Recent Developments

The past year was marked by a number of key developments across the power sector. There were concerted efforts towards addressing the stressed assets issue in the generation segment with the approval of the high-level empowered committee (HLEC) recommendations and measures for reviving the hydropower segment. Also, in a significant step to address the issue of mounting discom dues, the Ministry of Power (MoP) approved the proposal to make it mandatory for distribution licensees to open and maintain an adequate letter of credit as a payment security mechanism.

Indian Infrastructure takes a look at the recent developments in the sector…


  • In April 2019, the Supreme Court set aside the Reserve Bank of India’s (RBI) circular dated February 12, 2018, for the resolution of stressed assets. The circular required banks to compulsorily implement a plan for debt resolution in a time-bound manner or refer the borrowers under the Insolvency and Bankruptcy Code. Subsequently, in June 2019, RBI issued a new framework for the resolution of bad loans, increasing the period to implement a resolution from 180 days to 365 days and offering a 30-day gap for stress recognition.
  • In March 2019, the cabinet approved a slew of measures for the hydropower segment, including classifying large hydropower projects (over 25 MW) under renewable energy as well as rationalising hydro tariffs. Further, hydro purchase obligations will be notified as a separate category under non-solar renewable purchase obligations. Tariff rationalisation measures include providing flexibility to developers to determine tariffs by backloading tariffs after increasing the project life to 40 years, increasing the debt repayment period to 18 years and introducing a tariff escalation of 2 per cent. Budgetary support has been provided for funding the flood moderation component of hydropower projects on a case-to-case basis.
  • Also, in March 2019, the cabinet approved the recommendations of the HLEC regarding the resolution of stressed thermal power plants (TPPs). The cabinet approved the grant of linkage coal for short-term power purchase agreements (PPAs), as against the earlier norms of granting coal linkages only to those TPPs that have medium/long-term PPAs. In addition, generators have been allowed to terminate PPAs in case of payment defaults by discoms, and use the existing coal linkage to generate power and sell it in the short-term market. Further, the quantity of coal for the power sector in e-auctions has been increased. However, the recommendations of the HLEC related to the payment security mechanism involving the bill discounting framework with discoms to address the issue of delayed payments and measures for improving the utilisation of stranded gas-based power projects are still pending.
  • In February 2019, the MoP launched the Pilot Scheme II for facilitating the procurement of 2,500 MW of power for three years from the commissioned coal-fired plants that have not entered into a PPA. Subsequently, in the reverse e-auctions concluded in April 2019, a tariff of Rs 4.41 per unit was discovered, with the lowest bid about 4 per cent higher than that discovered (Rs 4.24 per unit) in Pilot Scheme I in April 2018. Fifteen power producers participated in the latest auction.


  • In July 2019, the central government accepted a proposal to give early regulatory approval to transmission schemes identified for 66.5 GW of renewable capacity. The Ministry of New and Renewable Energy has identified transmission schemes for around 28 GW of renewable projects under Phase I and around 38.5 GW under Phase II.
  • In March 2019, the Central Electricity Regulatory Commission notified the Terms and Conditions of Tariff Regulations, 2019, for the 2019-24 tariff period. Broadly, the regulations retain most of the terms of the previous regulations for interstate transmission systems (ISTS). The post-tax return on equity has been kept unchanged at 15.5 per cent and the method of cost recovery has been retained. However, changes have been made to some of the operations and maintenance norms. Further, under certain conditions, ISTS licensees are now allowed to charge lower tariffs during the tariff period to help increase their competitiveness.
  • The transmission segment saw some mergers and acquisitions during the year. In October 2018, Sekura Energy Limited, a unit of the Edelweiss Infrastructure Yield Plus Fund, entered into an agreement with Essel Infraprojects Limited for the acquisition of four transmission special purpose vehicles (SPVs) at an estimated cost of Rs 60 billion. In July 2019, CLP India entered into a binding agreement with Kalpataru Power Transmission Limited and Techno Electric & Engineering Company Limited to buy equity stakes in three SPVs owning power transmission assets, for an estimated enterprise value of Rs 32.75 billion. Further, in May 2019, the India Grid Trust announced that it will be acquiring five electricity transmission assets worth Rs 115 billion from Sterlite Power Limited.


