energy Act, 2015”, developers are eligible for deemed generation benefits and payments as per the power purchase agreement (“PPA”) even on the grid not being available.[iii] This creates an ambiguous situation where the developer is responsible for grid connectivity and yet is eligible for deemed generation benefits on the same not being available.

d)     Transport logistics: The developer is mandated to ensure that the components of the wind power project can be transported to the selected site with existing infrastructure and in case any addition is required the same would be created without any legal issues.

       This is one of the most crucial provisions of the Guidelines as several key players in the industry have been facing issues regarding the same lately. Wind projects and manufacturing facilities are usually located in a portion of a large parcel of land with other developers and allied corporations occupying the rest of the land. In such a situation, the transportation of blades, turbines, nacelle, hub, controller etc. without interfering with the enjoyment of the property by other occupants can be a huge logistical challenge given the size and weight of wind turbine components.

      To overcome this, the ideal approach would be to enter into appropriate covenants through the sale/lease deed and the easement deed while procuring land from the original owner so as to ensure that the other occupants of the parcel of land cannot interfere/impair or raise objections to the business activity of the developer by virtue of their occupation of the adjoining lands.  The Govt. seems to have left this entire aspect in the realm of private contract between parties whereas ideally the Govt. should have taken the onus upon itself to make land with suitable transportation facilities available to the developers.

e)      Environmental acceptability:  The developer has to obtain all the necessary permits and clearances from the concerned authorities if the land falls in the area of forest land, civil aviation, defense, heritage establishments etc.

        Even here, the role assumed by the Govt. is negligible transferring complete responsibility on to the developer. The Govt. should in the least have assumed the role of a facilitator in ensuring coordination with the various authorities and ensuring time bound disposal of applications, as is the case under the various state policies.

2.         Type Certification and Quality Assurance

The manufacturers of wind turbines and components are mandated to obtain type and quality certification from an internationally recognized certification body and such type and quality certification should also include the manufacturing facility in India.

This is a highly desirable provision as it does away with the monopoly enjoyed by the NIWE with respect to type and quality certification. It is a well-known fact that obtaining a certification from the NIWE was a tedious process and the impugned provision will go a long way in boosting investor sentiment and infusing dynamism in the sector.

The NIWE also proposes to bring out a list of type and quality certified wind turbine models eligible for installation in the country. Though, this provision will help the ease of doing business in the sector, it might impair the rapid deployment of breakthrough technology in the sector.

3.         Micrositing

Micrositing refers to the practice to arranging the wind turbine generators (“WTGs”) in such a manner so as to ensure optimal output from their operation. These Guidelines have taken rapid strides in recognizing and formalizing the process of micrositing, which is a comparatively new practice in the wind industry. Until these Guidelines were promulgated, the process of micrositing was largely governed as a matter of private contract between parties. Now these Guidelines seek to formalize and regularize the same by prescribing that the distance between a WTG with an adjacent WTG should be three times the diameter of the rotor (3D). The rows should also be formed in a manner such that it’s perpendicular to the predominant wind direction and the ideal distance between rows should five times the diameter of the rotor (5D).

4.         Capacity Utilization Factor (“CUF”)

In order to optimally utilize the wind energy resources available the project proponent should judiciously select the size of the wind turbines for a particular site. The annual average CUF should not be less than 20% in any case.

There are a few problems with this provision as discussed below.

Firstly, it might affect the Internal Rate of Return (IRR) of some of the older projects which will then be forced to modernize. This modernization comes with its own additional cost and will be a huge burden on the developers in an already saturated financing market, with a low appetite for risk.

Secondly, the inclusion of the provision itself is quite redundant as most projects deploy modern turbines that provide 20% CUF and no developer will risk capital, nor banks will finance projects, that suffer low CUF.

Finally, a developer may initiate a project with an acceptable CUF but would have no control if the wind regime alters from climate change events. Thus, a carve out for Force Majeure events in the Guidelines itself is highly desirable[iv].

