The Electricity Act, 2003 was enacted by the Indian Parliament and came into force on 10 June 2003. The Electricity Act is a central, unified and comprehensive piece of legislation, and is the main source of law and regulation in the electricity sector (along with the rules, regulations and policies made under the Electricity Act). The main objectives of the Electricity Act are as follows:

• developing the electricity industry;
• promoting competition;
• protecting consumer interest;
• supplying electricity to all areas;
• rationalising tariffs; and
• ensuring transparent policies regarding subsidies.

The Electricity Act recognises the distinct activities of generation, transmission, trading (ie, the purchase of electricity for resale), and supply and distribution (ie, the retail supply and sale of electricity to consumers).

Generation

No licence is required for the generation of electricity (however, prior techno-economic clearance has to be obtained for hydroelectric power plants). Generators are permitted to sell power to utilities as well as directly to consumers.

Transmission

A licence is required for undertaking transmission of electricity. The licensing authority is an Electricity Regulatory Commission (ERC) depending upon the nature of transmission, whether intra-state or inter-state.

Trading

Trading of power refers to the purchase of electricity for the purpose of resale. Trading is a licensed activity, for which a licence is granted by the concerned ERC. Trading of electricity can take place on the power exchange as well as over the counter.

Distribution/Sale

Currently, the activities of distribution and supply are clubbed together under a single licence. A distribution licence is granted by the concerned state ERC. Distribution licensees may also grant franchises for distribution on their behalf in their licensed area.

Energy Storage Systems (ESS)

Energy storage systems are devices or groups of devices that convert electrical energy received from power systems and store that energy to supply at a later time. The Indian government is expected to issue an energy storage policy for, amongst other things, integrating renewable energy into the country’s power system.

Private Versus Public Sector

The electricity market had previously been dominated by state-owned vertically integrated electricity boards. However, after reforms and the enactment of the Electricity Act, the market has witnessed the unbundling of erstwhile state electricity boards, increased competition, and greater private sector participation. The electricity market is currently characterised by a mix of private sector and public sector players.

Relationship Between Central Government and State Governments

Electricity is a regulated sector and a concurrent subject in the Indian polity, which means that both central and state governments play a key role in it. While central government-backed generation companies may supply power to multiple states, generation companies owned by state governments supply power to the parent state only. The Power Grid Corporation of India Limited (PGCIL) is the Central Transmission Utility (CTU), responsible for the majority of inter-state transmission projects. In the same manner, each state has a State Transmission Utility (STU) along with private transmission companies which are responsible for setting up intra-state transmission projects.

The installed generation capacity as of May 2023, for the central sector was 100,055 MW as compared to 105,726 MW for the state sector.

As noted above, the Indian electricity market is broadly divided into the following distinct types of activity:

• generation;
• transmission;
• trading (ie, purchase of electricity for resale); and
• supply and distribution (ie, retail supply and sale).

The principal players in the generation segment are:

• NTPC Limited;
• NHPC Limited;
• Adani Power Limited;
• Reliance Power Limited;
• Tata Power Company;
• GMR group; and
• GVK group.

The principal players in the transmission segment are:

• Power Grid Corporation of India Limited;
• Sterlite Power; and
• Adani Transmission Limited.

Additionally, each state has a designated State Transmission Utility, which undertakes a large portion of transmission within the state.

In most states, distribution continues to be undertaken by state-run utilities. In some states (eg, Maharashtra and Delhi), the distribution of electricity has been privatised.

Foreign investment in India is principally governed by the Foreign Exchange Management Act, 1999 and regulations issued under it, including the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and by policy announcements of the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India.

The extant framework contemplates two routes of foreign direct investment: the automatic route (ie, where no approval is required) and the approval route (ie, where prior approval of the government is needed). Proposals for foreign investment under the government route are considered by each respective administrative ministry/department on a case-by-case basis.

