1/6/24, 1:01 PM Q&A: electricity generation and transmission in India - Lexology

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Q&A: electricity generation and transmission in India

Trilegal

India September 18 2023

Legal framework
Policy and law

What is the government policy and legislative framework for the electricity sector?
Constitutional framework

The seventh schedule of the Constitution of India sets out the subjects on which the parliament and the state
legislatures can frame legislation. It demarcates such subjects into three lists:
the Union List;
the State List; and
the Concurrent List.

While Parliament and the state legislatures legislate exclusively upon subjects mentioned in the Union List and the
State List respectively, the subjects mentioned in the Concurrent List can be legislated upon by both. However, in the
case of a conflict between the laws made by the state legislatures and Parliament on the same subject matter under
the Concurrent List, the state legislation will be void to the extent it is inconsistent with the legislation made by
parliament. Electricity is a subject mentioned in the Concurrent List.

Legislative framework

The Electricity Act 2003 (the Electricity Act) is the parent legislation governing the electricity sector in India (other
than nuclear energy, which is governed by the Atomic Energy Act 1962). The Electricity Act consolidated various
laws governing the electricity sector in India and introduced key reforms such as:
restructuring of state electricity boards into separate entities governing generation, transmission and
distribution activities;

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delicensing most generation activities, recognising power trading as a distinct activity and promoting captive
generation;
introducing the requirement for providing non-discriminatory open access;
constituting electricity regulatory commissions at state and central levels (ie, state electricity regulatory
commissions (SERCs) and the Central Electricity Regulatory Commission (CERC) respectively), and an
appellate tribunal (ie, the Appellate Tribunal for Electricity, among other things) to hear appeals against
decisions of the SERCs and the CERC;
recognising the Central Electricity Authority (CEA) as the technical advisory body to the government of India
and the electricity regulatory commissions; and
promoting renewable energy projects.

The Electricity (Amendment) Bill 2022 was introduced in Lok Sabha in August 2022 and has been referred to the
Standing Committee on Energy for further consideration. This bill proposes the following key amendments to the
Electricity Act:
requiring that distribution companies (DISCOMs) provide non-discriminatory access to their network for all
other DISCOMs operating in the same region;
deemed grant of licenses in cases where there is inordinate delay in processing the applications of grant of
licenses by the relevant commission; and
authorising the CERC and SERCs to settle disputes concerning the performance of contracts for sale and
transmission of electricity.

The government of India, under the provisions of the Electricity Act, and in consultation with CEA and state
governments, has prepared the National Electricity Policy 2005 (NEP) and the Tariff Policy 2016 (Tariff Policy) for
the development of the power sector, based on the optimal utilisation of natural resources. A draft of the updated
National Energy Policy was issued in 2021 by the Ministry of Power (the Power Ministry), which is yet to be
notified. The draft Policy proposes actions for the revitalisation of distribution companies, development of efficient
markets for electricity, and generally a move towards light-touch regulation.
In May 2018, the Power Ministry issued draft amendments to the Tariff Policy. Some of the key amendments
proposed include:
stricter operating norms with certain restrictions on aggregate technical and commercial losses;
adoption of direct benefit transfer for subsidy payments;
moving electricity consumers from a post-paid to a pre-paid metering system;
prescribing mandatory debt-to-equity ratio for financing the capital cost of future projects;
allowing for a change in law relief on the introduction of any charges and surcharges after the awarding of the
bids;
stricter implementation of renewable purchase obligations (RPOs);
providing a service standard framework for the distribution of electricity;
identifying clear categories of consumers for tariff fixation; and
reduction of cross-subsidy charges.
Organisation of the market

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What is the organisational structure for the generation, transmission, distribution and sale of power?
The Electricity Act restructured the electricity sector into separate generation, distribution and transmission sectors.
Additionally, there exists a separate market for electricity trading that is undertaken by companies with a trading
licence or at power exchanges.

Generation
Generation of electricity (including captive generation) is a delicensed activity (other than for hydro projects
exceeding the notified capital cost, for which an approval of the CEA is required). Private entities are permitted to
set up power stations using any type of fuel or power source (eg, coal, gas, wind, solar and biomass) except for
nuclear power projects, which may be undertaken only by a government of India entity or a government company
(ie, where the government holds a minimum of 51 per cent of the shareholding).
While India has historically been a power deficit country, the Power Ministry has recently reported a significant shift
– India is now a power surplus nation. Between 2014 and 2021, India augmented its power generation capacity with
83,920 megawatts of fossil fuel based generation and 76,900 megawatts of non-fossil fuel generation.

Conventional power

Power generation activities in India have until now been dominated by long-term power offtake purchase
agreements. For thermal power projects (coal and gas) and hydro projects, long-term power is procured either
through a negotiated route or a competitive bidding route. Under the negotiated route, a distribution company’s
power procurement tariff is determined by the relevant electricity regulatory commission, upon considering various
factors such as return on equity, interest on loans and working capital, depreciation, operation and maintenance
expenses and allowances for any renovation and modernisation. Under the competitive bidding route, the tariff
discovered through a competitive bidding process is adopted by the relevant electricity regulatory commission and
procurement is governed by standard bid documents including power purchase agreements, which are issued by the
Power Ministry. While the statutory option to procure electricity under the negotiated route still exists, the Power
Ministry has directed state governments and distribution companies to procure power only under the competitive
bidding route (except that negotiated route may be used for hydropower projects until the end of 2022 and waste to
energy projects).
Before 2013, all tariff-based competitive bidding for thermal power projects was done through standard bidding
documents, which provided for two modes for procurement (ie, Case 1 and Case 2). Under Case 1, all project assets
and inputs (eg, land, fuel, water, etc) and relevant statutory approvals required for the construction and operation of,
and the supply of power from, the power station had to be arranged by the power producer, while the same had to be
arranged by the distribution licensee in Case 2. While these standard bidding documents provided a comprehensive
framework for procurement of electricity, they did not address key concerns such as:
shortage of fuel availability in the domestic market;
indexation of fuel prices to market rates;
uncertainty in obtaining key approvals such as environmental clearance;
delays in land acquisition; and
foreign exchange variations.

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To address the manifold concerns of all stakeholders, in 2013, the Power Ministry issued revised competitive
bidding guidelines and standard bidding documents that provided for two modes of bidding and supply of electricity
(the Revised standard bidding documents (SBDs)):
design-build-finance-own-operate model (DBFOO) (on the lines of Case 1); and
design-build-finance-operate-transfer model (DBFOT) (on the lines of Case 2).

The Revised SBDs prescribe higher normative availability, single variable bidding, restrictions on usage of fuel
procured at subsidised rates from government suppliers, pass-through of variable charges (including the cost of fuel)
to consumers, detailed construction, operation and maintenance standards, the appointment of a mandatory
independent engineer for each project and also provision for the cost of imported fuel to be benchmarked at actuals
and linked to prevailing prices on international indices.
Following the dismal industry response to the competitive bidding process for allotment of ultra-mega power
projects (UMPPs, ie, coal-based projects of at least 4 gigawatts capacity) that were proposed on the DBFOT model,
and general criticism from developers and lenders concerning various aspects of the DBFOT model, the Power
Ministry issued draft guidelines and standard bidding documents for UMPPs. The draft bidding documents for
UMPPs (which are based on domestic captive coal blocks) contemplate a build, own and operate structure where the
government provides part of the land for the power plant and the captive coal block on a long-term lease to the
selected bidder and the selected bidder is required to build and operate a power plant and sell the power generated
under a long-term power purchase agreement with state distribution licensees. The draft proposes that upon expiry of
the power purchase agreement term the power generator will cease to have any rights over the coal block but will
continue to have leasehold rights over the power plant land.
In addition to long-term power procurement guidelines, the Power Ministry has introduced guidelines (and revised
standard bidding documents) for medium-term power procurement (ie, one year to five years) of electricity from
coal, gas or hydro-based power stations on a DBFOO basis, and power traders and distribution licensees that have
back-to-back arrangements with power generators. In January 2019, the Power Ministry released new norms for the
procurement of electricity for the medium-term (five to seven years). The Power Ministry has also issued revised
guidelines for the procurement of power on a short-term basis (ie, for a period of more than one day up to one year).
The revised guidelines introduce tariff determination through an e-auction with an overall aim of reducing power
procurement costs in the short term for distribution licensees. Additionally, the Power Ministry is also in the process
of finalising new bidding documents for short-term power procurement (one day to one year).
Further, for coal-based generation of electricity, the Power Ministry ran a scheme for procurement of aggregate
power of 2,500 megawatts for three years from commissioned coal-based generating companies that are not a party
to a power purchase agreement. Through a notification, the Power Ministry has also recently liberalised the
eligibility criteria of thermal power plants for participation in auctions. The notification has permitted power plants
that do not have power purchase agreements to participate in an auction of coal linkage for a short-term period. The
government of India has also recently approved a single window based e-auction of non-linkage coal for both
regulated sectors such as the power sector and for non-regulated sectors (including merchant trade). The
government’s policy in this regard is ‘one nation – one grade – one rate’, to ensure parity of price and availability of
coal throughout the country.

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Other than the above amendment, to introduce competition, transparency and private sector participation in the coal
sector, the government of India is also looking to further amend the methodology for auction of coal and lignite
mines or blocks for sale of coal or lignite. Some of the key amendments proposed by the government of India
through Part 4 of the Atmanirbhar Bharat Plan, dated 16 May 2020, include:
the introduction of a revenue-sharing mechanism instead of the regime of a fixed rupee per tonne;
any party is allowed to bid for the coal block and sell it on the open market;
the liberalisation of entry norms for nearly 50 blocks offered immediately and with no eligibility conditions,
other than an upfront payment;
partially explored blocks to be open for auction;
increased private-sector participation in exploration; and
rebates offered in revenue share payments in the event of the early production of coal.

In November 2022, the Power Ministry launched a scheme for procurement of power with coal linkages on a
finance-own-operate (FOO) basis under the SHAKTI Policy (Scheme to Harness and Allocate Koyla Transparently
in India). Under this scheme, the government intends to purchase electricity on a long term basis (12 to 15 years) and
medium term basis (exceeding one year up to seven years) through tariff-based competitive bidding.
The Power Ministry has also recently introduced acquire-operate-maintain-transfer (AOMT) based public-private
partnership model for transmission assets with a view to maximise savings for the government while unlocking
private sector capabilities.

Non-conventional power
For renewable energy projects, power is typically procured through contracts entered into with state utilities under
specific state policies at a regulator determined feed-in tariff or at a tariff discovered through competitive bidding
depending on the state or central policy. All distribution utilities, captive-power users and open-access consumers are
mandated to procure a prescribed quantum of electricity generated from renewable energy sources (ie, RPO). The
Tariff Policy sets out several measures to promote renewable energy development in the country, including:
an increase in the solar RPO to 10.5 per cent by 2022;
the procurement of power from renewable energy sources by distribution licensees through competitive
bidding; and
applicability of RPOs on co-generation power plants.

