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ElectricityregulationinIndia:overview
Resourcetype:CountryQ&A
Status:Lawstatedasat01Mar2013
Jurisdiction:India

AQ&AguidetoelectricityregulationinIndia.
TheQ&Agivesahighleveloverviewofthedomesticelectricitymarket,includingdomesticelectricitycompanies,electricitygeneration
andrenewableenergy,transmission,distribution,supplyandtaxissues.Itcoverstheregulatorystructureforeignownershipimportof
electricityauthorisationandoperatingrequirementstradingbetweengeneratorsandsuppliersratesandconditionsofsaleandproposals
forreform.
ThisQ&Aispartofthemultijurisdictionalguidetoenergyandnaturalresources.Forafulllistofcontentvisit
www.practicallaw.com/energymjg.
PallaviBediandRohitRajagopal,JSagarAssociates

Contents
Overview
Electricitymarket
Regulatorystructure
Electricitycompanies
Maincompanies
Foreignownership
Importofelectricity
Electricitygenerationandrenewableenergy
Sourcesofelectricitygeneration
Authorisationandoperatingrequirements
Renewableenergy
Electricitytransmission
Authorisationandoperatingrequirements
Rates
Electricitydistribution
Authorisationandoperatingrequirements
Electricitysupply
Authorisationandoperatingrequirements
Tradingbetweengeneratorsandsuppliers
Ratesandconditionsofsale
Taxissues
Reform
Theregulatoryauthorities
MinistryofPower(MoP)
MinistryofNewandRenewableEnergy(MNRE)
CentralElectricityRegulatoryCommission(CERC)

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StateElectricityRegulatoryCommission(SERCs)
CentralElectricityAuthority(CEA)
AppellateTribunalforElectricity(APTEL)
NationalLoadDespatchCentre
RegionalLoadDespatchCentre
Onlineresources

Overview
Electricitymarket
1.Provideanoverviewoftheelectricitymarketinyourjurisdiction,includingrecenttrendsoverthelast12months.

Overview
Theinstalledcapacityofpowerplantsincreasedfrom1,713MWin1950toabout211,766MWbyDecember2012.Arobustinterstate
andinterregionaltransmissionsystemhasevolvedoverdecades,whichfacilitateswidespreadreachofpoweracrossthecountry.
Thepercapitaconsumptionofelectricityalsoincreasedfromabout15kWhin1950toabout814kWhin2011.About90%ofthevillages
inIndiahaveelectricity.Althoughtherehasbeensubstantialgrowthingeneration,transmissionanddistributioncapacityoverthelast
sixtyyears,growthindemandforpowerhasalwaysexceededgenerationcapacity.ThepercapitaelectricityconsumptioninIndiais24%
oftheworld'saverage,and35%and28%ofChinaandBrazilrespectively.

Recenttrendsintheelectricitysector
Thepowersectorcontinuestoendeavourtoprovideadequatepower,withintherealmsofsustainabledevelopmentprinciples,tofuelthe
growingeconomy.Currently,themainissuesinclude:
Fuelshortage(domesticcoal).Coalproductionhasnotbeenkeepingpacewiththeincreasingdemandoftheelectricitysector,
mainlyduetovariousdelaysinthedevelopmentofcoalminesinIndia.Duetothiscoalshortage,CoalIndiaLimited(CIL)throughits
operatingsubsidiarieshadnotbeenissuing/signinglettersofassurances/fuelsupplyagreements(FSAs)topowerplantdevelopersfor
supplyofcoal.TheMinistryofCoal(MoC)thereforedirectedCILtosignFSAswithpowerplantstosupplyaminimumannual
contractedquantityofcoalofatleast80%.Itwasalsonecessarytoimportcoalduetotheshortage.However,someFSAshave
beensignedalthoughcertainissuescontinuetoneedresolving.
Pooledpricingofcoal.Pooledpricingofcoal(domesticandimported)isnecessaryastheproductionofdomesticcoalisnot
adequateforthecoalrequirementsofpowerplants(bothexistingandplanned).TheCentralElectricityAuthority(CEA)andCIL
thereforeproposetoprepareaschemeofcoalpricepoolingtobeconsideredbytheMinistryofPower(MoP).
Renegotiationofbidroutepurchasepoweragreements(PPAs)duetoimportedcoalcost.Duetorecentchangesinthe
internationalcoalmarket(specificallyIndonesia),thepricesofcoalhavesubstantiallyincreased.Thisincreaseinfuelpriceshas
substantiallyimpactedthetariffinitiallybidbytheprojectdevelopersforcoastalpowerplantsinIndia(runonimportedcoal).Following
thisunexpectedchange,certainprojectdevelopershaveaskedtheCentralElectricityRegulatoryCommission(CERC)tointervene
andapprovearevisedtarifffortheirpowerplants.
Environmentalclearanceandlandrelatedissues.Landallocationissuesandobtainingenvironmentalclearancefortheirprojects
continuetobeissuesforpowerprojectdevelopers.
Tariffrationalisation.Inarecentorder,theAppellateTribunalforElectricity(APTEL)issueddirectionstotheStateElectricity
RegulatoryCommissions(SERCs)toensurethatstatedistributionutilitiesfiletariffpetitionsforannualreviewoftariffs.Thisorder
wasconsequenttoasuomotoactiontakenbytheAPTEL(anactiontakenbytheAPTELonitsowninitiative)followingaletter
receivedfromtheMoP.MostSERCshavethereforeaskedelectricitydistributioncompaniestofiletariffpetitionsforincreaseof
tariffs.Incaseswherethedistributioncompanieshadnotfiledtariffpetitionsfortariffincreases,theSERCshavepassedsuomoto
ordersforincreasingdistributioncompaniestariffs.
Distributionreforms.TheMoPidentifiedthepoorfinancialhealthofthedistributionutilitiesinIndiaasamajorissuetobeaddressed
togetthepowersectorbackontrack.Basedonahighlevelpanelreport(popularlyknownastheDrShungluCommitteereport),the
governmentisconsideringschemesforfinancialrestructuringofstatedistributioncompanies.