  • In July 2019, the MoP issued an order making it mandatory (from August 1, 2019) for distribution licensees to open and maintain adequate letters of credit as a payment security mechanism under the PPAs. In the event of a stoppage of electricity supply due to non-opening of the LC by the discoms, they will be liable to pay compensation to the generator as per the terms of the PPA.
  • In June 2019, NTPC Limited signed an agreement with Power Grid Corporation of India Limited to incorporate a joint venture (JV) company, the National Distribution Company, with 50:50 equity participation. The JV will undertake the business of electricity distribution in various states and union territories as well as other related activities.
  • In September 2018, the MoP notified the Electricity (Amendment) Act, 2018, making the proposed amendments to the Electricity Act, 2003. Among the key provisions related to power distribution are the switch to the direct benefit subsidy from subsidies in tariff, separation of electricity distribution and supply in order to encourage competition, and imposition of a penalty on discoms failing to provide 24×7 power supply. The MoP has recommended that the violation of PPAs also attract penalties. It has also proposed the simplification of the tariff structure as well as making the structure more uniform across states through amendments in the tariff policy.
  • In January 2019, Maharashtra awarded distribution franchises for two circles – one to Torrent Power for the Mumbra-Shil-Kalwa region and the other to CESC Limited for the Malegaon region.
  • In July 2019, the first-ever draft Distribution Perspective Plan for the power distribution segment prepared by the Central Electricity Authority (CEA) was reviewed by the power minister. The plan anticipates an increase in distribution substation capacity by 38 per cent and in distribution transformation capacity by 32 per cent and an increase in different types of feeder lengths by 27-38 per cent till 2022.


  • In February 2019, the Cabinet Committee on Economic Affairs (CCEA) launched the Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM). The scheme entails central aid of Rs 344.22 billion for providing financial and water security to farmers by harnessing 25.75 GW of solar energy by 2022. Subsequently, in July 2019, the government also issued detailed guidelines under KUSUM.
  •  In February 2019, the CCEA also approved Phase II of the Grid Connected Rooftop Solar Programme for achieving a cumulative capacity of 40,000 MW from rooftop solar projects by 2022. The programme will be implemented with central financial assistance of Rs 118.14 billion.
  • There were positive developments in the grid-scale energy storage market. In March 2019, the Solar Energy Corporation of India (SECI) invited bids for 3.6 GWh of storage connected to 1.2 GW of solar capacity on the interstate transmission system, the biggest battery-based project proposed in the country so far. During the same month, SECI invited bids for two 150 MWh battery systems to be connected to 100 MW solar farms in Andhra Pradesh. In February 2019, it invited bids for a 42 MWh battery system for 14 MW of solar capacity in Ladakh and the Northeast.
  • Meanwhile, in a significant move towards resolving the issue of land constraints for renewable energy project development, in early 2019, the Gujarat government released a land policy for renewable projects. The new policy mandates that all future solar, wind and solar-wind hybrid projects will have to be built in parks allocated for such systems.


  • In April 2019, the Central Electricity Authority issued norms for coal consumption in TPPs. As per the norms, the annual contracted quantity per MW entitlement for all TPPs, irrespective of their age or technical parameters, will be calculated based on the normative station heat rate with an upper ceiling of 2,600 kCal/kWh. Accordingly, the normative coal requirements of different unit ratings of TPPs have been revised.
  • In February 2019, the CCEA allowed coal block allocatees the flexibility to sell 25 per cent of their coal output in the open market on payment of an additional premium. The committee approved the methodology for allowing allocatees of coal mines for a specified end use or own consumption to sell 25 per cent of the actual production on a run-of-the-mine basis in the open market on payment of an additional premium on such sales. In the case of auctions, the successful bidder will be required to pay an additional premium of 15 per cent of the final bid price on a per tonne basis for the actual quantity of coal sold in the open market. The move aims to address the issue of poor response from bidders during the earlier auctions/allotments.
  • In March 2019, the coal ministry cancelled the sixth and seventh rounds of auctions in which 19 blocks were to be put on sale. The tender for allocation was issued in November 2018, according to which 13 blocks were to be allocated under round six to the regulated sectors, including iron and steel, cement and aluminium, and six blocks under round seven to the iron and steel sector only.


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