To further the objective of renewable energy development, the relevant electricity regulatory commissions have
introduced market-based policy instruments (called renewable energy certificates (REC)), which the renewable
energy producers can get if they do not opt for the preferential feed-in tariff offered by distribution utilities. To
incentivise distribution licensees to procure renewable energy, all distribution licensees procuring renewable power
above their RPOs are also eligible for obtaining RECs. The CERC (Terms and Conditions for Renewable Energy
Certificates for Renewable Energy Generation) Regulations 2022 were notified in December 2022. These
regulations provide procedures and eligibility requirements for issuance and sale of RECs. Under the current
regulatory framework, RECs may be issued to open access consumers, captive generating stations based on

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renewable energy sources and DISCOMs. Additionally, the Supreme Court of India has also upheld the imposition
of RPO on captive power generators and open-access consumers on the ground that there is a need to promote
renewable energy. On the other hand, despite electricity regulatory commissions having the authority to enforce
RPOs, there is repeated failure by the state distribution utilities to comply with their RPO requirements, and
accordingly, there is an abundant supply of RECs in the market, with few takers.
To further the government’s policy objectives to better RPO compliance, penalties for failure to meet RPOs are
proposed to be increased under the Electricity (Amendment) Bill 2022. To better the monitoring of RPO compliance,
the Ministry of New and Renewable Energy has also constituted the National Portal for Renewable Purchase
Obligation to manage RPO compliance issues across states and publish monthly reports on RPO compliance.

Captive power plants

Another mode of setting up generation facilities is through captive power plants where the captive power user has to
hold a minimum of 26 per cent of the ownership of such a power plant and should consume at least 51 per cent of
the annual aggregate electricity generated by such a power plant. On 30 June 2023, the Electricity (Amendment)
Rules 2023 were notified, which provides that each captive power user, including those in a group captive structure,
is required to hold at least 26 per cent ownership in the captive generating plant. Prior to this amendment, a
minimum of 26 per cent was required to be collectively held by all captive users. In addition to that, the amendment
also provides that if the captive power generating plant is set up by an affiliate company, the captive user would have
to hold a minimum of 51 per cent ownership in the affiliate company. The amendments have met with stiff industry
opposition as in case of an affiliate company setting up the captive power generating plant, the other affiliate
company being the captive user is required to hold not less than 51 per cent of the ownership, while on the other
hand, for un-related entities, the captive user is only required to have not less than 26 per cent ownership in the
captive power generating plant. It seems that the government is reconsidering the amendments to address these
issues. Additionally, the CERC has amended its regulations, to disqualify renewable energy generators (including
captive generators) – to the extent of their self-consumption and selling of power on open access while availing
promotional wheeling, transmission, cross-subsidy or banking charges – from obtaining the benefit of RECs. The
amendment aims to reduce the unsold inventory of RECs, of which a major portion is contributed by captive
generators. The CERC was of the view that developers under the third-party model were able to leverage the
concessional benefits while participating under the REC framework and has therefore amended the regulations to
prevent developers from doing so. However, the CERC has given renewable energy generators (including captive
generators) the option of availing the benefit of RECs three years after they forgo the benefits of concessional
transmission or wheeling charges or the banking facility benefits (or both).

Transmission
Transmission of electricity in India is a licensed activity and transmission systems are divided into interstate and
intra-state transmission systems. The interstate transmission system is mainly owned and operated by Power Grid
Corporation of India Ltd, a government of India-owned company, and the intra-state transmission systems are owned
and maintained by respective state transmission utilities.
Transmission projects may be undertaken for developing new transmission systems or for strengthening the existing
transmission system (which typically include investments in substations along with transmission lines for
augmenting the capacity of the existing transmission system). Like generation projects, such projects may be

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implemented under two modes, namely the negotiated route (where the transmission tariff is determined by the
relevant electricity regulatory commission) and the competitive bidding route (where the transmission tariff is
discovered through competitive bidding under standard bidding documents). For interstate transmission projects, the
Tariff Policy states that while all future interstate transmission projects should ordinarily be developed through
competitive bidding, the central government may give an exemption for certain projects that are of strategic
importance or technical upgrading and where works are required to be done to cater to an urgent situation on a case-
by-case basis. For intra-state transmission projects, the Power Ministry requested the state and union territory
governments to adopt a tariff-based competitive bidding route for the development of projects costing above a
threshold, to be decided by the SERCs.

Distribution
The sale and distribution of power to consumers is undertaken under a single licence and once the distribution
licence has been issued, the licensee does not require a separate licence for the sale of power. However, the
Electricity (Amendment) Bill 2022 not only expands the meaning of distribution companies but also aims to
delicence the distribution sector on the same lines as the power generation sector. The distribution sector has been
the weakest link in terms of financial and operational sustainability, a realisation that has led to many such changes
in the sector.
It has also been indicated under the Atmanirbhar Bharat Plan that privatisation of the distribution of electricity may
also improve the sub-optimal performance of the power distribution and supply sector. However, while the
government of India is moving towards privatisation of the distribution and supply sector, it was noted in the budget
speech for the financial year 2020–2021 that both government and private distribution companies have started
monopolising. Thus, the sector needs to provide a choice to consumers to promote competition. Also, the Electricity
(Rights of Consumers) Rules, notified on 31 December 2020, empower customers with rights against distribution
companies and provides access to the continuous supply of quality and reliable electricity to increase accountability
of the distribution sector.

Trading
Electricity trading is a distinct recognised activity for which a separate licence is required (except for distribution
licensees) from the CERC or a SERC (for interstate and intra-state trading respectively). Trading may involve the
purchase of electricity from generating stations or distribution licensees for sale to end consumers.
Trading has led to the rise of real-time markets, which allow distribution licensees to buy electricity an hour before
the delivery. The CERC (Power Market) Regulations, 2021 allow power markets to schedule and deliver
transactions for the day ahead contracts and real-time contracts in coordination with the National Load Despatch
Centre.
Regulation of electricity utilities – power generation
Authorisation to construct and operate generation facilities
What authorisations are required to construct and operate generation facilities?
Generation is a delicensed subject; however, construction, operation and maintenance of a generation facility require
permits, consents and approvals under other laws relating to land acquisition, environmental clearance, corporate
and labour compliances, approvals for use of restricted land and consent to establish and operate the power station

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from pollution control authorities (except for renewable energy projects that fall under the white category and are
exempt from the requirement of obtaining consent to establish and operate). Further, in the case of power stations
using domestic coal, the developer is required to obtain a coal linkage (which provides for assured fuel supply from
the coal mines of Coal India Ltd and its subsidiaries) or use coal extracted from a coal block specifically allotted to it
by a government entity. If coal is used from an allotted mine, the developer is also required to obtain specific
approvals (such as an environmental clearance) concerning the coal mine. Earlier, the Ministry of Environment,
Forests and Climate Change and the government of India (Environment Ministry) mandated that standalone coal-
fired thermal power plants of all capacities are required to be supplied with, and are required to use, raw, blended or
beneficiated coal with an ash content not exceeding 34 per cent, on a quarterly average basis.
All power-generating stations are also required to comply with technical standards prescribed by the Central
Electricity Authority (CEA), including those concerning the construction of power plants, safety requirements for
construction, operation and maintenance. Hydropower projects above 25 megawatts have an additional requirement
to obtain a techno-economic clearance from the CEA before the commencement of construction works. In August
2022, the CEA issued revised guidelines for formulation of detailed project reports (DPR) for hydroelectric schemes.
A DPR of hydroelectric schemes is required to be submitted to the CEA for techno-economic concurrence. Similarly,
a clearance is required from the Atomic Energy Regulatory Board for atomic energy-based power plants.
Grid connection policies
What are the policies with respect to connection of generation to the transmission grid?
Under the Electricity Act 2003 (Electricity Act), each transmission licensee is required to provide non-discriminatory
use of transmission lines, distribution systems or associated facilities to a licensee, consumer or a person engaged in
generation. An applicant is first required to obtain connectivity to the transmis­sion network and then obtain long,
medium or short-term open access, as the case may be, depending on the period for which it requires the
transmission capacity. On obtaining these approvals, an applicant can interchange power with the transmission grid.
Grant of connectivity and long, medium or short-term open access is governed by regulations issued by the Central
Electricity Regulatory Commission (CERC) and the respective state electricity regulatory commissions (SERC). In
January 2019, the CERC issued amendments to regulations dealing with the interstate transmission system with the
aim of planning and developing an efficient, coordinated, reliable and economical system for the smooth flow of
electricity from generating stations to the load centres. These amendments specifically include renewable energy
developers and operators of solar and wind power parks. The amendments provide an enabling framework for the
transfer of connectivity (in limited circumstances such as transfer to the parent company) granted for renewable
energy projects. In March 2019, the government of India recognised hydro power projects as a renewable source of
power. However, the waiver of interstate transmission system (ISTS) charges, which was granted to solar and wind
projects did not apply to hydro power projects. To address this disparity the Power Ministry has decided to extend
the waiver of ISTS charges on the transmission of electricity generated from new hydro power projects. This waiver
will apply only to projects for which construction work is awarded and a power purchase agreement is signed on or
before 30 June 2025. Under the amendments made to the CERC connectivity regulations in 2019, the CERC on 20
February 2021 issued revised detailed procedures for grant of connectivity to projects based on renewable sources to
interstate transmission systems. This provides much-needed clarity on procedures to be followed by solar and wind
park developers.

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The CERC (Connectivity and General Network Access to the inter-state Transmission System) Regulations 2022
have been issued in line with the concept of ‘one nation, one grid’ and facilitates non-discriminatory open access to
the ISTS to generating companies through general network access (GNA). These regulations were recently amended
to introduce GNARE (general network access-renewable energy) and T-GNARE (temporary general network access-
renewable energy) with a view to enable long term and temporary open access exclusively for drawal of renewable
energy.
The Power Ministry has mandated that all conventional grid-connected electricity units (coal, gas, liquid fuel,
hydro), nuclear-generating stations, captive power plants, renewable energy generators, off-grid generating units of
more than 0.5 megawatt capacity, and all generating units supplying power to neighbouring countries, irrespective of
whether they have connected to the Indian Electricity Grid, must obtain a unique registration number from the CEA.
Alternative energy sources
Does government policy or legislation encourage power generation based on alternative energy sources such
as renewable energies or combined heat and power?
The regulatory environment increasingly seeks to incentivise renewable energy, with favourable tariff regimes
established by SERCs. The Electricity Act, the National Electricity Policy 2005 and the Tariff Policy 2016 encourage
private-sector participation in renewable energy through measures such as fixing renewable purchase obligations for
obliged entities. A new draft National Electricity Policy is also being formulated in the backdrop of the government’s
energy transition plans to achieve an installed renewable energy capacity of 500 gigawatts by 2030 and net zero
carbon neutrality by 2070. The objective of the policy includes, inter alia, decarbonisation and energy transition.
In 2017, tariff-based competitive bidding guidelines for the procurement of power were introduced for solar and
wind power projects where the procurer sets a benchmark tariff above which a bid cannot be made and the bidder
with the lowest tariff bid discovered through a reverse auction is selected to enter into a power purchase agreement
with the procurer. These bidding guidelines have introduced several provisions to enhance the attractiveness of the
solar and wind bids through measures such as:
generation compensation by the procurer to the developer in the case of power evacuation constraints;
the payment security mechanism for tariff payments; and
termination compensation in the event of procurer default.