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Regulatorystructure
2.Describetheregulatoryframeworkfortheelectricitysector,includingtheregulatoryauthorities.

Regulatoryframework
TheConstitutionofIndiaplaceselectricityontheconcurrentlist,thatis,boththecentreandstatelegislaturesareauthorisedtoenactlaw
andmakepoliciestopromotetheelectricitysector.
TheElectricityAct2003(ElectricityAct)framedbythecentrallegislaturecoversmajorissuesinvolvinggeneration,distribution,
transmissionandtradingofpower.
ThemainregulatoryauthoritiesthatregulatethetariffofgeneratingcompaniesareCERCandSERC.
CERCisresponsiblefor:
Determiningandregulatingtariffsforgeneratingcompaniesownedorcontrolledbythecentralgovernment.
Generatingcompaniesotherthanthoseownedorcontrolledbycentralgovernment,ifthosecompanieshaveenteredintoacomposite
schemeforgenerationandsaleofelectricityinmorethanonestate.
SERCsdetermineandregulatetariffsforintrastategeneration,supply,transmissionandwheelingofelectricityintherelevantstates.
TheElectricityActgovernsthefollowing,amongotherthings:
Generation.Licensingrequirementswereremovedforthegenerationofelectricity(exceptforpermissionforcertainhydroprojects)
(ElectricityAct).AnyonecanthereforedevelopageneratingstationinaccordancewiththeapplicableIndianlaws.Generating
companiesarenowpermittedtosellelectricitytoanytradinganddistributionlicenseeandtoconsumersdirectly(subjecttogetting
openaccessapprovals).
Transmission.Transmissionisaregulatedactivitythatrequiresalicencefromtheappropriateregulatorycommission(CERCor
SERC),unlessexemptedinaccordancewiththeElectricityActorifdeemedalicenseeundertheElectricityAct.CentralGovernment
mustdesignateonegovernmentcompanyasthecentraltransmissionutility(CTU),whichwouldbedeemedatransmissionlicensee
(ElectricityAct).Similarly,eachstategovernmentdesignatesonegovernmentcompanyasastatetransmissionutility(STU),which
wouldalsobedeemedasatransmissionlicensee.CERCandSERCaretheregulatorsandlicensorsforanyoneseekingtoundertake
transmissionactivities.CTUsareprohibitedfromgeneratingelectricityortradinginelectricity(Section38,ElectricityAct).The
prohibitiononSTUs,however,isonlyforengagingintradinginelectricity.Transmissionlicenseescanalsoengageinanyother
businessinadditiontotransmission(excepttrading),providedpriornoticeisgiventotheappropriateregulatorycommission(Section
41,ElectricityAct).
Trading.Tradingofelectricityisalicensedactivity,whichisdefinedasthepurchaseofelectricityforresaletoanyperson(Electricity
Act),whichcaninvolveeither:
wholesalesupply(thatis,purchasingpowerfromgeneratorsandsellingtothedistributionlicensees)or
retailsupply(thatis,purchasingfromgeneratorsordistributionlicenseesforsaletoendconsumers).
TheregulatoryauthoritiesresponsibleforgrantingatradinglicenceareCERC(ifthetradingisproposedtobeinterstate)andSERC
(ifthetradingisproposedtobeintrastate).Atradinglicenseemustkeeptheaccountsofthetradingbusinessseparatefromanyother
businesscarriedoutbyit.
Distributionandretailsupply.TheElectricityActdoesnotmakeanydistinctionbetweendistributionandretailsupplyofelectricity.
Distributionisalicensedactivityanddistributionlicenseesareallowedtoundertaketradingwithoutanyseparatelicence.A
distributionlicenseecanengageinanyotherbusinesswithpriornoticetotheappropriatecommission(Section51,ElectricityAct).

Regulatoryauthorities
Seebox,Theregulatoryauthorities.

Electricitycompanies
Maincompanies

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3.Whatarethemaincompaniesinvolvedinelectricitygeneration,transmission,distributionandsupplyinyourjurisdiction?

Generation
ThemaincompaniesinvolvedinelectricitygenerationaretheNationalThermalPowerCorporation,NationalHydroPowerCorporation,
DamodarValleyCorporation,GMREnergy,TorrentPower,EssarPower,TataPower,ReliancePower,AdaniPower,LancoPowerand
JaypeePowerVentures.

Transmission
ThemaincompaniesinvolvedintransmissionarethePowerGridCorporationofIndia(CTU),STUs(suchasDelhiTransco),Powerlinks
TransmissionPvt,KalpataruPowerTransmission,SterliteTechnologiesandIsoluxInfrastructures.

Distributionandsupply
ThemaindistributionandsupplycompaniesincludeTataPower,BSESRajdhaniPowerandBSESYamunaPower.

Foreignownership
4.Arethereanyrestrictionsconcerningtheforeignownershipofelectricitycompaniesinyourjurisdiction?
TheForeignDirectInvestment(FDI)PolicyofIndiaallowsupto100%investmentinthepowersector(exceptatomicenergy)underthe
automaticroute(thatis,wherespecificapprovalofthegovernmentfortheinvestmentisnotrequired).Thisincludesgeneration,
transmissionanddistributionofelectricity,aswellaspowertrading.