There are no investment limit thresholds for the power industry – foreign direct investment without prior government approval is permitted up to 100% in the generation (except atomic energy), transmission, distribution and trading of electricity. However, prior government approval is required for investment by an entity of a country that shares a land border with India, or where the beneficial owner of an investment into India is situated in, or is a citizen of, any such country.

Investment in the power exchanges is limited to 49% through the automatic route.

For sale of power industry assets of businesses, the Electricity Act mandates that a licensee must obtain prior approval from the respective licensing authority (ie, the Central Electricity Regulatory Commission (CERC) or state electricity regulatory commission (SERC)) in order to acquire (by purchase or takeover or otherwise) the utility of any other licensee or merge its utility with the utility of any other licensee. Such an approval is also necessary for the assignment of a licence or the transfer of a utility, or any part thereof, by sale, lease, exchange or otherwise. Any such arrangement will be void if the necessary approvals are not obtained. It should be noted that these requirements apply only to licensees and not to generators (which are unlicensed).

Additionally, the Companies Act, 2013 and Competition Act, 2002 generally govern mergers and acquisitions in India.

Approval From the Relevant State Renewable Energy Development Agency

Each state has their own renewable energy development agency (REDA) – such as the Gujarat Energy Development Agency (GEDA), Haryana Renewable Energy Development Agency (HAREDA), Manipur Renewable Energy Development Agency (MANIREDA), etc. Setting up and any sale of renewable energy projects may require the approval of or registration with the relevant state REDA.

For transmission planning purposes, the Central Electricity Authority (CEA) is responsible for formulating a short-term plan every year on a rolling basis for the next five years and a prospective plan every alternative year on a rolling basis for the next ten years. The Central Transmission Utility (CTU) is required to prepare an implementation plan for the inter-state transmission system every year on a rolling basis for up to the next five years, which will take into account aspects such as “right of way”, the progress of generation capacity and energy demand in the country.

Amendment to the Electricity Act

The proposed amendment to the Electricity Act, 2003, amongst other things, provides for the following:

• it gives a choice to electricity consumers in selecting their electricity supplier by having multiple distribution companies operate in the same area of supply;
• it makes it mandatory to appoint a member to the relevant ERC with a legal background;
• it increases the number of members to strengthen capacity of the Appellate Tribunal for Electricity to address the long pendency of cases and consequent delay in deciding appeals; and
• to meet India’s international commitments, provisions related to compliance with renewable purchase obligations (RPOs) have been proposed to promote the use of renewable energy.

CERC Regulations

The CERC has issued a number of new regulations with respect to renewable energy. These include the following.

• The CERC (Indian Electricity Grid Code) Regulations, 2023 entail provisions concerning the responsibilities and operational interdependence of various statutory bodies and organisations, in addition to extensive clauses ensuring stable, dependable and secure grid operation and attaining optimal economy and efficiency of the power system.
• The CERC (Deviation Settlement Mechanism and Related Matters) Regulations, 2022 aim to ensure, through a commercial mechanism that users of the grid conform to the drawl schedule and injection of electricity in the interest of security and stability of the grid. These regulations are applicable to all grid connected regional entities and other entities engaged in inter-state purchase and sale of electricity. The regulations set out the mechanisms to compute the deviations for projects and the applicable charges for the same.
• The CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) Regulations, 2022, which set out the framework for the development of a renewable energy market through renewable energy certificates.
• The CERC (Connectivity and General Network Access to the Inter-State Transmission System) Regulations, 2022 provide a regulatory framework to facilitate non-discriminatory open access to licensees or generating companies or consumers for use of inter-state transmission system through General Network Access.
• The Guidelines for Registration and Filing Application for Establishing and Operating Over the Counter (OTC) Platform, 2022 which, inter alia, provide the eligibility guidelines, procedure for registration of OTC platforms and framework of operation.
• The CERC (Ancillary Services) Regulations, 2022, which provide for mechanisms for procurement, deployment and payment of ancillary services at the regional and national level for maintaining the grid frequency and restoring the grid frequency within the allowable band.