In 2021, the Ministry of New and Renewable Energy (MNRE) issued an amendment to the guidelines for setting up
12,000 megawatts grid-connected solar projects where:
the amount of viability gap funding available on a per megawatt basis has been decreased;
the usage charges have been decreased; and
the timeline for project commissioning from the date of the letter of award has been increased.

Other than the above monetary incentives provided for solar and wind bids, the feed-in tariff regime continues to be
applicable for solar and wind plants with capacities under 5 megawatts and 25 megawatts respectively. Benefits such
as the continued availability of accelerated depreciation for wind power projects and exemptions from payment of
electricity duty (which are state-specific but are typically granted by a majority of the states) are also provided to
renewable power generators.

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Nonetheless, unlike conventional power generation, renewable power projects are primarily based on state-specific
policies that provide incentives and policies that are not always consistent, leading to developers choosing states
based on their financial model and operational expertise. This is why some states have witnessed tremendous growth
in the renewable energy sector compared to others.
The MNRE has also made amendments to the implementation guidelines of the Pradhan Mantri Kisan Urja Suraksha
evam Utthan Mahabhiyaan Scheme on 13 November 2020. The new amendments allow solar plants to be installed
on pastures and marshland owned by farmers. The size of the solar plant that can be implemented has also been
reduced; this will allow the participation of small farmers. The period for completion has also been increased from
nine to 12 months, coupled with the abolition of the penalty for a shortfall in generation.
The renewable energy sector has experienced exponential growth in the past few years and various government
incentives (both fiscal and non-fiscal) have played critical roles in this. However, as the renewable energy sector has
come of age and achieved grid parity, the government aims to gradually roll back the incentives. For instance,
renewable energy project developers (along with other power project developers) had the benefit of a 10-year
corporate tax holiday that has expired. Even so, the rolling back of incentives by the government has not deterred
private-sector developers from developing renewable energy projects in the country.
The solar sector in particular has led the way in India’s clean-energy growth transition. Solar plants can be set up
under state policies or the government-of-India-launched National Solar Mission (NSM), which has been at the
forefront of the government’s renewable energy policy. Solar projects, under either the NSM or state-specific
policies, are envisaged to be developed in a phased manner with a target of achieving 100 gigawatts (increased from
the original target of 20 gigawatts) of installed solar capacity by 2022 (out of which a capacity of 61.97 gigawatts
has already been installed by November 2022). The government of India intends to develop 40 gigawatts (of the 100
gigawatts) through rooftop solar projects and the remainder through ground-mounted solar projects.
To encourage setting up of rooftop projects on residential premises, the MNRE has developed a national portalthat
enables any residential consumer to apply for setting up a rooftop solar power project without needing distribution
companies (DISCOMs) to finalise a tender and empanel vendors. Projects registered with this portal are eligible for
a subsidy of 14,588 Indian rupees per kilowatt for capacity up to 3 kilowatts which will be credited directly to
residential consumer’s bank account by the Power Ministry. Since its inception in July 2022, the national portal has
received applications for projects with an aggregate capacity of about 117 megawatts solar capacity, of which
projects with aggregate capacity of about 18 megawatts has been granted.
Further, the government of India is developing large solar parks in collaboration with the state governments and has
also issued detailed guidelines for their development. MNRE has modified its guidelines for the development of
solar parks and ultra-mega solar power projects to introduce another model called Ultra-Mega Renewable Energy
Power Parks. The intention is to provide ring-fenced, shovel-ready land to the power developer along with providing
the associated power evacuation facilities. The government of India has doubled the capacity target from 20
gigawatts to 40 gigawatts for solar projects to be set up in a solar park, to be achieved by 2023–2024. In May 2021,
the Solar Energy Corporation of India (SECI) floated a tender for the procurement of 1,200 megawatts of power
from wind-based sources.
While onshore wind power projects account for a substantial portion of the installed renewable capacity in India, the
government of India issued the National Offshore Wind Energy Policy in September 2015 intending to promote the
country’s offshore wind energy potential and had invited expressions of interest in 2018 from suitable and

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experienced bidders for the development of 1 gigawatt of offshore wind energy anywhere within India’s exclusive
economic zone. The MNRE annual report 2022–2023 states that the initial offshore wind energy potential off the
coast of Gujarat and Tamil Nadu is estimated to be about 70 gigawatts. The principal agency charged with the
development of the sector is the National Institute of Wind Energy (NIWE). Under this policy, blocks are to be
allocated through a competitive bidding route and developers are required to enter into seabed lease agreements with
NIWE. As a part of the planned off-take arrangement, NIWE or the respective state distribution utilities will sign
power purchase agreements. Transmission utilities owned by the government will provide the onshore infrastructure
required to evacuate power generated from these projects. Offshore power evacuation infrastructure up to the first
onshore substation will have to be constructed by developers at their own cost. While the government has put in
place a policy and institutional framework to support the development of offshore wind energy in the country, there
has not been any project development activity yet. In a notification dated 29 May 2023, the Power Ministry
mandated that offshore wind power projects commissioned on or before 31 December 2032 are exempted from the
payment of ISTS charges for a period of 25 years, commencing from the date of commissioning of the project.
In May 2020, Oil and Natural Gas Corporation Ltd and NTPC Ltd entered into a memorandum of understanding to
set up a joint venture to explore and set up renewable power assets, which includes offshore wind projects, in India.
The government of India plans to develop 5 gigawatts and 30 gigawatts of offshore wind energy by 2022 and 2030,
respectively.
Additionally, in May 2018, the MNRE issued a National Wind-Solar Hybrid Policy that seeks to optimise the
utilisation of infrastructures such as land and the transmission system, as there are regions in India where wind and
solar energy have moderate to high potential. A wind-solar plant will be considered hybrid if the rated power
capacity of either source is at least 25 per cent of the rated power capacity of the other source. The policy not only
aims at the development of new wind-solar hybrid plants but at the hybridisation of existing wind and solar plants.
In facilitating this, in May 2018, the MNRE issued a scheme for setting up 2,500 megawatts of interstate
transmission connected wind-solar hybrid power projects that initially provided only for battery storage but was later
expanded to include all forms of storage, such as, pumped hydro, compressed air and flywheel, etc. In April 2023,
SECI announced four allottees for the development of a 1.2 gigawatts solar-wind hybrid power project under
Tranche VI of the interstate transmission programme at a tariff ranging from 4.64 to 4.73 Indian rupees per kilowatt
hour.
In the context of municipal waste-to-energy projects, while Indian cities present significant scope for growth, the
industry has faced intense opposition on account of environmental and health concerns. The government of India is
undertaking measures to promote waste-to-energy projects. In this context, the National Biofuels Policy was
approved by the Union Cabinet in May 2018, which, among other things, promotes research and development into
technology using biofuels for the generation of power.
Further, the MNRE has notified the National Bioenergy Programme comprising of the following sub-schemes:
a waste to energy programme to assist in the establishment of large-scale biogas and bio-compressed natural
gas based power plants;
a biomass programme to assist in the setting up of pellets- and briquettes-based power generation projects as
well as to support non-bagasse-based power generation projects; and
a biogas programme to assist in establishment of small to medium-sized biogas plants in rural areas.

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On 14 February 2022, the MNRE introduced a framework for promotion of decentralised renewable energy (DRE)
livelihood with the aim to establish a conducive regulatory environment to enhance accessibility to DRE and to
encourage the advancement of sustainable livelihoods across the country including in rural and remote areas.
The government of India also recently issued Electricity (Rights of Consumers) Rules, notified on 31 December
2020, that allow prosumers (according to the rules, these are consumers that while consuming electricity from the
grid can also inject electricity into the grid using the same point of supply), to set up net metering for rooftop solar
projects of capacity 500 kilowatts or the sanctioned limit (whichever is lower) and gross metering for rooftop project
with capacity above 500 kilowatts.
Climate change
What impact will government policy on climate change have on the types of resources that are used to meet
electricity demand and on the cost and amount of power that is consumed?
India has ratified the United Nations Framework Convention on Climate Change and the Kyoto Protocol (but with
no binding obligations) to reduce its greenhouse gas emissions. Consequently, the government of India launched the
National Action Plan on Climate Change (NAPCC), under which major initiatives such as the NSM and Waste to
Energy Programme have been introduced. Additionally, sharing of Clean Development Mechanism benefits
(between the developer and the consumer, usually a state-owned distribution utility) is present across most states.
India has also ratified the Paris agreement. The Paris agreement requires its signatories to devise a national plan to
limit global temperature rise, and as part of its plan, India has set a goal of producing 40 per cent of its electricity
with non-fossil fuel sources by 2030.
The government of India, under the NAPCC, formulated a National Mission for Enhanced Energy Efficiency
(NMEEE), among other such policy measures. The NMEE comprises four initiatives, namely:
Perform Achieve Trade (PAT);
the Energy Efficiency Financing Platform;
Market Transformation for Energy Efficiency; and
the Framework for Energy Efficient Economic Development.

PAT aims to reduce specific energy consumption (ie, energy use per unit of production for Designated Consumers
(DCs)) in specific energy intensive industries with the issuance of tradable energy savings certificates to those
participants who achieved their saving targets. In PAT cycle I, which ended in 2015, 3.825 million energy savings
certificates were issued. PAT cycle VII commenced on 1 April 2022 and has 509 DCs from nine sectors.
Another measure taken by the government of India was the Street Lighting National Programme, which started in
2015 and is aimed at replacing India’s 14 million conventional streetlamps with smart light-emitting diode (LED)
variants by 2019. By May 2022, the programme had installed 12.7 million smart LED streetlights that resulted in
energy savings of more than 8.587 billion units of electricity per annum and 5.92 million tonnes of CO2 emission
reduction annually. The government of India also launched the Unnat Jyoti by Affordable LEDs for All scheme,
intending to distribute 770 million LEDs across India by March 2019. To date, roughly 360 million such LEDs have
been distributed. Both these policies are examples of the government of India’s initiatives to make India energy
efficient.