5.         Repowering and Hybridization

These Guidelines provide the option to the developers to go for repowering based on improved wind turbine technology being available. However, such repowering has to be in line with the “Draft Policy for Repowering of Wind Power Projects” (available here) released by the MNRE on March 14, 2016. It is interesting to note that the aforementioned draft policy is applicable only to wind turbine generators of 1 MW and below, thereby making the provision for repowering in the present Guidelines only applicable to a limited number of projects. A large number of projects which could have benefitted by installing higher capacity generators will be consequently excluded from availing any benefits/incentives from the Govt. under the repowering mechanism.

The Guidelines also give an impetus to hybridization of wind energy with other sources of renewable energy so as to minimize disruptions in the supply of power from wind energy and ensure optimal utilization of the transmission infrastructure. However, the appetite for such hybrid projects in India has usually been low and the Govt. will have to introduce further radical policy measures to give a thrust to such projects. However, this a small step in the right direction.

6.         Other provisions

a)     Grid regulations: The Guidelines state that wind turbine control equipment should be certified for the compliance of the grid regulations including Active/Reactive power control, Low Voltage Ride Through (LVRT), power quality and other applicable requirements.  However, unlike the previous provisions, this provision is silent as to whether such certification has to be done through a designated Indian agency or certification by any internationally acceptable agency would suffice towards compliance with this provision.

b)      Metering and Monitoring: It has been made necessary for the developers to install Availability Based Tariff (ABT) compliant meters with telecommunication facility at the pooling substation to enable implementation of forecasting and scheduling regulations. However, it is not clear whether these Guidelines will apply to future projects only or are applicable to existing ones as well. In case of the latter, the developers would have to incur significant costs in replacing the existing meters.  It is further mandatory to communicate vital grid parameters on real time basis to the Regional/State Load Dispatch Centres.

c)       Health & Safety: In order to enhance the safety of the people working/residing near the wind power installations the NIWE will prescribe criteria for noise and shadow flicker. This shall be an additional cost to the developers of projects already commissioned (if applicable) to comply with these new safety stipulations.

d)  Decommissioning Plan: The developers are required to submit a decommissioning plan along with the proposal to establish a wind power project. The confusion is created with the usage of the term ‘after completion of its useful life’ in the Guidelines. We have seen that the useful life of most projects are 20-25 years; a situation where the developer chooses to repower or the project remains functional post its estimated useful life has not been covered under this provision of the Guidelines and might create ambiguity regarding as to when exactly the decommissioning plan should be implemented. Hopefully, the same will be clarified under the guidelines for decommissioning which the NIWE proposes to formulate.

Conclusion

Having an overall look at the details of the Guidelines it can be safely concluded that it oscillates between being over-prescriptive in parts and path breaking in others. However, three major questions need to be answered in principle for these Guidelines to achieve their intended purpose:

(i)     Do the provisions with respect to procurement of land apply only to privately procured land?

          If they apply to lands allotted by the Govt. then the Guidelines will have to be suitably clarified or tweaked to remove the existing ambiguities.

(ii)     Do these Guidelines apply only to future projects or projects that have been already installed as well?

         If they apply to already installed projects as well, then clear timelines as to compliance with the provisions of the extant Guidelines will have to be incorporated into the document.

(iii)       What are the consequences of non-compliance?

        The text of the Guidelines while containing words such as ‘shall’ and ‘mandatory’ do not mention any consequence for breach or non-compliance with the same. This paradox renders the enforcement of these Guidelines suspect and the MNRE would be well served by reflecting on the same.

Thus, hopefully the contentious points will be clarified and modified in due course of time and the industry/stakeholders will have something to cheer about.

- Alimpan Banerjee



[i]  Clause 8 (g), Andhra Pradesh Wind Power Policy, 2015- (available here)

[ii]  Kaavya Chandrasekharan, Ministry of New and Renewable Energy issues fresh draft norms for onshore wind power projects , (Economic Times, May 16 2016) (available here)

[iii]  Clause 42 (2) (iii), Draft Renewable Energy Act, 2015 (available here)

[iv] Special Correspondent, Wind energy developers must secure power grid connectivity, (The Hindu, May 13 2016) (available here)