Importofelectricity
5.Towhatextentiselectricityimportedinyourjurisdictionandarethereinterconnectionissues?
ElectricalenergyisarestricteditemforimportsandaspecificlicencemustbeobtainedfromtheDirectorGeneralofForeignTrade
(DGFT)(IndianForeignTradePolicy(issuedundertheForeignTrade(DevelopmentandRegulation)Act1992)).Inaddition,anentity
importingelectricityrequiresatradinglicence.Indiadoesnotimportasubstantialamountofelectricityand3,900MWwasimportedin
ApriltoSeptember2012.Thegenerationtargetfor2012to2013forimportsfromBhutanis5,480MW.
InIndia,thePowerTradingCorporation(PTC)isthemainagencyappointedtoimportpower(currentlyfromNepalandBhutan).
Therefore,theauthorityoftheentityimportingpowerintoIndiaandresponsiblefortransmissionofelectricityfromthedeliverypointto
theclosestgridneedsconsideration.Inaddition,thenorms/guidelinesfortransmissionofelectricity,injectionsintothegridinIndiaand
theexportingcountry,mustbeexaminedtoensurethatthetwocanbecoordinated/paralleledtoavoidconflicts,andsoon.

Electricitygenerationandrenewableenergy
Sourcesofelectricitygeneration
6.Whatarethemainsourcesofelectricitygenerationinyourjurisdiction,excludingrenewablesources?
Themainsourcesofthetotal185,895.58MWofelectricitygenerationareasfollows:
Coal:120,873.38MW(65.02%).
Gas:18,903.05MW(10.16%).
Oil:1,999.75MW(1.07%).
Hydro:39,339.40MW(21.16%).
Nuclear:4,780.00MW(2.57%).

7.Arethereanyplanstobuildnewnuclearpowerstationsinyourjurisdiction?

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TheAtomicEnergyAct1962governsthedevelopmentandregulationofnuclearenergy.Theprojectscurrentlyunderconstructioninclude
thenuclearpowerplantsofKoodankulaminTamilNadu,JaitapurintheMaharashtraandRawatbhatainRajasthan.
PostFukushima,thereweremassprotestsagainsttheFrenchbacked9,900MWJaitapurNuclearPowerProjectinMaharashtraandthe
2,000MWKoodankulamNuclearPowerPlantinTamilNadu.Therehasbeenamixedresponsetonuclearpower,postFukushima,atthe
statelevel.Forexample,thestateofWestBengalrefusedpermissiontoaproposed6,000MWfacilitynearthetownofHaripurthat
intendedtohostsixRussianreactors.However,developmentoftheKoodankulamnuclearpowerplantinTamilNaducontinues,despite
massprotests.
Also,postFukushima,aPublicInterestLitigation(PIL)againstthegovernment'scivilnuclearprogrammewasfiledwiththeSupreme
Court(currentlypending).Thepetitionwasfiledwitharequesttocancel"clearancesgiventoproposednuclearpowerplantsandstaying
allproposednuclearpowerplants"untilsatisfactorysafetymeasuresandcostbenefitanalysesarecompletedby"independent"
agencies.

Authorisationandoperatingrequirements
8.Whataretheauthorisationrequirementstoconstructelectricitygenerationplants?
Thefollowingaddressesonlythecentralauthorisations/approvals.Otherstatespecificapprovals(dependingonthelocationofthepower
plant)mayalsoberequired.

Environmentpermitspriortoconstruction
Theauthorisationsgenerallyrequiredforconstructingapowerplantinclude:
EnvironmentalclearancefromtheMinistryofForestandEnvironment(MOEF)beforethepowerplantissetup(EIANotification2006).
Environmentalclearanceisnotrequiredforasolarpowerproject.
Consenttoestablishfromtherespectivestatepollutioncontrolboard(Water(PreventionandControlofPollution)Act1974andAir
(PreventionandControlofPollution)Act1981).
Forestclearance,ifforestlandistobeusedfornonforestrypurposes(Forest(Conservation)Act1980).
Licencesforusageandstorageoffueloilstoragetanks,explosiveandinflammableliquids,andchemicalsunderboththe:
ExplosivesAct1884readwithExplosivesRules2008and
PetroleumAct1934readwithPetroleumRules2002,ifapplicable.
Coastalregulatoryzoneclearance,iftheprojectfallswithinthecoastalregulatoryzone(EnvironmentProtectionAct1986andCoastal
RegulationZoneRegulations).
Approvalforuseofboilers(IndianBoilersAct1923).
Authorisationforstorageofhazardouswaste(HazardousWaste(ManagementandHandling)Rules1989).

Labourpermits
Thelabourpermitsrequiredinclude:
RegistrationundertheBuildingsandotherConstructionWorkers(RegulationofEmploymentandConditionsofService)Act1996.
RegistrationoftheproposeddesignandconstructionofthepowerplantundertheFactoriesAct1948.
Registrationofallforeignnationalsemployedforconstruction/supervisionactivitiesfortheprojectundertheRegistrationofForeigners
Rules1992.
Ifcontractlabouristobeemployedattheprojectsiteforconstructionactivitiesacertificateofregistrationmustbeobtainedfromthe
relevantLabourDepartmentundertheContractLabour(RegulationandAbolition)Act1970.
Ifacertainpercentageofworkershavebeenhiredfromoutsidethestatewherethepowerprojectislocated,thegeneratingcompany
mustacquirearegistrationundertheInterStateMigrantWorkmen(RegulationofEmploymentandConditionofService)Act1979.

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Inadditiontotheseapprovals,registrationmayberequiredundertheEmployees'ProvidentFundsandMiscellaneousProvisionsAct
1952,PaymentofGratuityAct1972,MaternityBenefitAct1961,EmployeeStateInsuranceAct1948,andsoon.