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To reduce the carbon footprint of thermal power generation, the Power Ministry has recently decided to set up a
National Mission on the use of Biomass in coal-based thermal power plants. One of the objectives of the mission is
to increase the level of co-firing from the present 5 per cent to higher levels to have a larger share of carbon-neutral
power generation from thermal power plants.
However, owing to the effects of the covid-19 pandemic, and to mitigate it, the government has leaned towards
supporting economic development. The Environment Ministry has allowed companies operating in several industries
(other than renewable energy generation projects that are categorised as white category and do not require the prior
consent of the pollution board), to expand capacities based on a self-certification that such an expansion will not
‘increase the pollution load’. However, this may result in wrongful declarations being made by companies.
While the government of India has been promoting the development of India’s renewable energy capacity and
capability through various policy measures, the decision by the Directorate General of Trade Remedies in July 2018
to impose a safeguard duty on the importation of solar cells and modules from Malaysia and China and the MNRE’s
decision to increase the basic customs duty on imported solar modules or cells is likely to adversely impact solar
tariffs. A recent review investigation has extended the safeguard duty. A 14.9 per cent duty will be imposed from 30
July 2020 to 29 January 2021, followed by a 14.5 per cent duty from 30 January 2021 to 29 July 2021. The
imposition of the safeguard duty has, however, been met with a legal challenge. In 2018, the Supreme Court stayed
the ban on the imposition of the safeguard duty on solar panels (in the context of proceedings where high courts had
stayed the implementation of the safeguard duty). Recently, the MNRE announced the imposition of a basic customs
duty on imported solar modules and cells at a rate of 40 per cent and 25 per cent respectively, with effect from April
2022.
Storage
Does the regulatory framework support electricity storage including research and development of storage
solutions?
Currently, there is no regulatory framework governing electricity storage in India. The MNRE constituted an expert
committee to propose a draft policy to establish a National Energy Storage Mission (NESM) for India and the
committee submitted the draft policy to the MNRE. The NESM aims to establish a regulatory framework that
promotes the manufacturing and deployment of battery storage systems. Before this, in January 2017, the CERC
issued a consultation paper setting out a broad framework for the introduction of battery energy storage systems
(BESS). The consultation paper discusses models of tariff determination for multiple users of BESS, the commercial
viability of BESS and policy changes that may be required to deploy bulk storage facilities in the country. Further,
media reports indicate that the government is also working on a policy framework to introduce on-site storage
integration for wind and solar power projects, but this yet to be announced.
While the government of India has previously floated tenders for renewable energy capacity with storage systems,
most of these systems have been suspended or withdrawn for various reasons. There have been several tenders for
storage-linked renewable generation capacity in various parts of the country, such as Andhra Pradesh and Karnataka,
which are currently underway. SECI has issued tender documents for setting up 500 megawatt/1,000 megawatt hour
standalone BESS in India. This initiative is a component of the initial phase of the government of India’s immediate
target of setting up 4,000 megawatt hours of battery storage capacity in order to enhance the integration and
penetration of renewable energy in the national grid. The Power Ministry’s report on optimal generation capacity
mix for 2029–2030 envisages a battery energy storage capacity of 27,000 megawatt/108,000 megawatt hour (4-hour
storage) to be part of the installed capacity by 2029-30. The government had also launched the National Smart Grid

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Mission (NSGM), through which it introduced incentives such as a 30 per cent capital grant towards a project’s cost,
and a 100 per cent grant for select components such as training and capacity building. The NSGM has now entered
Phase 3, which proposes:
completion of sanctioned and ongoing NSGM smart grid projects;
handholding of DISCOMs on their smart grid preparedness;
developing smart grid roadmaps; and
establishing new processes for distribution system efficiency and effectiveness improvement, reliability
improvements and data analysis, etc.

To encourage the development of energy storage projects in India, the Power Ministry has waived ISTS charges for
storage-based projects that are commissioned before 30 June 2025 for a period of 12 years, provided that at least 51
per cent of the annual energy requirement for such storage based projects is procured from solar and wind based
power projects.
Energy storage also plays an important part in combating one of the biggest concerns with renewable energy, which
is the lack of round-the-clock supply. In May 2020, India issued its first round-the-clock supply contract aimed at
supplying power with a combination of solar, wind power and energy storage systems. Later in 2020, the Power
Ministry introduced the guidelines for a tariff-based competitive bidding process for the procurement of round-the-
clock power from grid-connected renewable energy power projects, complemented with power from coal-based
thermal power projects to enable such procurement.
The regulatory framework also aims to support the research and development of storage solutions. On 12 May 2021,
the proposal for a Production Linked Incentive Scheme ‘National Programme on Advanced Chemistry Cell Battery
Storage’ was approved by the cabinet. Advanced chemistry cells are the new generation of advanced storage
technologies that can store electric energy either as electrochemical or as chemical energy and convert it back to
electric energy as and when required.
Government policy
Does government policy encourage or discourage development of new nuclear power plants? How?
While the government is positive about setting up power stations based on nuclear energy (it has already installed
6,780 megawatts of capacity from 22 operational nuclear reactors and projects with an aggregate capacity of
approximately 15,700 megawatts are currently under construction), currently only a government of India entity or a
government company can own and operate a nuclear power plant. Private ownership of nuclear power generation
assets is not allowed.
A major issue that hampered private investment in other areas of nuclear power generation was the interpretation of
a provision of the Civil Liability for Nuclear Damage Act 2010 (CLND Act) as mandating a civil nuclear liability
clause in supply contracts, therefore dissuading foreign equipment suppliers from supplying Indian nuclear power
projects. However, the government of India has clarified that while the legislation would not be amended, it is not
mandatory to include a civil liability clause in the contractual arrangements between the foreign supplier and the
Indian operator. This clarification has been provided as a part of responses to certain ‘frequently asked questions’
issued by the government of India and has therefore led to concerns that such a stance may not be legally binding.
While it is highly unlikely, it remains to be seen whether the Nuclear Power Corporation of India (a government
company and operator of nuclear power plants) will agree to undertake such liability. India has also ratified the

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Convention on Supplementary Compensation for Nuclear Damage (CSC), which has been hailed as an important
step towards creating a global nuclear liability regime. It is important to note that ratification of the treaty requires
national law to comply with article 10 of the CSC, which states that national law may provide that an operator may
have a right of recourse to the supplier only if this is expressly provided for in writing or if the nuclear incident
results from an act or incident done with an intent to cause damage. However, section 17(b) of the CLND Act in
India adds another instance where an operator may have recourse to the supplier and that is if the nuclear incident
occurred owing to an act of the supplier, which includes supplying parts with a latent or patent defect. The
government of India has also issued a clarificatory response concerning section 17 (b) of the CLND Act stating that
while the language of section 17(b) is in addition to the provisions of article 10 of the CSC, it relates to actions and
matters such as conditions of service and contract. The government of India is of the view that these are in any case
ordinarily a part of the contract and are not a new method of tracing liability back to the supplier. India is also a part
of the limited group of countries with a Nuclear Insurance Pool, which provides insurance cover to operators of
nuclear power plants and suppliers. India’s nuclear insurance pool has a corpus of 15 billion Indian rupees.
Regulation of electricity utilities – transmission
Authorisations to construct and operate transmission networks
What authorisations are required to construct and operate transmission networks?
Owning and operating transmission assets requires a licence from the Central Electricity Regulatory Commission
(CERC) for interstate transmission facilities and the relevant state electricity regulatory commissions (SERC) for
intra-state transmission facilities. The Electricity Act 2003 (Electricity Act) allows the appropriate electricity
regulatory commission to specify any general or specific conditions that a licensee must comply with. The
appropriate electricity regulatory commission may, on the recommendation of the government and in the public
interest, even permit any local authority, cooperative society, government institution, etc to transmit (and distribute)
electricity, subject to certain terms and conditions, without a licence.
Transmission licensees also require right of way from landowners for construction of transmission lines, approvals
under the Electricity Act for installation of overhead lines and installation of transmission towers, apart from other
applicable clearances such as those from the Environment Ministry. Alternatively, the Electricity Act also enables a
transmission licensee to place and maintain a transmission line on any immovable property, upon being authorised
by the government. The government authorisation entitles the transmission licensee to enter any privately owned or
occupied land without the notice or consent of the owner or occupier to carry out the works required for setting up
the transmission project. On 16 July 2020, the Power Ministry issued the Guidelines for Payment of Compensation
concerning Right of Way for Transmission Lines in Urban Areas. These guidelines provide for compensation to
landowners for obtaining the right of way for the construction of transmission lines of a voltage of 66 kilovolts and
above. The guidelines state that compensation of an amount equal to 85 per cent of the market value of the land
should be paid to landowners for the land required for the construction of the tower base area. Further, these
guidelines also state that compensation of up to 15 per cent of the land value should be paid to landowners for the
diminution in the width of a right of way corridor owing to the construction of transmission lines. In addition to the
above, the licensee also needs to comply with regulations issued by the Central Electricity Authority (CEA) and the
CERC concerning grid and technical standards upon grant of the transmission licence.
Eligibility to obtain transmission services
Who is eligible to obtain transmission services and what requirements must be met to obtain access?

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The open-access regulations issued by the relevant electricity regulatory commissions permit usage of transmission
lines by any generating company, distribution licensee, any consumer with a requirement of over 1 megawatt of
electricity and electricity traders, provided they comply with the requirements of obtaining connectivity and open
access to the transmission system. The regulations also cast an obligation on the transmission licensees to provide
non-discriminatory access to their transmission lines upon application for such access. The applicant is required to
pay transmission charges and other charges as applicable, which may include a cross-subsidy surcharge, wheeling
charges and open-access charges.
Government transmission policy
Are there any government measures to encourage or otherwise require the expansion of the transmission
grid?
The government is looking to increase private participation to strengthen transmission networks and has introduced a
string of measures such as the introduction of electronic competitive bidding for transmission projects and a viability
gap funding model on a public-private partnership (PPP) structure for setting up intra-state transmission networks.
The interstate transmission system is mainly owned and operated by Power Grid Corporation of India Ltd (PGCIL),
a state-owned company, which has become the first public sector company in the country to launch its infrastructure
investment trust. PGCIL is monetising transmission assets such as high voltage transmission lines and substations to
utilise the funds for new and under-construction projects. The intra-state transmission system is owned and
maintained by state transmission utilities. The government is increasingly preferring the PPP structure for setting up
the interstate and intra-state transmission networks.
The Power Ministry has waived interstate transmission system charges (but not transmission losses) for solar and
wind generation projects commissioned before 30 June 2025. Projects that have been awarded through a competitive
bidding process before 15 January 2021 are eligible for waiver of transmission losses as well.
It is generally seen that impetus is specifically being given to the transmission sector through various measures
including:
the introduction of the National Smart Grid Mission to implement a smart electrical grid based on technology
for automation, communication and IT systems, to monitor and control power flows from points of generation
to points of consumption;
the setting up of a National Transmission Asset Management Centre;
the creation of the Power System Development Fund drawing from congestion charges, deviation settlement
charges and reactive energy charges, for primarily relieving congestion in government transmission systems of
strategic importance; and
the renovation and modernisation of government transmission systems for relieving congestion.

Various state governments have begun to implement feeder separation systems to augment power supply to rural
areas and for strengthening sub-transmission and distribution systems.
Rates and terms for transmission services

Who determines the rates and terms for the provision of transmission services and what legal standard does
that entity apply?