Electricity (Transmission System Planning, Development and Recovery of Inter-State Transmission Charges) Rules, 2021

The central government issued the Electricity (Transmission System Planning, Development and Recovery of Inter-State Transmission Charges) Rules, 2021, to give easier access to utilities in the power sector to the electricity transmission network. Further, these Rules promote the concept of General Network Access, which provides flexibility to the generating station as well as states to acquire, hold and transfer transmission capacity according to their requirements. The Rules enable state power distribution and transmission companies to determine their transmission requirements and build them. 

Electricity (Promotion of Generation of Electricity From Must-Run Power Plants) Rules, 2021

These Rules are applicable to renewable energy projects such as projects with hydropower, wind and solar sources. The Rules provide for monetary relief for any curtailment of generation of must-run plants by the procurer. They also provide for intermediary procurers, which provide power to the procurer at a weighted average bid rate, to acquire electricity for one or more distribution licensees.

Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022

The central government notified the Green Energy Open Access Rules, 2022 for purchase and consumption of green energy including the energy from waste-to-energy plants. The Rules provide that there must be a uniform renewable purchase obligation on all obliged entities in the area of a distribution licensee. It also provides for the methods through which an entity may generate, purchase or consume renewable energy as well as the charges which will be levied on Green Energy Open Access consumers.

Electricity (Late Payment Surcharge and Related Matters) Rules, 2022

The central government notified the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 with the objective of financially shoring up distribution utilities and ensuring financial discipline in the power sector. These rules apply to dues outstanding to generating companies, inter-state transmission licensees, and trading licensees. The Rules stipulate that a “late payment surcharge”, which increases month-on-month (capped at the rate specified in the respective agreement), shall be payable on payments outstanding beyond their due date.

Amendment to the Electricity (Rights of Consumers) Rules

The Ministry of Power (MoP) issued the Electricity (Rights of Consumers) Amendment Rules, 2022 to further amend the Electricity (Rights of Consumers) Rules, 2020. Pursuant to the amendment, certain definitions have been inserted in the Rules, along with the insertion of rules under the compensation mechanism. The amendment mandates the distribution licensee to ensure 24/7 uninterrupted power supply to consumers living in metro areas and cities with populations of more than 1 million. Amongst other things, the amendment also encourages consumers using diesel generators to shift to cleaner technology in the five years following commencement of these Rules.

Amendment to the Electricity Rules, 2005

The MoP issued the Electricity (Amendment) Rules, 2023 to further amend the Electricity Rules. This amendment provides that if a captive generating plant is being set up by an affiliate of a company, 51% of the ownership in that affiliate company should be held by the captive user. Further, the amended rules stipulate that consumption by a subsidiary of an existing captive user is admissible as captive consumption. The Rules have also clarified that consumption by a captive user may be directly or through an ESS. New insertions have been made with respect to period of licence and deemed licence granted under Section 14 of the Electricity Act, 2003.

Electric Vehicle (EV) Charging Stations

The MoP has released and/or updated guidelines and norms for setting up EV-charging infrastructure. The revised guidelines allow EV owners to charge EVs at their residence/offices using their existing electricity connections and the guidelines have de-licensed the setting up of EV-charging infrastructure. These were introduced under the Guidelines & Standards for Charging Infrastructure for Electric Vehicles (EV), 2022. A model revenue-sharing agreement has also been included under the guidelines.

Production Linked Incentive Scheme

In 2021, the Production Linked Incentive Scheme was introduced, which incentivises the manufacturing of advanced chemistry cells (ACC) in the country to bring down prices of batteries. This will promote EV-manufacturing companies to set up factories in India under the Make in India government scheme.

National Programme on High Efficiency Solar PV Modules

The central government has allotted INR500 billion to boost the manufacturing of solar modules under the government’s flagship production-linked incentive (PLI) scheme. The Ministry of New and Renewable Energy (MNRE) has notified the implementation of a production-linked incentive scheme, the “National Programme on High Efficiency Solar PV Modules”, with the aim of promoting manufacturing of high efficiency solar PV modules in India and thus reducing import dependence in the area of renewable energy.

