Powering Progress: A round-up of policy and regulatory developments in the sector

A round-up of policy and regulatory developments in the sector

Over the past year, the power sector witnessed considerable activity, particularly on the policy front. Most notably, NITI Aayog released the draft of the National Electricity Policy in June 2017, broadly setting a new agenda consistent with the emerging developments in the energy space. The policy anticipates major transformation in energy demand and supply owing to evolving technology, consumer behaviour and air quality considerations. It also projects that the share of solar and wind will reach 14-18 per cent and 9-11 per cent, respectively, in the electricity mix, and 3-5 per cent and 2-3 per cent, respectively, in the primary commercial energy mix by 2040.

Further, the government’s commitment to electrify all households and focus on targeting electricity access at the household level was strengthened by the launch of the Sahaj Bijli Har Ghar Yojana (Saubhagya). The electric

mobility space too received an impetus with the launch of the National E-mobility Programme. Recently, the Ministry of Power (MoP) launched a pilot scheme for centralised medium-term power procurement, thereby improving the power demand outlook. These policy movements have been complemented by a well-defined regulatory framework defined by the Central Electricity Regulatory Commission (CERC) which amended key regulations.

Key policy measures

Saubhagya: In September 2017, the government introduced the Saubhagya scheme, with the aim of electrifying all households by December 2018, and designated the Rural Electrification Corporation as the nodal agency for the scheme. About 60 per cent of the funds for the Rs 163.2 billion scheme will come from central grants, 30 per cent from bank loans and the remaining 10 per cent from states. Of the total outlay, Rs 140.25 billion will be directed to rural areas. Since October 2017, 12.15 per cent of the unelectrified households have been electrified. Under the scheme, all states and union territories (UTs) are required to complete household electrification by March 31, 2019.

Focus on electric vehicles (EVs): In April 2018, the MoP released a notification eliminating the need for obtaining a licence for setting up charging infrastructure for EVs. This is expected to encourage private participation in the electric charging space. Earlier, in March 2018, the MoP launched the National E-Mobility Programme to provide an impetus to the e-mobility ecosystem. The programme will be implemented by Energy Efficiency Services Limited (EESL), which will procure EVs in bulk. Post the announcement of the programme, EESL issued a new tender for the procurement of 10,000 EVs. It had previously (in November 2017) successfully completed the tendering for 10,000 electric cars, which are (being jointly supplied by Tata Motors and Mahindra & Mahindra).

Distribution reforms: In November 2017, Nagaland, the Andaman & Nicobar Islands, Dadra & Nagar Haveli, and Daman & Diu joined the Ujwal Discom Assurance Yojana (UDAY), thereby increasing the coverage of the scheme. Later, in February 2018, Lakshadweep also joined the scheme. With this, 27 states and 5 UTs are a part of UDAY. Another key policy initiative in the distribution segment was the issuance of guidelines in April 2018 for the centralised procurement of 2,500 MW of power for three years from stressed projects. As per the guidelines, PTC India will sign three-year power purchase agreements with successful bidders and enter into contracts with the discoms to sell the electricity. The competitive bidding for the pilot scheme will be conducted by PFC Consulting, a subsidiary of the Power Finance Corporation. Earlier, in August 2017, the MoP had issued a consultation paper on open access with the objective of addressing the grievances of open access consumers, power sellers and distribution licensees.

Methodology for the auction of coal mines/ blocks: In February 2018, the government approved the methodology for the auction of coal mines/blocks for the sale of coal under the Coal Mines (Special Provisions) Act, 2015, and the Mines and Minerals (Development and Regulation) Act, 1957. This is a landmark decision which will allow private players to actively participate in commercial coal mining.

Launch of National Wind-Solar Hybrid Policy: In May 2018, the government launched the National Wind-Solar Hybrid Policy with the objective of formulating a framework for the promotion of large grid-connected wind-solar photovoltaic hybrid systems. The policy provides flexibility in the share of solar and wind components in hybrid projects, given that the rated power capacity of one resource is at least 25 per cent of the rated power capacity of the other. The move is expected to result in efficient utilisation of transmission infrastructure and land, along with improving grid stability through a reduction in renewable power generation variability.

Launch of the International Solar Alliance (ISA): In December 2017, the ISA became an international inter-governmental organisation, with 46 countries signing the framework agreement and 19 countries ratifying it. The Indian initiative was jointly launched by India and France in Paris, on the sidelines of COP 21, the United Nations Climate Change Conference.