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The rates and terms for the provision of transmission services are determined by the appropriate electricity
regulatory commission (the CERC in the case of interstate transmission and the relevant SERC in the case of intra-
state transmission). For transmission schemes implemented through the negotiated route, transmission charges are
determined by the relevant electricity regulatory commission in line with tariff regulations issued by it, which
consider factors such as return on equity, interest on loan capital and working capital, depreciation, operation and
maintenance expenses and allowance for any renovation and modernisation. Under the competitive bidding route,
transmission charges discovered through a competitive bidding process are required to be adopted by the relevant
electricity regulatory commission.
Once the charges for a transmission network are determined or discovered, the CERC adopts a point-of-connection
method for calculating charges payable by each user in the transmission system based on its actual usage and
develops a transmission charge-sharing mechanism among grid constituents. The point-of-connection method is,
however, not adopted for intra-state transmission for entities not connected to the interstate transmission system. The
CERC has amended its regulations governing sharing of transmission charges and losses, making them applicable to
intra-state entities with medium-term open access or long-term access to the interstate transmission network and
introducing a reliability service charge, charge for using high-voltage direct current transmission lines and provisions
for misdeclaration. Further, through another amendment, the CERC has waived the payment of transmission charges
and transmission losses for incremental gas-based generation from the re-gasified liquefied natural gas e-bid
auctions.
Entities responsible for grid reliability
Which entities are responsible for the reliability of the transmission grid and what are their powers and
responsibilities?
Recently, the CERC (Indian Electricity Grid Code) Regulations 2023 were introduced but are yet to be notified. The
2023 regulation sets out extensive provisions regarding reliability and adequacy of resources, integration of
renewable sources, technical and design standards for grid connectivity, outlining operational requirements and
technical capabilities to ensure reliable grid operation including maintaining load generation balance. Until the 2023
Regulations are notified, the CERC (Indian Electricity Grid Code) Regulations 2010 (Grid Code) remains in force.
The Grid Code brings together a single set of technical and commercial rules that facilitate planning and
development of reliable national and state grids, encompassing all the utilities connected to or using the interstate
transmission system. One of the key aspects of the Grid Code is to facilitate the planning and development of
economic and reliable national and regional grids. Further, states have also issued their respective grid code
regulations, for regulating the intra-state transmission grid network.
The key entities responsible for ensuring the reliability of the transmission grid include the National Load Despatch
Centre (NLDC), the Regional Load Despatch Centre (RLDC) (established for five regions in India), and State Load
Despatch Centres (SLDC) (established for each state). They ensure optimum scheduling and despatch and integrated
operation of the power system in their respective jurisdiction. Additionally, the central transmission utility (CTU)
and various state transmission utilities are responsible for planning and coordination of interstate and intra-state
transmission systems respectively. Under the Electricity (Amendment) Bill 2022, the functions of the NLDCs and
SLDCs have been proposed to be included in the Electricity Act instead of being prescribed by the
governments. Directions issued by the NLDC would have to necessarily be followed by every RLDC, SLDC,
licensee, generating company, generating station, sub-station and any other person connected with the operation of
the power system.

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On 9 March 2021, the government of India notified the establishment of an independent CTU called the Central
Transmission Utility of India Ltd, to undertake and discharge all functions of CTU. The PGCIL that was declared as
the CTU in 2003, shall continue to be a deemed transmission licensee and discharge functions incidental and
connected therewith.
The CERC has recently enacted the CERC (Ancillary Services) Regulations 2022 to be provided by power
generators to improve the reliability of the grid. Ancillary services are the services that are necessary to support the
grid operation in maintaining power quality, reliability and security of the grid. These regulations aim to provide
mechanisms for procurement, through administered as well as market-based mechanisms, deployment and payment
of ancillary services for maintaining the grid frequency close to 50 hertz and restoring the grid frequency within the
allowable band as specified in the Grid Code. The provisions of the regulations would also be useful in relieving
congestion in the transmission network, to ensure smooth operation of the power system and the safety and security
of the grid.
Additionally, the CERC amended the Grid Code in December 2019, to provide a procedure and mechanism for
declaration of commercial operation of interstate generating stations. Under this procedure, generators are required
to make such a declaration after demonstrating the unit capacity after a trial run and after obtaining the relevant
clearance from NLDC, RLDC or SLDC. Through the amendment, the CERC has clarified the procedure for such
declaration of the commercial operations date for thermal and hydro-generating stations and interstate transmission
systems. The procedure involves successful completion of all tests that are required under the Grid Code, issuing
notice to power procurers, if any, and successful completion of trial runs for the equipment or generating units to be
commissioned.
Concerning renewable sources of energy, several states in India have, over the years, adopted norms for computation
of deviations in actual injections of power as against scheduled injections to the state and national grids. These
regulations also set out the charges payable towards deviations in quantum and frequency of power injected.
Regulation of electricity utilities – distribution
Authorisation to construct and operate distribution networks
What authorisations are required to construct and operate distribution networks?
The Electricity (Amendment) Bill 2022 proposes delicencing of distribution activities and introduces registration
provisions as an alternative. This bill proposes to delicence distribution activities and replace the requirement of a
licence with registration provisions. However, until the same is approved by the parliament, a licence is required to
construct and operate a distribution network. Electricity distribution activities (except for distribution of electricity in
rural areas notified by the relevant state government and distribution by notified exempted entities such as local
authorities and non-governmental organisations) require a licence from the relevant state electricity regulatory
commission (SERC).
For obtaining a distribution licence, the entity is required to make an application to the SERC as prescribed in the
Electricity Act 2003 (Electricity Act) along with the requisite fees. Additional clearances may be required from
relevant authorities. To promote open access and competition in distribution activities, the Electricity Act permits
two or more distribution licensees to operate within the same area of supply through their own distribution network
and also permits applicants to file petitions for obtaining a distribution licence in the same area and for the same
purpose, as previously granted to another distribution licensee, so long as they comply with additional requirements
concerning capital adequacy, creditworthiness and code of conduct as may be prescribed by the government of India.

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The Electricity (Amendment) Bill 2022 stipulates that a distribution company (DISCOM) must offer non-
discriminatory open access to its network to all other DISCOMs operating in the same region, subject to payment of
certain wheeling charges and in accordance with the regulations as specified by the appropriate government
authority. In case of non-compliance by the DISCOM, the appropriate commission, on an application made to it,
may issue directions and levy penalties as outlined in the Electricity Act.
Access to the distribution grid
Who is eligible to obtain access to the distribution network and what requirements must be met to obtain
access?
Distribution licensees are obliged to provide a non-discriminatory supply of electricity to any person situated in the
licensee’s area, under the regulations made by the relevant electricity regulatory commission.
Every person whose premises are situated within the distribution licensee’s area and who has given notice for
wheeling electricity is eligible to receive electricity from:
the distribution licensee: or
from any other supplier through the distribution licensee’s network, by seeking open access.

Under the first option, the distribution licensee operating in a particular area is required to lay down its network, if
required, to supply electricity itself to a consumer seeking supply. Under the second option, ie, through open access,
a consumer has the right to require a distribution licensee to make its network available for wheeling electricity to
such consumer from a third-party supplier upon payment of wheeling charges and an additional surcharge (eg, a
cross-subsidy surcharge) as determined by the SERC to meet such distribution licensee’s fixed costs arising out of its
obligation to supply. The cross-subsidy charge is payable irrespective of whether the distribution licensee’s network
is used, in the case of third-party supply.
Government distribution network policy
Are there any governmental measures to encourage or otherwise require the expansion of the distribution
network?
Electricity distribution has largely been controlled by government distribution utilities, with minimal privatisation on
account of significant historic liabilities of the state distribution companies. However, few examples of privatisation
in certain areas (eg, Delhi, Odisha, Ahmedabad, Mumbai and Jamshedpur) have met with success. The government
of India has commenced the privatisation of the distribution networks situated in union territories. The Power
Ministry issued draft standard bidding documents to select bidders that can acquire a majority stake in distribution
licensees. The government of India proposes to privatise distribution networks in union territories under the
Atmanirbhar Bharat Abhiyan. The privatisation of DISCOMs in the union territories is expected to act as a model for
privatisation of DISCOMs throughout India. So far, Torrent Power has emerged as the highest bidder for a 51 per
cent equity stake in the distribution company for the union territory of Dadra Nagar Haveli and Daman and Diu. The
Bombay High Court suspended the tender process in a public interest litigation case; however, this was stayed by the
Supreme Court and the matter is currently listed for hearing before the Supreme Court. The Supreme Court has also
stayed an order of the Punjab and Haryana High Court, which intended to prevent the privatisation of Chandigarh’s
Electricity Distribution Company. Thus, it is clear that the Supreme Court is inclining towards the removal of
obstacles for the privatisation of distribution companies. The distribution networks of other union territories like
Puducherry, Lakshadweep, Jammu and Kashmir, are also in different stages of the privatisation process.

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A tariff for electricity distribution, comprising wheeling charges and cost of supply, is levelled and determined on a
cost-plus basis by the relevant SERC. The proposed amendments to the Tariff Policy 2016 (Tariff Policy) address
distribution as well. To ensure the burden of distribution licensees’ inefficiencies are not passed on to the consumers,
the SERCs and joint commissions (constituted solely for tariff setting) are required to not consider aggregate
technical and commercial (AT and C) losses exceeding 15 per cent for determination of tariff after 31 March 2019.
In recent years, the government has taken many measures to encourage and improve the distribution network and
infrastructure in the country. An additional fund of 3 trillion Indian rupees over five years was allocated to the power
distribution companies to make them more efficient and reduce the widening financial losses. However, one of the
major problems plaguing the distribution sector is the abysmal credit ratings of the state distribution utilities and
their persistent or extensive delays in making payments to generators under power purchase agreements. Distribution
utilities had borrowed heavily to finance losses in their businesses and were facing major hurdles in repaying their
debt. The Power Ministry had released data that at the end of June 2021, distribution companies owed 121.91 billion
Indian rupees to renewable energy generators in overdue payments. The Electricity (Late Payment Surcharge and
Related Matters) Rules 2022 (LPS Rules) were notified to strengthen the regulatory provisions for recovery of
outstanding dues of generating companies, inter-state transmission licensees and DISCOMs. The LPS Rules have
introduced an instalment-based mechanism for payment of outstanding amounts. The Power Ministry year-end
review 2022 reports that, since August 2022, all current dues are being paid within 75 days, and the total overdue
of 265.46 million Indian rupees was settled between August 2022 and September 2022. This is a positive
development, and the long-standing issue of overly delayed payments seem to have reduced.
The government launched the Ujwal Discom Assurance Yojana Scheme (UDAY Scheme) intending to improve the
operational and financial efficiency of state-owned distribution utilities. Some 27 states and five union territories had
signed up for the UDAY Scheme. One of the major features of the UDAY Scheme involved requiring participating
states to take over 75 per cent of the debt of distribution licensees by way of a grant over two years. Such states may
then issue non-statutory liquidity ratio bonds, including state development loan bonds for subscription by pension
funds, insurance companies and other institutional investors. Under the UDAY Scheme, lenders and financial
institutions were to not levy prepayment charges on distribution licensee’s debt and waive unpaid overdue interest,
including penal interest. For financing losses and working capital of distribution utilities, state governments took
over and funded losses in a graded manner until the financial year 2020–2021. One of the much-praised aspects of
the UDAY Scheme was its greater acceptability by the respective state governments as the debt proposed to be
absorbed would not have affected their fiscal deficit and in turn, would not have affected their budgetary allocation
from the central government. This aimed to distribute utilities, significantly increasing their procurement of power
that was constrained on account of their financial distress. However, the UDAY scheme has been criticised in some
quarters for a perceived lack of explicit central government support as part of the transitional financing mechanisms
and a lack of operational control measures in terms of automatic fuel and power purchase price adjustments.
It has become apparent, however, based on data supplied by various states, that the UDAY Scheme has not achieved
the intended results. Many states have failed to reduce their AT and C losses and to narrow the gap between their
distribution licensees’ cost of power supply and revenue realised to the earmarked levels for the year (average cost of
supply-average revenue realised gap (ACS-ARR)).
On 20 July 2021, the Power Ministry issued detailed guidelines for a ‘Revamped Distribution Sector Scheme: A
Reforms-Based and Results-Linked Scheme’ (Revamped Distribution Scheme) that will be applied over the next five
years. The programme’s scope is in two parts: the first covers the financial support for the upgrade of distribution