Landandconstruction
Theapprovals/permitsrequiredforlandandconstructioninclude:
Foracquisitionofland,theapprovals/permitsrequireddependonthetypeofland(thatisgovernmentrevenueland,forestland,
agriculturallandorprivatelyheldland).Ifthelandwheretheprojectistobesituatedisforestland,thenapprovalsmayberequired
undertheIndianForestAct1927fromMOEF,andsoon.Foragriculturalland,approvalsmayberequiredforusingagriculturallandfor
nonagriculturalpurposes,andsoon.
Anoobjectioncertificate(NOC)fromGramPanchayat(villagelevelentity)mayberequiredfordevelopmentofthepowerproject
(dependingonthelocationoftheproject).
Anapprovalforuseofwaterforthepowerplant(groundwaterorseawater).
AnNOCfromtheMinistryofDefenceifthepowerprojectislocatednearaninternationalborderoranairforcebase.
ACivilAviationClearancefortheheightofthechimney(CivilAviationAct2000).
Anallocation/approvalofelectricsupplyforbulkconstructionpowersupply.
Anapproval/NOCinaccordancewiththeElectricityActfromtheChiefElectricalInspectoroftherespectivestateforplantlayoutfor
electricalequipmentoperationalsafety.
AdherencetotheCEA(TechnicalStandardsforConstructionofElectricalPlantsandElectricalLines)Regulations2010whilebuilding
thepowerplant.
AdherencetotheCEA(SafetyRequirementsforConstruction,OperationandMaintenanceofElectricalPlantsandElectricalLines)
Regulations2011whilebuildingthepowerplant.
PriorconcurrenceoftheCEA(onlyforhydropower)mayberequired(Section8,ElectricityAct).
AnImportExportCodeisrequiredforimportofequipmentforthedevelopmentofthepowerproject(ForeignTrade(Developmentand
Regulation)1992).

9.Arethereanyrequirementstoensurenewpowerstationsarereadyforcarboncaptureandstorage(CCS)technology,or
requiringaplanttoretrofitCCtechnologyoncethisisready?
Currently,therearenoCCSrequirementsforpowerplants.Indiahasdecidedtoadoptalowcarbongenerationstrategytoreduceenergy
intensityandpromotesustainabledevelopment.Someofthestepsbeingtakentoachievethisaiminclude:
Harnessingofrenewableresourcestotheextentpossible.
Promotionofhydroandnucleargeneration.
Enhancingefficiencyoftheexistingpowerplants.
Creatingindigenousmanufacturingcapacityforsupercriticalequipmentsuchasboilersandturbinesthatoperateathigher
temperaturesresultinginhigherefficiency.
CCSisconsideredaprimarytechnology,however,itisdifficulttostorecarbonandCCSis,amongotherthings:
Energyintensive.
Expensive.

10.Whataretheauthorisationrequirementstooperateelectricitygenerationplants?
Themainauthorisationstooperateelectricitygenerationplantsinclude:
Approvalforageneratorfromtheappropriateregulatorycommission(CERC/SERC)forthetariff.

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ConsenttooperateundertheWater(PreventionandControlofPollution)Act1974andAir(PreventionandControlofPollution)Act
1981fromtherespectivestatepollutioncontrolboards.
Approvalbytherelevantstatetransmissionlicensee/distributionlicenseeforthepowerevacuationarrangementsandgridinterfacing
planfortheproject.
Compliancewithongoinglabourandenvironmentapprovals.Mostapprovals(seeQuestion8)generallyprovideforavalidityperiod
andfollowingtheexpiryofthevalidityperiodneedtoberenewedduringtheoperationofthepowerplant.
AdherencetoCERC(IndianElectricityGridCode)Regulations2010andCEA(GridStandards)Regulations2010.

11.Whatarethemainongoingrequirements?
SomeofthemainongoingsafetyrequirementsaresetoutintheCEA(SafetyRequirementsforConstruction,OperationandMaintenance
ofElectricalPlantsandElectricalLines)Regulations2011andtheCEA(MeasuresrelatingtoSafetyandElectricSupply)2010.
Conditionsthatmustbecompliedwithinaccordancewiththeseregulationsinclude:
ObtainingaccreditationofelectricplantsandlineswithIS18001certificationwithintwoyearsoftheconstructioncommencement
date.
Settingupasoundandscientificsafetymanagementsystemto:
includeasafetymanualandanemergencymanagementplan,forexampleand
identifyhazardsthatcouldgiverisetoinjury,impairment,andsoon.
Appointingasafetyofficer.
ReportingaccidentsandoutagestotheCEA.
Settingupmedicalfacilitiesatthepowerplant.

12.Whatrequirementsarethereconcerninginterconnectionofgenerationtothetransmissiongrid?
Generatingcompaniesmust:
GetapprovalfromCTU/STUforaccesstothetransmissionsystem,interconnectiontothegrid.
EnterintoaconnectivityagreementwiththeCTU(forconnectiontotheinterstatetransmissiongrid)ortherespectiveSTU(for
connectiontotheintrastatetransmissiongrid).ThismustbedoneinaccordancewithCERC(GrantofConnectivity,Longterm
AccessandMediumtermOpenAccessinInterStateTransmissionandrelatedmatters)Regulations2009orundertherelevant
SERCregulations.

Renewableenergy
13.Arerenewablesourcesusedtogenerateelectricityinyourjurisdiction?
RenewableenergyisanimportantfocusoftheIndianGovernment.Themainsourcesofrenewableenergyarewind,solar,biopower
(biomasspower,bagassecogeneration(fibrousmatterthatremainsaftercrushingsugarcaneorsorghumstalks),urbanandindustrial
wastetoenergy)andsmallhydro.Currently,renewablesourcescontributeabout12.25%ofthetotalelectricitygeneratedasfollows:
Wind:69.9%.
Smallhydro:15.7%.
Biopower:14.2%.
Solar:0.2%.

