Regulatory Updates
Amendment in Standard Bidding Documents for procurement of Inter-State Transmission Services through Tariff Based Competitive Bidding process
The Ministry of Power (“MoP”) has, vide resolution dated 5 June 2025, notified amendments to standard bidding documents for procurement of inter-state transmission services through Tariff Based Competitive Bidding process.
Some of the key changes brought in the standard Request for Proposal (“RfP“) are:
- The definition of ‘Bid Bond’ has been modified to include reference to an unconditional and irrevocable Insurance Surety Bond issued by insurance company authorized by Insurance Regulatory and Development Authority of India or Payment on Order Instrument, with their respective standard formats being prescribed in the RfP.
- The definition of ‘Payment on Order Instrument’ has been added to inter alia mean letter of undertaking from Indian Renewable Energy Development Agency or Power Finance Corporation or REC Limited, to pay in case of default in terms of tender conditions.
Some of the key changes brought in the standard Transmission Service Agreement (“TSA“) are:
- The definition of ‘Contract Performance Guarantee’ has been modified to include reference to ISB and PoN. Standard formats for these have also been prescribed in the TSA.
- The definition of “Payment on Order Instrument” has been added in line with the definition added in the RfP.
Viability Gap Funding Scheme introduced for Battery Energy Storage Systems
The MoP has approved a Viability Gap Funding (“VGF“) Scheme on 9 June 2025, allocating INR 54 billion from the Power System Development Fund (“PSDF“) to support the development of 30 GWh Battery Energy Storage Systems (“BESS“) capacity across India.
The VGF has been fixed at INR 18 lakh per MWh, and 15 states and National Thermal Power Corporation (“NTPC“) will receive allocations of 25 GWh and 5 GWh respectively.
The MoF has also provided guidelines for the VGF. Some of the key provisions of these guidelines are:
- The VGF for each project shall be disbursed to the eligible entity / renewable energy implementing agency, once the Central Electricity Authority (“CEA”) certifies the achievement of the disbursement schedule milestone and submission of the bank guarantees required to be obtained by such eligible entity / renewable energy implementing agency.
- The VGF disbursement follows a structured schedule: 20% upon financial closure (with bank guarantee submission), 50% at Commercial Operation Date (“COD“), and the remaining 30% after completing 1 year from COD.
- To qualify for VGF, the Battery Energy Storage Purchase Agreement or Power Purchase Agreement must be signed within 9 months from the issuance date of the VGF Guidelines and the projects must be commissioned within 18 months from signing these agreements.
- The BESS projects are to be awarded under Tariff-Based Competitive Bidding as per Section 63 of the Electricity Act, 2003, and can be implemented on a Build Own Operate or Build Own Operate Transfer basis, preferably for contract durations of 12 to 15 years.
- The VGF Guidelines include strict compliance, audit and financial oversight requirements in line with the General Financial Rules, 2017. Further, the VGF Guidelines mandate that the bidding entities’ shareholding in the project company must remain above 51% until COD.
The MoP retains the authority to amend the guidelines to address any implementation challenges.
Regime for waiver of ISTS Charges for Energy Storage Systems amended
This MoP has, vide order dated 10 June 2025 (“Order“), provided for certain amendments to its earlier orders regarding waiver of inter-state transmission (“ISTS”) charges for energy storage systems.
Before the Order, ISTS charge waivers were provided for energy storage systems through a series of orders dating back to 2021. Under such orders, hydro Pumped Storage Projects (“PSPs“) were eligible for 100% waiver of ISTS charges if construction work was awarded on or before 30 June 2025. For BESS, the waiver was applicable for projects commissioned up to 30 June 2025, provided at least 51% of their annual electricity requirement for charging was met through solar and/or wind power plants.
The Order makes the following provisions with respect to Hydro PSP and BESS projects:
For Hydro PSP projects:
- 100% ISTS charges waiver for projects where construction work has been awarded on or before 30 June 2028.
- No ISTS charges waiver for projects where construction work is awarded after 30 June 2028.