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infrastructure, prepaid smart metering and system metering; the second covers training, capacity building, and other
enabling and supporting activities. Every eligible distribution company, if it meets the pre-qualifying criteria, will
prepare an action plan to avail funding under the programme and would be evaluated based on the result evaluation
matrix. The plan is to reduce AT and C losses across India to 12 to 15 per cent and eliminate the ACS-ARR gap by
2024–2025. The outlay for the programme is 3.03 trillion Indian rupees, over five years (ie, financial year 2021–
2022 to financial year 2025–2026), with budgetary support of 976.31 billion Indian rupees from the government of
India. So far, under the Revamped Distribution Sector Scheme, 173 million prepaid smart meters, 4.9 million DT
meters and 168,085 feeder meters have been sanctioned across 23 States and 40 DISCOMs with a total sanctioned
cost of 1.15 trillion Indian rupees. Artificial intelligence, machine learning and blockchain technology will be used
to help distribution companies to make decisions on loss reduction, demand forecasting, asset management, time of
day tariff, renewable energy integration, and other predictive analysis. To reap the benefits of the programme, the
states and the distribution companies would have to sign a tripartite agreement with the government of India.
Rates and terms for distribution services
Who determines the rates or terms for the provision of distribution services and what legal standard does that
entity apply?
The tariff for electricity distribution, comprising wheeling charges and cost of supply, is levelled and determined on
a cost-plus basis by the relevant SERC. In this regard, SERCs are also competent to formulate regulations that set
out the terms and conditions for the distribution of electricity. While determining the rates and terms, the SERCs are
guided by factors mentioned in the Electricity Act, which include promotion of competition, safeguarding of
consumers’ interest and, at the same time, recovery of the cost of electricity. The rates so determined are usually
notified by the relevant SERCs by passing tariff orders. The SERCs have an obligation under the Electricity Act for
timely issuance of tariff orders and in May 2021, the Power Ministry had issued a notice to various SERCs, to ensure
that distribution tariff is revised on regular and timely bases and orders in this regard are issued promptly. If tariff
has been determined through a transparent process of bidding, then the same would have to be adopted by the
appropriate electricity regulatory commission (ie, the Central Electricity Regulatory Commission (CERC) in the case
of inter-state transmission and the respective SERC in the case of intra-state transmission). The Electricity
(Amendment) Bill 2022 also proposes a time limit within which the tariff must be adopted and requires the
appropriate commission (the CERC/SERCs) to issue the adoption order within 90 days from the date of application
or pass an interim tariff within the 90 days’ period. The interim tariff is to remain in force till issue of final tariff
order which is required to be issued within 150 days of receipt of the application.
Concerning cross-subsidies, the Tariff Policy provides that the cross-subsidy charge shall be an aggregate of
weighted average cost of power; transmission and distribution losses, transmission, distribution and wheeling
charges and per-unit cost of carrying regulatory assets, if applicable. However, the Tariff Policy recognises that the
methodology for calculating cross-subsidy may not be suitable to all distribution licensees and therefore has given
the SERCs the power to review and vary the same taking into consideration different circumstances prevailing in the
area of relevant distribution licensees. The proposed amendments to the Tariff Policy provide for the deployment of
smart pre-paid meters, as it is felt that the shift to such a pre-paid system will remove problems such as meter
reading, billing, collection and disconnection in the case of non-payment of bills by consumers. Additionally,
proposed amendments to the Tariff Policy require all subsidies to be extended in the form of a direct benefit transfer
and the gradual reduction of cross-subsidies by the appropriate electricity regulatory commission. Finally, the
amendments propose a framework for the simplification and rationalisation of tariffs, as well as, ensuring a
consistent system across all states.

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SERCs may also consider distribution and supply margins while arriving at returns for the distribution business, and
the possibility of capping prices. Additionally, flexibility in the adoption of a surcharge formula and capping of
surcharge at 20 per cent of tariff applicable to a consumer has been introduced.
The Power Ministry has recently issued Electricity (Late Payment Surcharge) Rules 2021, concerning the late
payment surcharge payable in respect of the outstanding payment to be made by the distribution company beyond
the relevant due dates. According to the new rules, all payments from a distribution company to a generating
company for power procurement or by a user of a transmission system to a transmission licensee should be first
adjusted towards late payment surcharge due and payable and thereafter, towards monthly charges, starting from the
longest overdue bill.
Regulation of electricity utilities – sales of power
Approval to sell power
What authorisations are required for the sale of power to customers and which authorities grant such
approvals?
Sale and distribution of power are bundled activities and hence, if a developer has obtained a distribution licence for
the distribution of electricity for a certain area, it has the approval to sell power as well to both commercial and
domestic consumers, and no specific authorisations are required.
Further, generating companies can also sell power directly to a bulk consumer using open access or through
dedicated transmission lines. The consumer, however, is not allowed to further sell the power to other consumers.
Licensed traders are also authorised to supply and trade in power.
Power sales tariffs
Is there any tariff or other regulation regarding power sales?
The state electricity regulatory commissions (SERC) issue multi-year tariff regulations to regulate the procedure for
determination of a power sales tariff (comprising fixed charges and energy charges, which are usage-based) of
distribution licensees for various classes of consumers, the categorisation of which depends on the type of entities
that require the electricity and the voltage levels at which the electricity is to be distributed. For instance, a separate
tariff is determined for low-tension (LT) consumers (which includes domestic, residential and commercial units) and
high-tension (HT) consumers (which includes industries and railways). The HT and LT classes of consumers are
further subdivided depending on the type of entity to which electricity is to be supplied (for instance, HT 1A
consumers include all manufacturing, industrial establishments and registered factories, while HT 1B tariff is
determined for railways). The components and factors to be considered while determining a tariff are similar to the
components of a generation tariff and include return on equity capital, interest on debt, interest on working capital,
depreciation, power purchase cost and operation and maintenance expenses, albeit concerning the distribution
business. The proposed amendments to the Tariff Policy 2016 envision a two-part tariff with capital costs being
reflected in the fixed charges and the energy charges reflecting the average purchase price of power with
administrative margins.
On 15 February 2021, the Central Electricity Regulation Commission (CERC) approved the CERC (Power Market)
Regulations, 2021 to regulate power sales through power exchanges, market participants other than power exchange,
and over the counter markets. The regulations apply to delivery-based electricity contracts, contracts relating to
renewable energy certificates, contracts relating to energy saving certificates, and any other contracts, as may be
approved by the appropriate electricity regulatory commission.

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The government of India has introduced a time of day (ToD) tariff through the Electricity (Rights of Consumers)
Amendment Rules 2023. Under the amended ToD tariff system, the ToD tariff is 10 to 20 per cent less than the
normal tariff during solar hours (ie, eight hours of the day prescribed by the SERC), while the ToD tariff during peak
hours will be 10 to 20 per cent higher than the normal tariff. Commercial and industrial consumers that have a
maximum demand of 10 kilowatts and above are eligible for the ToD tariff from 1 April 2024.
Rates for wholesale of power
Who determines the rates for sales of wholesale power and what standard does that entity apply?
In furtherance of the multi-year tariff orders issued by each SERC for distribution tariffs for various types of HT and
LT consumers, distribution licensees file their respective petitions before the SERC for their area of supply. Such
tariff petitions typically include true-up of the tariff based on the previous year (ie, the specific adjustment required
on a case-by-case basis concerning units sold, aggregate technical and commercial losses, etc), review of the current
year’s performance and approval of the aggregate revenue requirement of the distribution licensee for the upcoming
year. In reviewing the aggregate revenue requirement, the SERC takes into consideration factors such as cost of
procurement of electricity (through long-term contracts or short-term procurement from the open market, in the case
of shortage) and, based on such review, the commission may alter the tariff mentioned in the multi-year tariff order
for the distribution licensee.
Public service obligations

To what extent are electricity utilities that sell power subject to public service obligations?
The Electricity Act 2003 (Electricity Act) sets out various obligations and duties of a distribution licensee, which
include the obligation to provide open access to any applicant (subject to system constraints), the duty to develop
and maintain a distribution system and commence supply within one month of request in the distribution licensee’s
area of supply. The Supreme Court has stated in various judgments that there is no exemption from the universal
service obligation of any distribution licensee under the Electricity Act and the licensee has a statutory duty to
supply electricity upon application to any premises located in the distribution licensee’s area. One of the key reasons
for the government’s decision to reform debt-ridden distribution licensees under the Ujwal Discom Assurance
Yojana Scheme and now through the Revamped Distribution Scheme is to ensure that the distribution licensees can
fulfil and perform their roles and functions under the Electricity Act effectively.
Regulatory authorities
Policy setting

Which authorities determine regulatory policy with respect to the electricity sector?
The power sector is governed by the government of India primarily through the Power Ministry and the Ministry of
New and Renewable Energy (MNRE). The Department of Atomic Energy of the government of India governs the
development of nuclear energy.
Other regulatory policies and technical and performance standards are determined by the Central Electricity
Regulatory Commission (CERC), the state electricity regulatory commissions (SERC), NITI Aayog and the Central
Electricity Authority (CEA).
Scope of authority
What is the scope of each regulator’s authority?