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14.Aretheregovernmentpoliciesand/orincentivesinplacetoencouragetheuseofrenewableenergy?

Governmentpolicies/incentives
Thepolicymeasuresinplacetoencouragetheuseofrenewableenergyinclude:
TheElectricityActwhich,amongotherthings,providesforwaystoacceleratethedevelopmentofrenewablesourcesofenergyas
follows:
thecentralgovernmentinconsultationwiththestategovernmentmustformulateaNationalElectricityandTariffPolicybasedon
optimalutilisationofresourcesincludingrenewablesourcesofenergy(Section3,ElectricityAct)
theSERCsfunctionswillincludepromotingcogenerationandgenerationofelectricityfromrenewablesourcesofenergy(Section
86,ElectricityAct).
ThecentralgovernmenttopromotesolarpowergenerationframedtheJawaharlalNehruNationalSolarMission(JNNSM).The
objectiveofJNNSMistoestablishIndiaasagloballeaderinsolarenergybycreatingpolicyconditionsforitsdiffusionacrossthe
country.
Inadditiontothenationalpolicies,thestateshavetheirownpoliciestoencouragetheuseanddevelopmentofrenewableenergy,
includingforexample,theMadhyaPradeshStateSolarPolicy2012,theGujaratSolarPolicy2009andtheGujaratWindPowerPolicy
2007.
Theincentivesprovidedunderthesepoliciesandotherrelevantlegislationinclude:
Feedintariffs.SERCsmustsetpreferentialtariffsforprocurementbydistributioncompaniesofpowergeneratedfromrenewable
energysources(TariffPolicy2006).CERChasalsoissuedthelevellisedtariffforrenewableprojects(thatis,theaveragefixedand
variabletariffovertheentiretermofthePowerPurchaseAgreementadjustedforinflation).Thegenericlevellisedtariffforsolar
projectsare(CERC(Termsandconditionsfortariffdeterminationfromrenewableenergysources)Regulations2012):
solarPV:uptoINR10.39/kWhwithoutclaimingaccelerateddepreciationandINR9.35/kWhafterclaimingaccelerateddepreciation
and
solarthermalprojects:INR12.46/kWhwithoutclaimingaccelerateddepreciationandINR11.22/kWhafterclaimingaccelerated
depreciation.
Accelerateddepreciation.Generatingcompaniescanavailofaccelerateddepreciation,whichallowsgreaterdeductionsintheearlier
yearsofthelifeofanasset.Thisallowsdeveloperstoreducetaxableprofits(Section32,IncomeTaxAct).Thisbenefitisnot
availableifthegeneratoravailsofthegeneratorbasedincentiveandmaybewithdrawnwiththeproposeddirecttaxcodecominginto
effect.
Generationbasedincentives.Outputorientedincentivesarealsogiven.Forexample,forwindenergy,aGenerationBasedIncentive
(GBI)ofINR0.50perunitofelectricityoverandabovethetariffapprovedbySERCisallowed.
Customsandexcisedutyexemption.Customsdutyexemptionisgrantedtosolarprojectdevelopersforimportingequipment
requiredfortheinitialsettingupofasolarpowerproject,subjecttocompliancewithcertainprescribedconditions.Also,specified
renewableenergyequipment(forexample,solarPVmodulesandwaterpumpingwindmills)isgrantedexcisedutyexemptionunder
section5A(1)oftheCentralExciseAct1944.
Cleandevelopmentmechanism(CDM)benefits.Theemissionreductionprojects(forexample,renewableenergyprojects)in
developingcountriesareentitledtoearncertifiedemissionreductions.Revenuegeneratedfromthesaleofcertifiedemission
reductionshascreatedapotentialmarketforsignificantadditionalcapacityinrenewableenergybasedprojects.

Renewableenergytargets
Topromotegenerationofelectricityfromrenewableresources,theSERCsmustfixaminimumpercentageforpurchaseofenergyfrom
renewableenergysourcesinthedistributionlicensee'sarea(Section86(1)(e),ElectricityActClause5.12.2,NationalElectricityPolicy
2005andClause6.4,TariffPolicy2006).RenewableEnergyCertificates(RECs)areissuedinaccordancewithCERC(Termsand
ConditionsforrecognitionandissuanceofRECsforRenewableEnergyGeneration)Regulations2010.Thesearevalidinstrumentsfor
thedischargeofrenewablepurchaseobligations.

15.Whatarethemainobstaclestothedevelopmentofrenewableenergyinyourjurisdiction?
Themainobstaclestothedevelopmentofrenewableenergyinclude:

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Lackofcoordinatedpolicy.Renewableenergydevelopmenthasbeenlargelydrivenbyseparateandnotfullycoordinatedcentral
andstatepolicies.
Projectfinancing.Securingtimelyfinancingfortheprojectshasbeenoneofthemainchallengesforthissector.Higherinterestrates
andshorterloantermshasincreasedthecostofpowerprojects.
Highinvestmentcost.Projectsinthissectorarecapitalintensiverequiringhighcapitalinvestment.Inaddition,decliningtariffsprove
tobeachallenge.
Lackofinfrastructure.Inadequateevacuationinfrastructureandgridinterconnectionsareoneofthebiggestbarrierstoharnessing
renewableenergypotential.
Renewablepurchaseobligations(RPO)enforcement.Currently,theenforcementofRPOsacrossstatesisinconsistentanda
numberofstatedistributionutilitieshavefailedtohonourtheirRPOs.
RECregime.TheRECmarkethasnotbeensuccessfultodate.