Manufacturing Zones

The MNRE along with MoP has launched a scheme which proposes the setting up of brownfield and greenfield manufacturing zones in coastal areas with a total financial outlay of INR10 billion.

Rooftop Solar Awareness Campaign

The MNRE along with the National Solar Energy Federation of India has also launched the Ghar ke upar Solar Is Super Pan-India Rooftop Solar Awareness Campaign to urge the public to install solar panels on rooftops. The MNRE is providing a 40% subsidy to households under the scheme.

New Environmental Legislation

The Ministry of Environment, Forest and Climate Change is planning to table a new environmental management law to replace and consolidate the Air Act 1981, Water Act 1974 and the Environment (Protection) Act 1986 as a single all-encompassing law to regulate environmental issues in India.

National Hydrogen Mission

The MNRE has launched the National Hydrogen Mission, which draws up a roadmap for using hydrogen as an energy source. The focus is on the generation of hydrogen from green power resources and linking India’s growing renewable capacity with the hydrogen economy. For the same, the goals are divided into short-term strategy and long-term principles. The Mission’s key aim is to promote production of environmentally sustainable energy by using green hydrogen and green ammonia.

Increasing Renewable Energy in the Energy Mix

India’s installed renewable energy capacity has increased 396% in the last eight and a half years and stands at more than 173.619 GW (including large hydro), which is about 41.4% of the country’s total capacity (as of May 2023) and the renewable energy generation capacity addition in FY24 is estimated at 20 GW.

No New Thermal Energy Power Plants

Though 49.1% of power generated in India is through coal-based power plants, no new thermal energy projects are being installed and thermal power generation capacity seems to have stabilised.

Nuclear Power

India has approximately 6,780 MW of installed nuclear energy. Nuclear power generation can only be undertaken by the Nuclear Power Corporation of India Limited (NPCIL) or any joint ventures formed along with the NPCIL.

One Nation One Grid

From five different AC grids operating at different frequencies, the Indian power transmission system has transitioned to “One Nation, One Grid, One Frequency”. The development of one national grid has helped in increasing grid stability, resulting in reduced blackouts across the country.

Green Energy Corridor

In order to integrate solar power parks into the grid in 21 states, a comprehensive transmission plan was developed to handle about 20,000 MW capacity envisaged through intra-state and inter-state transmission.

Energy Storage Systems (ESS)

The government is currently working towards adoption of ESS into the power system of India. Under the Union Budget 2022–23, the government announced plans of conferring infrastructure status to ESS, including grid-scale battery systems.

Increasing Generation in the C&I Space

In recent years, the commercial & industrial (C&I) sector has witnessed tremendous growth, especially in the field of solar power, in order to reduce India’s carbon footprint and air pollution.

The C&I segment accounts for about 50% of electricity consumption in India and the demand for green energy from this segment, especially from open access projects, has been growing rapidly in the last few years.

Increase in Trade of Renewable Energy Certificates

India has witnessed a massive increase in the trade of renewable energy certificates (RECs) in recent times. IEX traded 533,392 solar RECs in June 2023.

The Indian electricity market has evolved from a single-buyer model to a multi-buyer model. Power is ordinarily procured through long-term arrangements. Distribution licensees are responsible for supplying power to consumers in their licensed areas of supply and procure electricity using the following routes.

• Competitive procurement (either from generators or through trading licensees), whereby tariffs are discovered through price-bidding; competitive procurement is conducted in accordance with guidelines issued by the central government.
• Bilateral procurement of electricity (either from the generators or through trading licensees), whereby tariffs are negotiated as per regulatory norms and stipulations.
• Purchase of electricity on a registered power exchange; India has two power exchanges – the Indian Energy Exchange (IEX) and Power Exchange India Ltd (PXIL).

The procurement and purchase of power by distribution licensees is subject to the regulatory oversight of the respective SERCs.