For BESS Projects:
- 100% ISTS charges waiver for co-located BESS projects commissioned on or before 30 June 2028, if power is consumed outside the state where the BESS project is commissioned. A BESS project shall be considered “co-located” when the BESS and renewable energy projects are connected at the same ISTS sub-station.
- No ISTS charges waiver for co-located BESS projects commissioned after 30 June 2028.
For non-co-located BESS projects, ISTS charges waiver shall be as per existing MoP orders and CERC regulations.
PNGRB to support AERA Mandate for Common Fuel Storage Facilities on Open Access Basis at Major Airports
The Petroleum and Natural Gas Regulatory Board (“PNGRB“) has, vide press release dated 18 June 2025 (“Press Release“), extended its support to strategic initiative of the Airports Economic Regulatory Authority of India (“AERA“) issued via an official order dated 16 May 2025 for mandating the establishment of Common Fuel Storage Facilities on an open access basis at all major airports across India.
According to the Press Release, this strategic initiative, outlined in AERA’s official order, aligns with the Central Government’s push for sustainable infrastructure development in both the aviation and petroleum sectors. All airport operators, including those under the Airports Authority of India and state governments, have been directed to develop such shared infrastructure within twelve (12) months if not already in place.
The Press Release provides that this move complements PNGRB’s vision of a nationwide common carrier pipeline network for petroleum products, including Aviation Turbine Fuel (“ATF“). The integrated model is designed to enhance operational safety, ensure a reliable supply of fuel, and minimize environmental impact across India’s airport network.
Amendments to the Deviation Settlement Mechanism
The CERC has, vide its notification dated 25 June 2025, issued the CERC (Deviation Settlement Mechanism and Related Matters) (Second Amendment) Regulations, 2025, which came into force on 1 July 2025 (“Amendment Regulations“).
Charges for deviation due injection infirm power shall be zero as per the existing regulations. However, if such infirm power was scheduled, deviation charges for such power were applicable for a general seller or WS Seller (defined below). The Amendment Regulations inter alia provide that charges for injection of infirm power shall be zero, except in cases of thermal generation stations and if infirm power is scheduled after a successful trial run as specified in the grid code.
For thermal generating stations, infirm power injected into the grid from the date of first synchronization until successful completion of the trial run shall be paid at the normal rate of charges for deviations for each time block, subject to a ceiling of INR 2.86 per kWh. If infirm power is scheduled after a successful trial run as specified in the grid code, the charges for deviation over the scheduled infirm power shall be as applicable for a general seller or a seller in case of generating station based on wind or solar or hybrid of wind-solar resources (“WS Seller“), as the case may be. However, when the system frequency exceeds 50.05 Hz, the charges for injection of infirm power or for deviation of scheduled infirm power after the successful trial run by way of over injection by a general seller or WS Seller shall be zero.
Central Electricity Regulatory Commission (Sharing of Inter-State Transmission Charges and Losses) (Fourth Amendment) Regulations, 2025
The CERC vide notification dated 26 June 2025, has issued the CERC (Sharing of Inter-State Transmission Charges and Losses) (Fourth Amendment) Regulations, 2025 (“Fourth Amendment Regulations“), introducing amendments to the CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2020 (“Transmission Charges Regulations“), which amendments will come into effect upon publication in the official gazette.
Some of the key amendments are:
- The definition of ‘Terminal Bay’ has been inserted, adopting the meaning assigned to it in the General Network Access (“GNA”) Regulations.
- A key change has been made in the allocation of additional charges for Unscheduled Deviation beyond Cap (“AC-UBC”). The Fourth Amendment Regulations now clarify that any drawee entity (excluding state distribution licensees) that holds GNA separately from the state’s distribution licensees will bear AC-UBC charges in proportion to its own GNA.
- In the case of generating stations connected to both inter-state and intra-state transmission systems, new provisions clarify how transmission deviation is calculated. These stations will now be assessed based on their net injection exceeding the combined quantum of their ISTS GNA and STU access. To facilitate this, State Transmission Utilities (“STUs“) are required to share access details with the Central Transmission Utility (“CTU”) and National Load Dispatch Centre (“NLDC”).