Electricitytransmission
Authorisationandoperatingrequirements
16.Whataretheauthorisationrequirementstoconstructelectricitytransmissionnetworks?
Themaincentralauthorisationstoconstructelectricitytransmissionnetworksinclude:
LicencetoengageintheactivityofinterstatetransmissioninaccordancewithCERC(Procedure,TermsandConditionsforgrantof
TransmissionLicenceandotherrelatedmatters)Regulations2009.Ifthetransmissionisproposedtobeintrastatethenthelicence
mustbeobtainedinaccordancewiththerelevantSERC'sregulations.
AdherencetotheCEA(TechnicalStandardsforConstructionofElectricalPlantsandElectricalLines)Regulations2010whilebuilding
thetransmissionsystemandlayingelectricallines.
AdherencetotheCEA(SafetyRequirementsforConstruction,OperationandMaintenanceofElectricalPlantsandElectricalLines)
Regulations2011whilebuildingthetransmissionsystemandlayingelectricallines.
AdherencetotheWorkofLicenseesRules2006.
Approvalfromcentralorstategovernmentforplacingoverheadtransmissionlines(Section68,ElectricityAct).
ClearancefromIndianRailways(inaccordancewiththeRegulationforElectricalCrossingofRailwayTracks1963)forpowerlines
crossingrailwaytracks.
Labourapprovalsmayalsoberequired(seeQuestion8).

17.Whataretheauthorisationrequirementstooperateelectricitytransmissionnetworks?
Atransmissionlicensee:
Requiresapprovalfromtheappropriateregulatorycommission(CERC/SERC)forthetariff.
MustadheretoCERC(IndianElectricityGridCode)Regulations2010andCEA(GridStandards)Regulations2010.
MustcomplywithdirectionsthatmaybeissuedbytheNationalLoadDespatchCentre,theRegionalLoadDespatchCentreorthe
StateLoadDespatchCentretoensureavailabilityofthetransmissionsystemismaintained(Rule5,ElectricityRules2005).

18.Whatarethemainongoingrequirements?
SeeQuestion11.

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Rates
19.Howaretheratesandconditionsforthetransmissionofelectricityregulated?
ThetransmissionlicenseemustmakeanapplicationtotheCERCortheSERC(asrelevant)tofixthetariff.TheCERCregulatesthe
tariffforinterstatetransmissionofelectricitythroughCERC(TermsandConditionsofTariff)Regulations2009.TheseCERCregulations
arealsoaguidingfactorforSERCswhentheydeterminethetariffforintrastatetransmission.
Therelevantcommissionisguidedbythefollowingprinciples,amongotherthings(Section61,ElectricityAct):
Generation,transmission,distributionandsupplyofelectricityareconductedoncommercialprinciples.
Thefactorsthatencouragecompetition,efficiency,economicaluseofresources,goodperformanceandoptimuminvestments.
Safeguardingconsumers'interestandalsoensuringrecoveryofthecostofelectricityinareasonablemanner.
Incorporatingprinciplesthatrewardefficiencyinperformance.
Multiyeartariffprinciples.
Privatecompaniesthatarenotgeneratingcompaniessettingupdedicatedtransmissionlines,aregrantedatransmissionlicenceonlyif
theyareselectedthroughcompetitivebiddinginaccordancewithCERC(Procedure,TermsandConditionsforgrantofTransmission
Licenceandotherrelatedmatters)Regulations2009.Ifanentityisgrantedatransmissionlicenceduetoparticipationinthebidding
process,thetariffquotedasapartofthebidisadoptedbytheCERC.

Electricitydistribution
Authorisationandoperatingrequirements
20.Whataretheauthorisationrequirementstoconstructelectricitydistributionsystems?
Themaincentralauthorisationstoconstructelectricitydistributionsystemsinclude:
Adistributionlicenceundersection14oftheElectricityActinaccordancewiththerelevantregulationsissuedbytheSERCfor
grantingdistributionlicences.
AdherencetotheCEA(TechnicalStandardsforConstructionofElectricalPlantsandElectricalLines)Regulations2010whilebuilding
thedistributionsystem.
AdherencetotheCEA(SafetyRequirementsforConstruction,OperationandMaintenanceofElectricalPlantsandElectricalLines)
Regulations2011whilebuildingthedistributionsystem.
AdherencetotheWorkofLicenseesRules2006.
Labourapprovalsmayalsoberequired(seeQuestion8,Labourpermits).

21.Whataretheauthorisationrequirementstooperateelectricitydistributionsystems?
AdistributionlicenseerequiresapprovalfromtheappropriateSERCforretailsaleofelectricitytariffs.
ThedistributionlicenseemustcontinuouslycomplywiththeelectricitysupplycodeissuedbytheSERC(Section50,ElectricityAct),
which,amongotherthings,providesfor:
Recoveryofelectricitycharges.
Disconnectionofsupplyfornonpayment.
Measuresforpreventingtampering.

22.Whatarethemainongoingrequirements?

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SeeQuestion11.

23.Howaretheratesandconditionsforthedistributionofelectricityregulated?
Thedistributionlicenseemustmakeanapplication(intheformofapetition)totheappropriateSERCtofixatariff.Thepublic(end
consumer)hasarighttoraiseobjectionstothispetition.ThedistributiontariffisdeterminedbytherelevantSERCinaccordancewiththe
principlesandmethodsprescribedbyit(Section45(2),ElectricityAct).TheSERCisguidedbytheprinciplessetoutinsection61ofthe
ElectricityAct(seeQuestion19).

Electricitysupply
Authorisationandoperatingrequirements
24.Whataretheauthorisationrequirementstosupplyelectricitydistributionsystems?
TheElectricityActdoesnotmakeadistinctionbetweendistributionandretailsupplyofelectricity.Forauthorisationrequirementsto
constructelectricitydistributionsystemsseeQuestion20.

25.Whatarethemainongoingrequirements?
SeeQuestion21.