The Electricity Act also recognises the distinct activity of electricity trading, whereby trading licensees purchase power from generators and sell the power to consumers or distribution licensees at a margin. This margin can be regulated and varies depending on the state, the duration of the purchase arrangements, and whether it is inter-state or intra-state.

Furthermore, the ERCs are tasked with the development of a market (including trading) in power and are empowered to check abuses of dominant positions or combinations that adversely affect competition in the industry.

Additionally, as noted above, in certain circumstances and subject to the payment of the requisite surcharges, eligible consumers may by-pass the distribution licensee to procure power directly at a mutually negotiated tariff by taking advantage of “open access” to the transmission/distribution network.

Power is also bought and sold on organised energy exchanges, which have been set up pursuant to the mandate of the Electricity Act to promote the development of a market (including trading) in power, and the recognition of trading as a distinct activity. In addition to the IEX and PXIL, a third power exchange, Hindustan Power Exchange (HPX), recently began operations.

India is party to all cross-border power transactions in the South Asia region. India is set to import 10,000 MW of power from Nepal in the next decade. India, Bangladesh and Nepal are also set to sign an historic tripartite agreement, which will, amongst others, enable trade between Nepal and Bangladesh via India.

The primary transmission interconnections through which the import and export of power take place are as follows.

• Nepal:
1. Muzzaffarpur (India) – Dhalkebar (Nepal) 400 kV D/C line (operating at 220 kV);
2. Tanakpur (India) – Mahendranagar (Nepal) 132 kV Level; and
3. 13 interconnections at 11 kV, 33 kV and 132 kV along the borders of Bihar and Uttar Pradesh.
• Bhutan: associated transmission systems have been implemented for evacuating power from the corresponding hydropower project from which power is exported to India – Chukha, Kurichhu, Tala, Dagachhu and Mangdechhu.
• Bangladesh:
1. Baharampur (India) – Bheramara (Bangladesh) 400 kV D/C line; and
2. Surajmaninagar (India) – Comilla (Bangladesh) 400 kV D/C line (operating at 132 kV).

Tariffs for the import/export of electricity may be determined through mutual agreement at the inter-governmental level, through competitive bidding or negotiations between parties.

The total installed capacity of India as of May 2023 is 417,668 MW, of which renewable energy constitutes roughly 41.4%. The installed capacity comprises electricity generated from fossil fuels, nuclear power, hydroelectric power and renewable energy sources, as follows:

• fossil fuel (coal, lignite, gas & diesel) – 237,269 MW;
• nuclear – 6780 MW;
• hydroelectric – 46,850 MW;
• small-hydro – 4944 MW;
• wind – 42,868 MW;
• biomass/co-generation – 10,248 MW;
• waste-to-energy – 554 MW; and
• solar – 67,078 MW.

There are no concentration limits regarding the percentage of electricity supply that is controlled in the market by any one entity. However, market activities are subject to laws governing anti-competitive behaviour. Please see 2.5 Surveillance to Detect Anti-competitive Behaviour for more information in this regard.

The Electricity Act empowers the relevant ERC to issue such directions as it considers appropriate to a licensee or a 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 adverse effect on competition in the electricity industry.

In addition, the Competition Act, 2002 is the primary Indian law regulating anti-competitive behaviour. The objectives of the Competition Act are to prevent practices having an adverse effect on competition, to promote and sustain competition and markets, and to ensure freedom of trade.

The Competition Act recognises the following restrictive practices:

• abuse of dominant position;
• anti-competitive agreements causing or likely to cause an appreciable adverse effect on competition; and
• combinations causing or likely to cause an appreciable adverse effect on competition in the relevant market.

The Competition Commission of India (CCI) is the primary regulatory authority responsible for enforcing the Competition Act and is assisted by its investigative arm, the Director General (DG), in investigating contraventions of the Competition Act. CCI and DG have the power to summon and enforce attendance; require the discovery and production of documents; receive affidavit evidence; issue requests for the examination of witnesses or documents; and requisition public records or documents from any office. The DG also enjoys powers of search and seizure.