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The CERC and the SERCs exercise jurisdiction over all interstate and intra-state electricity regulatory issues
respectively (except issues relating to nuclear energy, which are regulated by the Atomic Energy Regulatory Board)
and are entrusted with the function of notifying regulations and acting as the independent regulators for their
respective jurisdictions. Some of their key functions and responsibilities include preparing their respective grid
codes, issuance of licences, determination of tariffs, adjudicating disputes, and aiding and advising the government
on any matter referred to them.
The Power Ministry and the MNRE act as the legislating bodies and are mainly responsible for evolving general
policies (including the National Electricity Policy 2005 (NEP), the Tariff Policy 2016 (Tariff Policy) and the Rural
Electrification Policy) for the development of the electricity sector, in consultation with the state governments and
the CEA.
The CEA, not a regulator in the electricity sector, primarily serves as the technical advisory body to the government
of India, advising on all technical matters related to transmission, generation and distribution (including specifying
technical standards for construction, and prescribing grid standards for operation and maintenance of transmission
lines and safety requirements).
Establishment of regulators
How is each regulator established and to what extent is it considered to be independent of the regulated
business and of governmental officials?
The CERC and SERCs are statutory bodies under the Electricity Act 2003 (Electricity Act), which also sets out their
powers and functions. The CERC was established by the central government under the Electricity Act and the
Electricity Regulatory Commissions Act 1998 where members of the CERC are appointed by a committee that is
appointed by the central government. Similarly, SERCs are also estab­lished by the respective state governments
under the Electricity Act and the Electricity Regulatory Commissions Act 1998. As autonomous bodies, they
independently perform their functions without any government interference. However, regulatory authorities are
required to be guided by policy directions of the government of India issued under the Electricity Act. That said, the
Electricity (Amendment) Bill 2022 require the SERCs and the CERC to mandatorily comply with the provisions of
the Tariff Policy (as opposed to being merely guided). The amendments also provide that if the SERC is unable to
perform its function on account of vacancies, then the government of India may, in consultation with the concerned
state government, entrust the functions of said SERC to another SERC or a Joint Commission.
The CEA was established by the central government under the Electricity Act. The CEA’s functions include advising
the central and state governments on matters relating to NEP, and all technical matters relating to generation,
transmission and distribution of electricity, specify the technical and safety standards for construction of electrical
plants, connectivity to the grid, etc.
Challenge and appeal of decisions
To what extent can decisions of the regulator be challenged or appealed, and to whom? What are the grounds
and procedures for appeal?
Under the Electricity Act, the CERC and SERCs (and adjudicating officers of such commissions) have the power to
hold inquiries and adjudicate disputes relating to interstate matters for the CERC and intra-state matters for the
respective SERCs. Under section 79 of the Electricity Act, the CERC is empowered to adjudicate upon disputes
involving generating companies, either owned or controlled by the central government or generating companies who
have entered into a composite scheme for generation and sale of electricity in one or more states, or transmission

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licensees concerning the interstate transmission of electricity and regulation of tariff. The Electricity (Amendment)
Bill 2022 proposes to add a clarification that disputes dealt with by the CERC would be regarding the performance
of obligations under a contract of sale, purchase or transmission of electricity. It also proposes that the CERC would
adjudicate upon disputes involving National Load Despatch Centre and Regional Load Despatch Centres regarding
the quality of electricity or safe, secure and integrated operation of the grid.
Section 86 of the Electricity Act authorises the respective SERCs to adjudicate disputes between licensees and
generating companies. Both the CERC and the SERCs also reserve the power to refer any dispute to arbitration. In
this regard, the Electricity (Amendment) Bill, 2022 also include that any order of the CERC or SERC will be
executable as a decree of a civil court and the commissions have all the powers of a civil court including but not
limited to powers of attachment and sale of property, arrest and detention in prison and appointment of a receiver.
The Electricity (Amendment) Rules 2022 provides that the appropriate commission (the CERC/SERCs), must issue
a final order within 120 days from the date of receipt of petition, which can be extended by 30 days. If a final order
cannot be issued within the prescribed timeline of 150 days, then an interim order must be issued. If the commission
does not issue the relevant orders within the 150 days timeline, then the petitioner may approach the Appellate
Tribunal for Electricity (APTEL) for relief.
The APTEL has the power to entertain appeals arising out of decisions of the CERC, the SERCs or adjudicating
officers if filed within 45 days from the date of receipt of the impugned order. APTEL is also conferred with suo
motu jurisdiction to examine the validity of any order made by an adjudicating officer, CERC or SERC, concerning
any proceeding. Additionally, any person aggrieved by the order of any electricity regulatory commission may
approach the relevant high court of the state for adjudicating on any question of law.
APTEL is required to decide appeals as expeditiously as possible and endeavour to dispose of the appeal within 180
days of the filing of the appeal. Further, appeals against the decisions of APTEL may be filed before the Supreme
Court within 60 days of receipt of such decision. Recently, the Supreme Court has stated in its order that if there is
any matter pending before the appropriate commission, the APTEL under section 121 is not allowed to hear such
cases.
Acquisition and merger control – competition
Responsible bodies
Which bodies have the authority to approve or block mergers or other changes in control over businesses in
the sector or acquisition of utility assets?
Under the Electricity Act 2003 (Electricity Act), every transmission and distribution licensee must seek the prior
approval of the relevant electricity regulatory commission, without which it cannot undertake any transaction to
acquire, or merge its utility with, the utility of another licensee; or assign its licence or transfer the whole or a part of
its utility.
Additionally, the Competition Commission of India (CCI), established under the Competition Act 2002
(Competition Act) has, under the merger control provisions, the authority to block a combination (a merger or
acquisition beyond specified assets or turnover thresholds) in the electricity sector if it believes that such merger or
acquisition will have an appreciable adverse effect on competition (AAEC) on the relevant market, such as the
electricity sector in India.

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Earlier, the regulations relating to connectivity issued by the Central Electricity Regulatory Commission
(CERC)allowed for the transfer of connectivity only in limited circumstances, between the parent company and a
wholly owned subsidiary. This provision becomes a bottleneck for change in shareholdings allowed under most
power purchase agreements, where companies are allowed to transfer shares of the special purpose vehicle, as long
as the parent company maintains 51 per cent of the shareholdings up until one year after the date of commissioning
of a project. In 2018, the Power Ministry had directed the CERC to allow transfer of connectivity from a parent
company to a subsidiary that is not wholly owned, with a condition that the shareholding of the parent company in
such subsidiary or affiliate company should not fall below 51 per cent at any time before one year from the date of
commissioning of the relevant project. The recent CERC (Connectivity and General Network Access to the inter-
state Transmission System) Regulations 2022 provide that the connectivity granted to a parent company may be
utilised by its subsidiary companies and vice-versa. This has removed any restrictions on transfer of connectivity
between parent and subsidiary companies.
Review of transfers of control
What criteria and procedures apply with respect to the review of mergers, acquisitions and other transfers of
control? How long does it typically take to obtain a decision approving or blocking the transaction?
The Competition Act prohibits any enterprise or person from entering into a combination that causes or is likely to
cause an AAEC within the relevant market in India. The Competition Act also mandates that any person or
enterprise proposing to enter into a combination obtains prior approval of the CCI before executing the transaction.
If the CCI believes that the proposed combination will not have an AAEC on the relevant market in India, it
approves the transaction, and if it subsequently finds that the combination may have an AAEC within the relevant
market in India, it may prohibit the proposed combination or allow it subject to certain conditions meant to
neutralise the adverse effects of such combination. The Competition (Amendment) Act 2023 requires that if the
value of any combination transaction exceeds 20 billion Indian rupees and has substantial business operations in
India, it must be reported to the CCI. While the Competition (Amendment) Act 2023 received the President of
India’s approval in May of 2023, certain provisions, including the 20 billion Indian rupees threshold for the deal
value, will come into effect as and when the CCI issues relevant regulations and recommendations. Till then,
combination deals will need to be reported to the CCI based on the value of the asset or turnover.
For determining the AAEC of any combination, the Competition Act sets out specific factors (such as the extent of
entry barriers, degree of countervailing power in the market, the extent of effective competition likely to sustain in a
market, nature and extent of vertical integration in the market, the possibility of a failing business, etc) and requires
the CCI to decide within 210 days from a notice of combination being filed. If no order is passed by the CCI on the
proposed combination within the prescribed period, it is deemed that the proposed combination has been approved
by the CCI. By way of its regulations, the CCI has committed to endeavour to pass an order within 180 days from a
notice of combination being filed. In practice, the CCI usually gives its prima facie opinion approving the
transaction within 60 working days in cases without any competition concerns. In case of competition concerns, the
CCI can take up to six months to pass its final order.
While the Electricity Act does not set out any specific thresholds, the bidding documents entered into by entities in
the power sector typically prescribe provisions for equity lock-in and change in control for a specified period (except
for wind power procurement), which effectively block a merger or acquisition.

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Other than competition law and sector-specific restrictions, provisions of the Companies Act 2013 and the Securities
and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (applicable to
listed companies) will also apply concerning change in shareholding through mergers and acquisitions.
Prevention and prosecution of anticompetitive practices

Which authorities have the power to prevent or prosecute anticompetitive or manipulative practices in the
electricity sector?
The CERC and state electricity regulatory commissions (SERC) are empowered to issue appropriate directions to a
licensee or an electricity generating company if such licensee or generating company enters into any agreement or
abuses its dominant position or enters into a combination that is likely to cause or causes an AAEC in the electricity
sector. The CCI has the authority to initiate an inquiry into alleged anticompetitive conduct, either suo motu based
on information that it has or based on complaints received or on a reference made by the government or statutory
authorities (eg, the CERC and the SERCs). Further, the CCI can also make a reference to other statutory authorities
(eg, the CERC and SERC) for their non-binding opinion on issues on the sectors under their jurisdiction. Similarly,
other statutory authorities can also make a reference to the CCI for issues on competition law. This enables
electricity regulatory authorities to make their own assessment and also consult the CCI concerning alleged
anticompetitive conduct.
Determination of anticompetitive conduct
What substantive standards are applied to determine whether conduct is anticompetitive or manipulative?
Section 3 of the Competition Act prohibits agreements that cause or are likely to cause an AAEC in India.
‘Agreement’ includes an arrangement, understanding or actions in concert. Such agreements can be oral or written,
formal contracts or informal arrangements, and need not be enforceable by law. While determining AAEC the CCI
considers the following factors:
the creation of barriers to new entrants in the market;
driving existing competitors out of the market;
the foreclosure of competition by hindering entry into the market;
the accrual of benefits to consumers;
improvements in production or distribution of goods or provision of services; and
the promotion of technical, scientific and economic development through production or distribution of goods
or provision of services.

Section 4 of the Competition Act prohibits abuse of dominant position. In the case of a section 4 investigation, the
CCI must:
define the relevant market;
demonstrate dominance in such market; and
establish abuse of dominance by the concerned enterprise.