Tradingbetweengeneratorsandsuppliers
26.Howiselectricitytrading(betweengeneratorsandsuppliers)regulated?
AnyonewishingtotradeinelectricitymustobtainatradinglicencefromCERC(ifinterstatetradingisproposed)andSERCs(ifonly
intrastatetradingisproposed).Theprocedureforobtainingthetradinglicence,andthetermsandconditionsofthetradinglicenceare
regulatedbyCERC(Procedure,TermsandConditionsforgrantofTradingLicenceandotherrelatedmatters)Regulations2009.The
holderofaninterstatetradinglicencegrantedbyCERCcanalsoengageinintrastatetradingofelectricitywithoutneedofaseparate
licenceforsuchtransactions(Rule9,ElectricityRules2005).
CERCisempoweredtofixthetradingmarginforinterstatetradingofelectricity(Section79(i)(j),ElectricityAct).CERC(Fixationof
TradingMargin)Regulations2010(MarginRegulations)regulatethesalepricesofatradinglicenseetoadistributionlicensee.TheMargin
Regulationsonlyapplytoshorttermcontractsforinterstatesaleofelectricity(thatis,foraperiodlessthanoneyear)bytheholderofan
interstatetradinglicencegrantedbytheCERC.Intrastatesaleofelectricitybytheholderofaninterstatetradinglicencegrantedby
CERCisnotgovernedbytheMarginRegulationshowever,intrastatetradingissubjecttoregulationbytheSERCs.SERCsare
empoweredtofixthetradingmarginforintrastatetradingofelectricity(Section86(i)(j),ElectricityAct).
TheMarginRegulationsprescribethatthetradingmarginforinterstateshorttermsaleofelectricitymustnotexceed:
INR0.07/kWhifthesalepriceexceedsINR3/kWh.
INR0.04/kWhwherethesalepriceislessthanorequaltoINR3/kWh.
Thismarginincludesallcharges,exceptthechargesforscheduledenergy,openaccessandtransmissionlosses.

Ratesandconditionsofsale
27.Howaretheratesandconditionsofsaleregulatedattheconsumerandwholesalelevel?

Consumer
Forconsumersales,atraderpurchaseselectricityfromageneratorordistributionlicenseeforonwardsaletoendconsumers.Tariffsfor
retailsaleofelectricityaredeterminedbytherelevantcommission(CERCorSERC)(seeQuestion23).

Wholesale

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Saleatwholesaleleveliswhenatraderpurchaseselectricityfromageneratortoselltoadistributionlicensee.Theissueofwhetherany
commission(CERCorSERC)willhavethepowertoregulatethewholesaletariffiscurrentlybeforethecourts.

Taxissues
28.Whatarethemaintaxissuesarisingonelectricity,generation,distributionandsupply?
Theprojectdeveloperneedstoconsidertheallocationofthefollowingtaxes,amongotherthings,withitscontractors(Engineering
ProcurementConstruction(EPC)/OperationandMaintenance(O&M)):
Centralsalestax/VATontheinterstatesaleofgoodsandservicesundertheCentralSalesTaxAct1956.
ServicetaxonanyservicesrenderedorreceivedinIndiainaccordancewiththeFinanceAct1994.
CustomsdutyontheimportofgoodsundertheCustomsAct1962andCustomsTariffAct1975.
Changesintaxissuesmustbeconsideredbytheprojectdeveloper(forexample,iffullpassthroughofadditionalcostsintariffis
allowed,andsoon).

Reform
29.Whatreformproposalsaretherefortheregulationoftheelectricitysector?
Thefollowingareproposedinrelationtoregulationoftheelectricitysector:
Modelstateelectricitydistributionresponsibilitybill.ThecentralgovernmentproposestointroduceamodelStateElectricity
DistributionResponsibilityBill.ThisBillproposestoholdstatedistributionlicenseesaccountableforimplementingthepowerreforms
introducedunderthenewlyapproveddebtrestructuringfinancialpackagefordistributioncompanies.
Dedicatedtransmissionlines.Asgenerationisadelicensedactivity,generationcompaniesthatconstructdedicatedtransmission
linesarenotcurrentlygovernedbytheWorkofLicenseeRules2006applicabletotransmissionanddistributionlicensees.Thereisa
proposaltoamendtheElectricityActsothattheWorkofLicenseeRules2006alsoappliestogenerationcompaniesthatbuild
dedicatedtransmissionlines.
ModelPPAbasedonadesign,build,finance,operateandtransfer(DBFOT)model.TheMoPisintheprocessofrevisingits
standardbiddingdocumentsforprocurementofpowerbydistributionlicensees.InthisregardMoPhadissuedadraftModelPower
PurchaseAgreementforPublicPrivatePartnershipingenerationofelectricityonaDBFOTmodel.Inthisregard,CERChas
suggestedthatthemodelbebasedonabuild,own,operate(BOO)modelratherthanaDBFOTmodel(see
www.cercind.gov.in/2012/Advice_Gov/26oct12.pdf).
Viabilitygapfunding.ThepolicydocumentforPhaseIIoftheJNNSMproposestosubsidisesolarenergyprojectsthroughviability
gapfunding(asanupfrontcapexsubsidy,thatis,asubsidyonthecapitalproposedtobeincurredforsettinguptheproject).Viability
gapfundingisbeingintroducedinthesolarenergysectorforthefirsttime(seehttp://mnre.gov.in/filemanager/UserFiles/draft
jnnsmpd2.pdf).
Suomotorevisionoftariff.Thereisaproposaltoamendsection64oftheElectricityActtoempowertheregulatorycommissions
forsuomotorevisionofconsumertariffs.
Tariffdeterminationbyregulators.Astatedistributioncompanycanprocurepower(ElectricityAct):
throughaMemorandumofUnderstanding(MoU)route(thatis,anegotiatedPPAundersection62oftheElectricityAct)or
byseekingcompetitivebidsfromgenerationcompanies(Section63,ElectricityAct).TheTariffPolicyprovidesthatallfuture
requirementofpowershouldbeprocuredcompetitivelybydistributionlicensees.