Inquiries into anti-competitive behaviour are initiated by CCI on its own motion, or upon the receipt of information in the prescribed manner from any person, or upon reference by any statutory authority or the central/state government. If CCI is convinced there is a prima facie case of anti-competitive behaviour, it directs the DG to investigate. DG submits a report on its findings and recommendations to CCI (which are not binding on CCI). Unless CCI seeks a supplementary report from DG, or decides to carry out further inquiries by itself, the report is released to the parties (or referring authority) for their written submissions. Parties may also present oral arguments. CCI issues its final order after reviewing the written submissions and concluding the oral arguments. Appeals against this order lie before the National Company Law Appellate Tribunal, and further to the Supreme Court of India.

In the case of an infringement of the Competition Act, CCI is empowered to issue cease and desist orders, modify the agreements concerned, pass any other order as it deems fit, and impose monetary penalties, as follows:

• for anti-competitive agreements, CCI can penalise the parties up to 10% of their average turnover from the infringing products/services in the past three financial years; and
• for cartels, CCI can impose a penalty of up to three times the cartel’s profits for each year the cartel agreement continued, or up to 10% of the relevant turnover of the parties for each year of continuance of the cartel agreement, whichever is higher.

In India, there is no single law that governs climate change. Climate change has been addressed through a wide range of sector-specific laws, policies and guidelines, as discussed below.

Power Sector

The Electricity Act

The Electricity Act features provisions relating to renewable energy and promotion of environment-friendly practices, as follows.

• In specifying the terms and conditions for the determination of tariffs, the ERCs must be guided by the promotion of the generation of electricity from renewable sources of energy, amongst other things.
• SERCs are required to promote the generation of electricity from renewable sources of energy by:
1. providing suitable measures for connectivity with the grid and sale of electricity to any person; and
2. specifying, for the purchase of electricity from renewable sources, a percentage of the total consumption of electricity in the area of a distribution licensee.

Green Open Access Rules, 2022

The MoP notified the Green Open Access Rules, 2022 to accelerate renewable energy programmes in India. These rules aim to promote generation, purchase and consumption of green energy, including energy from waste-to-energy plants. The rules provide for a simplified procedure for obtaining open access to green power. Industrial and commercial consumers can voluntarily purchase green power.

Priority Sector Lending Programme, 2015

Under the Reserve Bank of India (RBI) norms, the renewable energy sector is considered as a priority sector, which means that banks are obliged to earmark a certain percentage of their lending for this sector.

Energy Conservation Act

This Act was enacted with the aim of promoting efficient use of energy and its conservation. It provides an approach system and direction to national energy conservation activities. Further, it organises policies and programmes on the effective use of energy with shareholders.

Electric Vehicles

National Electric Mobility Mission Plan (NEMMP)

NEMMP is a governmental mission that aims to provide a roadmap for faster adoption of electric vehicles (EVs) in India. It also aims to increase manufacturing of EVs in India to achieve national fuel security.

Faster adoption and manufacture of hybrid and electric vehicles (FAME) scheme

The FAME scheme was launched under the NEMMP to promote the manufacturing of electric and hybrid vehicle technology in India to achieve electrification by 2030. Incentives under this scheme are provided in the form of subsidies to automotive manufacturers of EVs and infrastructure providers of EVs.

State EV policies

In order to support the national electric mobility policies, a number of states came up with their respective EV policies. Some of the state EV policies include the following.

• Delhi EV Policy: as part of this policy, 50% of all new stage-carriage buses are set to be pre-electric buses, starting with induction of 1,000 pure electric buses in 2020.
• Gujarat EV Policy: Gujarat targets to electrify 110,000 two-wheelers, 70,000 three-wheelers and 20,000 four-wheelers by 2025.
• Rajasthan EV Policy: the policy focuses on ramping up sales of electric two-wheelers and electric three-wheelers, also called e-rickshaws, in the state.

