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2017 (10) TMI 1549 - SC - Indian LawsInterpretation of the provisions of the PPA dated 18.1.2010 - International competitive bidding for selection of developer - significant contention of the appellant is that the operation cost mentioned in clause 2.7.1.4(3) of the RFP only referred to the cost towards operating and maintenance of power plant, and cannot refer to any cost associated with the cost of coal, which is a part of the energy charges - HELD THAT:- The pricing of the coal is, if one may say, the crux of the problem. It is no doubt true, as contended by the first respondent, that while submitting the financial bid, clause 2.7.1.4(3) of the RFP required the tariff to be quoted in Format-1 of Annexure 4 to be an ‘all inclusive tariff’ and provided that no exclusion shall be allowed. This clause has already been extracted aforesaid. The bidder/appellant was, thus, required to take into account all costs, including capital and operational costs, statutory taxes, etc.. The same clause also provides that the availability of inputs necessary for generation of power should be ensured by the seller at the ‘Project Site’, which must be reflected in the quoted tariff. The significant aspect is that the working of the contract is on the basis of ‘Project Site’. It has to be, however, simultaneously kept in mind that the present project is in the nature of a Case-2 project which provides for a fuel specific procurement, having a pre-identified site. The contract did not provide for a fixed energy charge, or a periodic revision of that charge, as the formula for energy charge was designed in such a manner that it would be influenced by the actual cost of coal. Thus, the basis is the actual cost incurred with regards to the coal. Of course, a major controversy has arisen as to whether the cost of coal has to be determined on the basis of the purchase price from SECL at the ‘mine-end’, when the property is supposed to pass to the appellant, or whether it is the cost of coal to be used for the plant as incurred by the appellant at site of the project, or the ‘project-end’. The variable component of ‘FCOALn’ refers to the ‘actual’ cost to the seller/appellant of the three components, i.e., (a) purchasing; (b) transporting; and (c) unloading the coal. The first respondent is thus right that there may be different aspects before the coal is used in the plant which are not required to be reimbursed by the first respondent. The illustrations given by the first respondent are of sizing of coal, crushing of coal, sprinkling and moisturisation of coal for stacking and storage, etc. being activities required to be undertaken prior to generation - there is no hesitation in our concluding that in view of the specific formula provided, only three aspects relatable to coal would determine the particular co-efficient. The definition of FCOALn is the weighted average actual cost incurred by the appellant of purchasing the coal and transporting it to the project site and thereafter unloading the coal at the project site. The fact that the property in coal passed on to the appellant vis-à-vis SECL, on delivery being taken at the mine-end would not change the definition of coal pricing as is required for the purposes of calculation of the tariff. The fact that the clarification made it clear that the appellant had to “arrange” the washing of coal, did not imply that the cost of washing the coal had to be borne by the appellant, as the energy charge formula alone would have to be referred to for the purposes of calculation of the coal price. The operating cost in clause 2.7.1.4(3) of the RFP would refer to the activities mentioned therein and the operation and maintenance of the power plant which would not alter the formula of the energy charges which contains the cost of coal. The principle of ‘business efficacy’ would also require us to read the ‘Monthly Energy Charges’ formula in a manner as would be normally understood - The plea of the first respondent that the fuel supply agreement and the fuel transportation agreement are part of the ‘project documents’ which does not include the component of ‘washing’, does not hold much water for the reason that ‘washed’ coal is a necessity for the project as a quality requirement for the formula envisaging the requisite quality of coal to be obtained at the project site and, thus, including all the relevant costs up to that quality. The mere term ‘coal’, therefore, would have to mean ‘washed’ coal, as no other type of coal could be used in the matter at hand. Transportation Cost - HELD THAT:- What is sought to be excluded is taking the coal for ‘washing’ as well as the last mile to the project, on account of the Railway siding not being located at the project site for a certain specified period of time. It is for that period of time that the actual transportation cost through road is sought to be recovered by the appellant. There is no hesitation in concluding that the point at which the Calorific Value of the coal is to be measured is at the project-site. The plea of the first respondent that there is no such methodology of measuring the Calorific Value at the project-site is belied by the sample reports of different financial years filed by the appellant along with the synopsis, which itself referred to the joint sampling and testing of the coal received and is duly signed by both sides. It is surprising how such a bald denial was made despite the position existing at the site. These sample reports are for years 2014, 2015, 2016 and 2017. Thus, the reading of the energy formula leads to only one conclusion that all costs of coal up to the point of the project site have to be included and the Calorific Value of the coal has to be taken as at the project-site. The appellant is held entitled to the washing cost of coal, the transportation from the mine site via washing of coal to the project site inclusive of cost of road transportation for the period where it was necessary. The Calorific Value of the coal would have to be taken at the project site - appeal allowed in part.
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