TheissueofstatedistributioncompanieshavingthecontinuedrighttodonegotiatedPPAshasbeenlitigated.TheabilitytodoMoUroute
PPAswasupheldattheAPTEL,however,thematteriscurrentlypendingbeforetheSupremeCourt(whichhasnotstayedtheorderof
theAPTEL).Thereisaproposaltoamendsections62and63oftheElectricityActtoclarifythepositioninthisregard.

Theregulatoryauthorities

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MinistryofPower(MoP)
Whttp://powermin.nic.in/JSP_SERVLETS/internal.jsp
Mainactivities.MoPistheumbrellaministryfortheregulationanddevelopmentoftheelectricitysector.

MinistryofNewandRenewableEnergy(MNRE)
Address.Block14,CGOComplex,LodhiRoad,NewDelhi110003
Wwww.mnre.gov.in
Mainactivities.MNREistheumbrellaministryfortheregulationofnewandrenewableenergy.

CentralElectricityRegulatoryCommission(CERC)
Address.3rdand4thFloor,ChanderlokBuilding,36,Janpath,NewDelhi110001
T+911123353503
F+911123753923
Wwww.cercind.gov.in
Einfo@cercind.gov.in
Mainactivities.CERCisresponsiblefor:
Regulatingthetariffofgeneratingstationsownedbythecentralgovernment,orthoseinvolvedingeneratingorsupplyingin
morethanonestate.
Regulatinginterstateelectricitytransmission.
Adjudicatingdisputesbetweengeneratingcompaniesandlicensees.

StateElectricityRegulatoryCommission(SERCs)
EachstatehasitsownSERC.
Wwww.gercin.org(Gujarat)
Wwww.mercindia.org.in(Maharashtra)
Wwww.mperc.nic.in(MadhyaPradesh)
Wwww.derc.gov.in(Delhi)
Wwww.tnerc.tn.nic.in(TamilNadu)
Mainactivities.TheSERCsregulateintrastatetransmissionandsupplyofelectricitywithinthejurisdictionofeachstate.

CentralElectricityAuthority(CEA)
Wwww.cea.nic.in
Address.SewaBhawan,RamaKrishnaPuram,NewDelhi110066
T+911126108889
Mainactivities.TheCEAisresponsibleforthetechnicalcoordinationandsupervisionofprogrammes/policiesandisalso
entrustedwithanumberofstatutoryfunctionsundertheElectricityAct.

AppellateTribunalforElectricity(APTEL)
Whttp://aptel.gov.in
Address.7thFloor,CORE4,ScopeComplex,LodhiRoad,NewDelhi110003
T+1124361518
Mainactivities.APTELhasbeensetupasanappellatebodyforappealsagainsttheordersofthecommissions(CERCand
SERCs).

NationalLoadDespatchCentre

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Wwww.nldc.in
Address.B9,QutabInstitutionalArea,NewDelhi
T+911126536832
Mainactivities.TheNationalLoadDespacthCentreschedulesanddespatcheselectricityoverinterregionallinksinaccordance
withgridstandards.

RegionalLoadDespatchCentre
Wwww.nrldc.org
Wwww.erldc.org
Wwww.nerldc.org
Wwww.srldc.org
Wwww.wrldc.com
Mainactivities.Eachregion(northern,eastern,northeastern,southernandwestern)hasitsownregionaldespatchcentre,which
isresponsiblefortheintegratedoperationofthepowersysteminitsownregion.

Onlineresources
Wwww.powermin.nic.in
Description.MoP'swebsitecontainsinformationaboutgeneration,distribution,transmissionandtradingstatisticandallrelevant
legislation(CentralActs).
Wwww.mnre.gov.in
Description.MNRE'swebsitecontainsinformationaboutnewandrenewableenergyinIndia,andallpolicies,schemes,notifications,
andsoon,forrenewableenergy.
Wwww.cea.nic.in
Description.CEA'swebsitecontainsthelatestinformationaboutthetechnicaldetailsoftheIndianElectricitySector.Italsocontains
therelevantregulations/guidelinesissuedbytheCEA.
Wwww.cercind.gov.in
Description.TheCERC'sofficialwebsitecontainsthepoliciesissuedundertheElectricityAct.Itcontainsallexisting,repealedand
draftregulations,andtariffordersissuedbytheCERC.Thewebsiteisperiodicallyupdated.
Wwww.gercin.org
Description.OfficialwebsiteoftheSERCofGujarat.
Wwww.derc.gov.in
Description.OfficialwebsiteoftheSERCofDelhi.
Whttp://dipp.gov.in
Description.TheDepartmentofIndustrialPolicyandPromotionwebsitecontainsinformationaboutFDIPolicyandenablingstatutes.
Wwww.dgft.gov.in
Description.TheDGFTwebsitecontainsinformationaboutForeignTradePolicyandenablingstatutes.
Wwww.dae.gov.in
Description.TheDepartmentofAtomicEnergywebsitecontainsinformationaboutnuclearpowerinIndia.
Whttp://labour.nic.in/content
Description.TheMinistryofLabourandEmploymentwebsitecontainsthetextofallrelevantlabourlegislationinIndia.
Whttp://envfor.nic.in
Description.TheMOEFwebsitecontainsthetextofallrelevantlabourlegislationandnotificationinIndia.
Whttp://aptel.gov.in
Description.TheAPTELwebsitecontainsordersandjudgmentspassedbyit.

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Environment,PLCUKLawDepartment,PLCUKTax,PLCUSLawDepartment
Series:CountryQ&A

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