Other states with existing EV policies include Andhra Pradesh, Karnataka, Kerela, Madhya Pradesh, Maharashtra, Tamil Nadu, etc.

Hydrogen

Green hydrogen policy

The government policy is aimed at boosting green hydrogen production in the country, that will in turn reduce India’s dependence on importing over 80% of its oil and gas requirements. The focus of the policy is to boost dependence on cleaner forms of energy and abandon fossil fuels. It allows companies to easily set up the capacity to generate electricity from renewable sources such as solar or wind anywhere in the country.

Batteries and Energy Storage

National Programme on Advanced Chemistry Cells (NPACC)

This programme was launched in 2020, with the aim of promoting local manufacturing in the battery storage sector. Under the NPACC, the central government notified a production-linked incentive (PLI) scheme to incentivise setting up advanced storage technologies that can store electric energy, as either electrochemical or chemical energy and convert it to electrical energy, as and when required.

MoP Notification on Battery Energy Storage System (BESS)

The MoP vide notification dated 21 June 2021, allowed waiver of inter-state transmission charges for battery storage systems commissioned up to 30 June 2025, with the condition that 70% of the annual electricity requirement for charging the BESS is met through use of electricity from solar and/or wind power plant.

MoP Clarification

The Ministry of Power has issued a clarification on the use of energy storage systems in various applications across the entire value chain of the power sector on 29 January 2022, as follows.

• An energy storage system can be utilised either on standalone basis or in complementarity with generation, transmission and distribution.
• The legal and regulatory treatment of the energy storage system will be based on its application area, ie, generation, transmission and distribution.
• A standalone energy storage system shall be a delicensed activity at par with a generating company.
• If the owner/developer seeks to operate the energy storage system on a standalone basis, it will be registered with the Central Electricity Authority.

Sustainable Fuels

National Biofuel Policy, 2009

This policy was introduced to accelerate the development and promotion of cultivation, production and use of biofuels to contribute to energy security, climate change mitigation and environmentally sustainable development.

The Environment

The Environment (Protection) Act and Rules

This Act stipulates provisions for protection and improvement of the environment. Under the Environment Act, the central government is empowered to establish authorities which are mandated to prevent environmental pollution and to deal with environmental problems peculiar to certain locations.

Forest Conservation Act, 1980

The Forest Conservation Act aims to help conserve the country’s forests by strictly restricting and regulating the use of forest land for non-forest purposes without prior approval of central government. In this context, the Act stipulates prerequisites for the diversion of forest land for non-forest purposes.

The Wildlife (Protection) Act

This Act aims to protect the wildlife in India and control poaching, smuggling and illegal trade in wildlife and its derivatives. It provides a legal framework for prohibition of hunting, protection and management of wildlife habitats, establishment of protected areas, regulation and control of trade in parts and products derived from wildlife, etc. Additionally, the Act also provides stringent punishment and penalties for offences.

The Water (Prevention and Control of Pollution) Act

This Act was enacted with the objective of prevention and control of water pollution in India. The central and state Pollution Control Boards have been constituted under this Act.

The Air (Prevention and Control of Pollution) Act

This Act provides for the prevention, control and abatement of air pollution in India with the aim of improving the overall quality of air. The Act stipulates that no person can establish or operate any industrial plant without the prior consent of the state Pollution Control Board.

Environmental, social and governance (ESG) reporting

The Securities and Exchange Board of India (SEBI) has introduced new reporting requirements on ESG parameters, called the Business Responsibility and Sustainability Report (BRSR). The BRSR is a mandatory requirement for the top-1,000 listed entities, which are required to disclose their performance against nine principles relating to sustainable business conduct. In addition, India is party to the United Nations Framework Convention on Climate Change, 1992, and has adopted the Paris Agreement under said framework. In this regard, it is notable that the courts in India, including the Supreme Court of India, have interpreted and given effect to rights and obligations of parties under Indian law in the context of treaty obligations.