- A significant part of the amendment revises the structure for waiver of inter-state transmission charges. For solar, wind, and renewable hybrid generating stations, projects commissioned on or before 30 June 2025 will continue to enjoy a 100% transmission charge waiver for 25 years. Projects commissioned later will see a phased reduction in waiver: 75% for projects up to June 2026, 50% up to June 2027, 25% up to June 2028, and no waiver thereafter. Offshore wind projects have been explicitly included and will be eligible for a full 25-year waiver as well.
- Energy Storage Systems (“ESS”) have been given a differentiated treatment. Pumped storage systems with hydro components will receive a 100% waiver for 25 years if their construction contracts are awarded before 30 June 2028. Battery-based ESS co-located with renewable generators can claim a 100% waiver for 12 years from COD if commissioned by the same date, subject to grid charging not exceeding 10% of their total annual input. Standalone battery storage systems are eligible for a reduced, phased waiver over a 12-year period.
- For hydro generating stations without storage, the amendment provides a full waiver of transmission charges for 18 years from COD, provided their PPAs or project awards are finalized by 30 June 2025. Later projects will be subject to a similar phased structure as other renewable sources.
- Green hydrogen and green ammonia plants are now covered under the waiver framework. These plants will qualify for the higher of two waivers: one applicable to their category or that applicable to the renewable energy source supplying them, provided at least 51% of their electricity consumption over a year comes from renewable sources.
- The amendment also introduces a force majeure relief mechanism. Projects originally scheduled to be commissioned by 30 June 2025 but delayed due to force majeure will retain their waiver eligibility, provided such delays are certified by designated authorities. Each project can receive a maximum of two extensions, up to six months each.
- To ensure compliance in waiver claims, especially for ESS, developers must now submit monthly self-declarations confirming that at least 51% of the system’s energy is charged from renewable sources. Annual statements will also be verified, and transmission billing will be revised retroactively if actual compliance falls short.
Case Summaries
Government notifications regularizing defaults in obtaining environmental clearance struck down
The Ministry of Environment, Forest and Climate Change (“MoEFCC“) had issued a notification dated 14 March 2017 allowing projects that had begun operations, expanded capacity, or changed production without obtaining prior environmental clearance (“EC“) (which is a requirement under the Environmental Impact Assessment Notification dated 4 September 2006) to apply for ex post facto EC within six months thereof (“2017 Notification“). Subsequently, an Office Memorandum dated 7 July 2021 extended such regularization even to completed projects, aiming to legalize violations of the 2006 notification (“2021 OM“).
In the matter of Vanashakti v. Union of India (Writ Petition (C) No. 1394 of 2023), the 2017 Notification as well as the 2021 OM was challenged. The Supreme Court relied on the matters of Common Cause v. Union of India (Writ Petition (C) No. 114 of 2014) and Alembic Pharmaceuticals v. Rohit Prajapati (AIROnline 2020 SC 445), wherein it held that an ex post facto environmental clearance would be detrimental to the environment and could lead to irreparable degradation of the environment, and that even a ‘one-time measure’ or ‘one-time relaxation’ was illegal and such measures infringe the right to live in a pollution free environment guaranteed by Article 21 of the Constitution of India.
The Supreme Court vide its judgement dated 16 May 2025 held that the 2017 Notification and the 2021 OM along with all the circulars/orders issued for giving effect to these notifications are illegal and were therefore struck down. The court restricted the Central Government from issuing circulars / orders / notifications providing for grant of ex post facto EC in any form or manner or for regularizing any acts done in contravention of the 2006 notification. All the ECs granted till date under the said notifications shall remain unaffected.
For more information contact:
Jhinook Roy
Practice Head – Projects & Infrastructure
jhinook.roy@veritaslegal.in
DISCLAIMER
VERSED by Veritas Legal intends to provide the readers with an overview of some of the noteworthy legal developments for education / information purposes only. This newsletter should not be construed or relied on as legal advice, or to create a lawyer-client relationship. Readers should reach out to us for any specific factual or legal questions or clarifications; and are encouraged to seek legal advice before acting on any information provided herein. The enclosed information is available in the public domain and shall not be construed as dissemination of any confidential information.