New coal pricing policy and other updates: In January 2018, Coal India Limited (CIL) announced its new pricing policy. The policy, which involves selling coal on the basis of total energy content in each consignment, is likely to reduce the cost of power production and, consequently, electricity tariffs. Coal blocks with a higher calorific value will command higher prices and vice versa. However, the methodology has attracted criticism from a few sections for not accounting for the moisture content in the calculation. In August 2017, CIL conducted the first round of auctions under the Scheme for Harnessing and Allocating Koyla Transparently in India. In the first round, coal linkages aggregating 27.18 million tonnes per annum were booked by 10 power plant developers including Adani Power Limited, GMR Energy Limited and KSK Energy Ventures Limited.

Stressed assets-related developments: In March 2018, the Standing Committee on Energy released a report which categorised 34 thermal projects (with a capacity of over 40 GW) as non-performing assets or financially stressed assets. As per the report, around 24.4 GW of commissioned projects and 15.7 GW of upcoming projects with an aggregate outstanding debt of almost Rs 1,744 billion are currently stressed. These assets include projects of major private players such as Adani Power, Essar Power, Lanco Infratech and Jaypee Power. Earlier, in February 2018, the Reserve Bank of India released new guidelines for addressing the issue of stressed assets. As per these guidelines, stressed assets will be classified as special mention accounts based on the number of days (1-90) for which the principal, interest payment or any other amount is wholly or partly overdue. Once a default occurs in accounts with an aggregate exposure of Rs 20 billion and above, banks are required to initiate a “resolution plan” within 180 days of the default. If a resolution plan for such large accounts is not implemented, then the lenders are required to file an insolvency application under the Insolvency and Bankruptcy Code, 2016, within 15 days.

Nuclear development: On the nuclear front, the biggest development was the government’s approval and financial sanction for the construction of 12 nuclear power reactors in February 2018. Of the 12 reactors, 10 will be indigenous pressurised heavy water reactors (PHWRs) with a capacity of 700 MW each whereas the remaining two will be light water reactors (LWRs). The two LWRs aggregating 1,000 MW will be set up at Kudankulam in Tamil Nadu. Further, two PHWRs each will be set up in Madhya Pradesh, Karnataka and Haryana, while four PWHRs will be installed in Rajasthan.

Key regulatory measures

Waiver of ISTS transmission losses and charges: In February 2018, the MoP extended the waiver of interstate transmission charges and losses for solar and wind projects commissioned till March 31, 2022. Earlier the waiver was applicable for solar projects commissioned till December 31, 2019 and wind projects commissioned till March 31, 2019. The waiver will be applicable for 25 years from the date of commissioning of such projects awarded through competitive bidding.

CERC modifies REC procedures: In March 2018, the CERC modified renewable energy certificate (REC) procedures in accordance with the CERC (Terms and Conditions for Recognition and Issuance of Renewable Energy Certificate for Renewable Energy Generation) (Fourth Amendment) Regulations, 2016. The procedures will be applicable to all grid-connected projects engaged in the generation of electricity from renewable sources.

The CERC’s report on national frequency: In November 2017, the CERC released an expert group report that suggested measures for bringing power system operations closer to the national reference frequency. The report has suggested several measures to ensure frequency control such as considering 50 Hz as the reference frequency, and monitoring system inertia at the regional and national level.

Communication system regulations: In April 2018, the Central Electricity Authority (CEA) notified the draft Technical Standards for Communication System in Power Sector Regulations, 2018. The proposed regulations aim to ensure seamless integration, and reliable and secure communication in the sector. Comments on the draft regulations can be furnished till May 26, 2018. In addition, the CEA has notified draft amendments to the Technical Standards for Connectivity below 33 kV Regulations, 2013, and draft Safety Provisions for Electric Vehicle Charging Stations.

CEA issues FGD perspective plan: In June 2017, the CEA released a region-wise implementation plan for the installation of flue gas desulphurisation (FGD) systems across the country which envisages the installation of FGD systems across coal-based plants aggregating 122 GW capacity. The plan has also identified 72 GW of plants that cannot install FGD systems owing to space constraints, and  can thus be phased out. FGD systems will be installed in 295 units aggregating 122.6 GW. As per estimates, the pre-installation activities will take three years and the installation of FGD systems will begin in January 2020.


On the whole, the sector witnessed several important policy and reform measures which are expected to pave the path for significant developments in the near future. The policy and regulatory movements are representative of the government’s endeavour to achieve its target of 24×7 quality power for all.