Abuse of dominance is of two kinds: exploitative and exclusionary conduct. These cover predatory pricing,
imposition of unfair terms and prices in one-sided contracts, leveraging, denial of market access, etc.
Preclusion and remedy of anticompetitive practices

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What authority does the regulator (or regulators) have to preclude or remedy anticompetitive or manipulative
practices?
The CERC and SERCs are empowered to issue appropriate directions to a licensee or an electricity-generating
company. Further, the CCI also has the authority to initiate an inquiry into alleged anticompetitive conduct and make
a reference to other statutory authorities (eg, the CERC and SERC) for their non-binding opinion on issues in the
sectors under their jurisdiction. Similarly, other statutory authorities can also make a reference to the CCI for issues
on competition law. This enables electricity regulatory authorities to make their own assessment and also consult the
CCI concerning alleged anticompetitive conduct.
International
Acquisitions by foreign companies
Are there any special requirements or limitations on acquisitions of interests in the electricity sector by
foreign companies?
It is permissible to have 100 per cent foreign direct investment (FDI) in generation (except nuclear power),
transmission, distribution of electricity and power trading sectors. Up to 49 per cent foreign investment (26 per cent
through FDI and 23 per cent through foreign institutional investment or foreign portfolio investment) is permissible
in power exchanges without prior regulatory approval in the primary and secondary markets.
Recently, the government of India amended the FDI policy to curb the opportunistic takeovers or acquisitions of
Indian companies owing to the current covid-19 pandemic. An entity of a country, which shares its land borders with
India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, then the
investment can only be done under the government-approved route.
Further, while there are no special requirements or limitations on acquisitions of interest in the electricity sector by
foreign companies, for competitively bid projects the standard bidding documents issued by the Power Ministry may
specifically provide each distribution utility (that is procuring power) to evaluate the association of a foreign
entity (with the bidder) from a national security or public interest perspective. To the extent such association is found
to be detrimental to the national interest, the distribution utility can reject the associated bid.
Authorisation to construct and operate interconnectors
What authorisations are required to construct and operate interconnectors?
Transmission licensees are required to abide by the regulations framed by the Central Electricity Regulatory
Commission (CERC) and the Central Electricity Authority (CEA) concerning the construction and operation of
transmission systems and connectivity to the grid. Under the Electricity Act 2003 (Electricity Act) and associated
Rules, the Chief Electrical Inspector is required to certify that any apparatus that is used for a transmission system
meets the safety regulations and guidelines prescribed. Further, according to the CEA’s regulations, any electrical
installations and apparatus that are of a voltage exceeding 650 volts are required to be inspected and approved by the
Chief Electrical Inspector before commissioning. Therefore, the construction and operation of an interconnector, or
any other similar apparatus, will be governed by the regulations that have been issued by the CERC and the CEA
and where required, approval must be obtained from the Chief Electrical Inspector.
CEA initiated the National Level Data Registry System in early 2018 to register all generating units with a capacity
above 0.5 megawatt to create a national-level data set. To implement the aggregation of the data, the CEA notified an
amendment on 6 February 2019 to the CEA (Technical Standard for Connectivity to the Grid) Regulations. Through

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a recent notification, the Power Ministry has specified that all generating units of the country that have an installed
capacity of 0.5 megawatt or above have to register on the e-portal effective from November 2020. The requirement
of obtaining a unique registration number is mandatory, as for existing grid-connected electricity generating units
and units that have already obtained grid connectivity, the number is required for injection of power in the grid and
for under construction electricity generating units, the number is required while applying for grid connectivity.
Interconnector access and cross-border electricity supply
What rules apply to access to interconnectors and to cross-border electricity supply, especially
interconnection issues?
Until December 2016, there was no legal framework for governing and regulating cross-border electricity supply. In
the absence of a regulatory framework governing cross-border electricity supply, Indian power trading companies
have supplied and procured electricity to and from neighbouring countries including Bhutan, Bangladesh, Myanmar
and Nepal by way of bilateral agreements that are generally government-to-government contracts. However, the past
few years have seen significant regulatory developments in the area. Although the Electricity Act as it stands today is
silent on cross-border electricity supply, the Electricity (Amendment) Bill 2022 allows the central government to
prescribe rules and issue guidelines for allowing and facilitating cross border trade of electricity.
The Power Ministry has issued Guidelines for Import/Export (Cross-Border) of Electricity. According to these
guidelines, in the case of cross-border transaction of electricity through arrangements other than government-to-
government negotiations, any entity proposing to import or export electricity may do so only after taking the
approval of the designated authority (the Power Ministry has notified the appointment of a Member (Power System)
in the CEA, who will be the designated authority for functions prescribed under these guidelines), who in turn will
have to take concurrence from the government of India. Coal-based generating plants may only be allowed to export
electricity in cases where they utilise imported coal or spot e-auction coal or coal obtained from commercial mining.
The tariff for the import of electricity by Indian entities from generating stations located outside India may be
determined through a process of competitive bidding. On the other hand, the tariff for export of electricity to entities
of neighbouring countries by Indian entities (through long-, medium- or short-term agreements) may be as mutually
agreed or through competitive bidding, subject to payment of applicable transmission or wheeling charges.
Transmission interconnection between India and a neighbouring country is envisaged to be planned jointly by
transmission planning agencies of the two countries.
In February 2017, the CERC issued draft regulations covering the cross-border trade of electricity for public
consultation. The final version of these regulations was notified by the CERC in March 2019. The regulations
address key aspects of the cross-border trade of electricity such as connectivity, open access and system safety and
set out the institutional framework for cross-border trade of electricity, such as the designated authorities and
agencies for facilitating the approval process and procedures for import and export of electricity. They also envisage
that a settlement nodal agency will be responsible for the settling of charges on grid operation (including deviation
charges) concerning a particular neighbouring country and the National Load Despatch Centre will act as the system
operator for cross-border trade. The Central Transmission Utility is responsible for grid access-related requirements
of cross-border trade. On 26 April 2018, the CEA issued Designated Authority (Conduct of Business Rules), 2018 to
frame its own rules for the conduct of business for facilitating the process of approval and laying down the
procedure for cross-border trade of electricity between India and neighbouring countries and other related matters.

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In February 2021, the CEA issued ‘Procedure for Approval and Facilitating Import/Export (Cross Border) of
Electricity’. The procedure aims to facilitate coordination with nodal agencies or authorities of neighbouring
countries for transmission system planning, joint system studies, surveys, preparation of feasibility study reports,
system development, construction, erection, monitoring, testing, commissioning, operation and maintenance of
transmission system for import or export (cross border) of electricity in a transparent manner. It also lays down
provisions for grant of approval to eligible entities to participate in cross-border exchange of electricity and the
procedure for grant of approval to an Indian generating station supplying electricity exclusively to neighbouring
countries for building a dedicated transmission line for connecting to the transmission system of a neighbouring
country.
India, along with other members of the South Asian Association for Regional Cooperation (SAARC), has also
signed the SAARC Framework Agreement for Energy Cooperation (Electricity) to enable cross-border trade of
electricity, which provides a broad framework for data updating and sharing, planning of cross-border
interconnections, transmission access, etc. Additionally, media reports suggest that steps for establishing a SAARC
power grid have been initiated by SAARC member countries.
Transactions between affiliates
Restrictions
What restrictions exist on transactions between electricity utilities and their affiliates?
Restrictions on transactions with affiliates are typically provided in licence conditions and regulations formulated by
the relevant electricity regulatory commissions. Typically, such transactions should be undertaken on an arms-length
basis and at a value that is fair and reasonable. Additionally, the Electricity Act also allows transmission or
distribution licensees to engage, with the prior approval of the relevant electricity regulatory commission, in other
businesses for the optimum utilisation of their assets, if a specified proportion of revenues from such other business
are used towards reducing wheeling charges, or wheeling and transmission, as the case may be. Further, in such a
case, the transmission or distribution business of the licensee must not subsidise the other business undertaking, nor
be encumbered by it.
Enforcement and sanctions

Who enforces the restrictions on utilities dealing with affiliates and what are the sanctions for non-
compliance?
The appropriate electricity regulatory commission is the body responsible for enforcing such restrictions. These
restrictions form part of the terms of the licence, therefore the appropriate electricity regulatory commission can
ensure compliance, under the powers provided under the Electricity Act 2003, and impose sanctions, which include
the imposition of penalties and revocation of the licence.
Update and trends
Key developments of the past year
Are there any emerging trends or hot topics in electricity regulation in your jurisdiction?
Payment Security and Late Payment Surcharge
On 28 June 2019, the Power Ministry issued an order regarding the opening and maintaining of a payment security
mechanism (to secure tariff payments) as required under power purchase agreements between developers and
distribution licensees (in the form of bank guarantees or letters of credit). The order directed that load despatch
centres despatch power only from those projects for which a letter of credit had been opened under the power

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purchase agreements. An intimation is required to be provided to the load despatch centres in this regard with details
such as the period of supply. Electricity will be despatched only up to the quantity for which payment security has
been provided. To give effect to the order, the Power Ministry issued a detailed procedure for scheduling power on
17 July 2019, which was later revised on 25 February 2021. The procedure reiterates that an intimation of the
opening of the letter of credit is to be provided to the load despatch centre along with details of the period of supply.
The procedure also states that the payment security may be provided by the distribution company for a shorter
duration of supply (eg, a week or fortnight) or advance payments may be made through direct deposits
(corresponding to at least one day’s purchase), irrespective of the period of the payment security opened under the
power purchase agreement. The quantum of power scheduled will be limited to the quantum for which money has
been deposited. The Electricity (Amendment) Bill 2022 provides that electricity will not be scheduled or despatched
if a distribution company (DISCOM) does not provide adequate payment security.
In the Indian context, while payment security is typically provided for in power purchase agreements, distribution
licensees (as the offtaker) did not provide such payment security as a matter of practice. DISCOMs and other users
of the transmissions system are required to maintain an adequate, unconditional and irrevocable payment security
mechanism under the Electricity (Late Payment Surcharge and Related Matters) Rules 2022 (LPS Rules). The LPS
Rules further stipulate that the supply of electricity will only be made or facilitated if an adequate security
mechanism is maintained or a proper security deposit is provided. In case adequate payment security is not provided
by the relevant offtaker, generation companies will have no right to collect late payment surcharge from DISCOMs.
This came as a much-needed reform in the distribution sector, particularly given the poor financial health of the
state-owned distribution licensees.

National Electricity Plan

The Central Electricity Authority prepares a National Electricity Plan for five years, which serves as the regulatory
roadmap for electricity sector reform in India. On 31 May 2023, the Central Electricity Authority notified the
National Electricity Plan (Volume I: Generation) for the period between 2022–2027, which sets out a review of the
capacity addition from conventional and renewable energy sources for the period between 2017–2022 as well as
projections for generation capacity for the next 15 years.

Bidding Guidelines – Wind Projects

The Power Ministry has recently issued the guidelines for tariff based competitive bidding process for power
procurement from grid connected wind power projects. The guidelines allow a procurer (which can be a DISCOM, a
power intermediary company or other power aggregator appointed by the MNRE) to procure electricity from wind
based power projects that have:
installed capacity of 10 megawatts or more and are connected to the intra-state transmission system; or
installed capacity of 50 megawatts or more and are connected to the interstate transmission system.

Launch of New Bid Processes

Recently, the government of India has approved the largest tranche of projects to be awarded basis tariff-based
competitive bidding, including, for power transmission projects that would connect Renewable Energy Zones in
Gujarat, Rajasthan and Maharashtra and hydropower projects in Himachal Pradesh, with the national grid.

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Coronavirus
What emergency legislation, relief programmes and other initiatives specific to your practice area has your
state implemented to address the pandemic? Have any existing government programs, laws or regulations
been amended to address these concerns? What best practices are advisable for clients?
Law stated date
Correct on
Give the date on which the information above is accurate.

Trilegal - Akshita Amit, Neeraj Menon and Sugandha Verma

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