There are no specific laws and/or policies relating to the early retirement of carbon-based generation. However, emissions norms have been made stricter in recent years; these stricter norms are applicable to existing as well as future power plants.

However, the CEA has periodically been identifying old and inefficient government-owned thermal generating units for retirement, either on account of their age, or due to their inability to comply with new emission norms.

At the COP26 summit, India announced its aim to install 500 GW of renewable energy by 2030, to meet 50% of its energy requirements from renewable energy by 2030, achieve net-zero emissions by 2070 and reduce its emissions intensity, or emissions per unit GDP, by at least 45% by 2030.

There are a number of incentives at both the central and state levels that are aimed at encouraging the use of electricity generated from renewable energy.

India also launched One Sun, One World, One Grid (OSOWOG) at the conference, with the aim of harnessing solar energy wherever the sun is shining, ensuring that generated electricity flows to areas that need it most. Furthermore, in 2021, the Ministry of Environment, Forest and Climate Change launched Plastic Hackathon 2021, which provides for the phasing out of single-use plastics by 2022. Under this challenge, start-ups/entrepreneurs and students at higher education institutions (HEIs) are encouraged to develop innovative solutions to mitigate plastic pollution and develop alternatives to single-use plastics.

The generation of electricity in India is a delicensed activity; ie, a developer may establish, operate and maintain a generating station without obtaining a licence. However, the construction of generation facilities is subject to obtaining a number of approvals and consents from the relevant state, central and statutory authorities. The approvals and consents required may vary for each power project depending on its type and location. The following is an indicative list of approvals and the corresponding authorities with respect to thermal power projects:

• approvals from the district administration under laws relating to land acquisition (eg, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 – the “LARR Act”);
• approvals from the Ministry of Environment, Forests and Climate Change and Pollution Control Boards under environment-related laws;
• approvals from relevant authorities under laws relating to the establishment of factories, use of boilers and regulation of labour;
• approvals from relevant authorities under laws relating to industrial safety – eg, to store petroleum, or to possess and use explosives;
• clearance from the Airports Authority of India for the height of chimneys; and
• projects based on domestic coal are required to obtain coal linkage (assurance of the supply of coal from Coal India Limited and its subsidiaries) or a captive coal mine.

Approvals required for renewable energy projects vary from state to state. Hydro projects above 25 MW are required to obtain a techno-economic clearance from the CEA prior to their construction. Solar, wind and mini hydroelectric projects (less than 25 MW) are exempt from having to obtain environmental clearance.

Nuclear power projects, which can be established, owned and operated only by the government by itself or through an authority or corporation established by it or by a government company, are required to obtain approval from the Atomic Energy Regulatory Board.

All power projects are also required to obtain approvals in relation to technical standards relating to the construction, safety, operation and maintenance of power plants (from the CEA), commissioning (from the Electrical Inspector), and the connection and evacuation of power from the project to the grid (from the Central/State Transmission Utilities).

In addition, all power projects are required to comply with requirements relating to undertaking business under corporate and tax laws.

The process for obtaining approvals for the construction and maintenance of generating facilities (as discussed in 4.1 The Construction and Operation of Generation Facilities) may be broadly classified into two categories: approvals required prior to construction, and approvals required prior to operation. The various approvals under each of these categories may be applied for simultaneously or in a sequence. Many states now offer single-window clearance portals, particularly for renewable energy projects. Typically, the process for obtaining approvals prior to construction is as follows.

• Application to the Ministry of Corporate Affairs online or offline for the incorporation of a company.
• Procurement of clear title of land through lease or on sale; in this process, considerations for approval may differ from state to state according to different parameters, such as payment of compensation, conversion of land use, rehabilitation, and restrictions, if any, on land held by scheduled tribes/castes.
• Application to the municipal administration/local authority for the approval of building plans, and to CEA for the approval of design/drawings of the generating station, where permission will depend on compliance with the applicable local and central laws.
• Application to the labour department for approvals under labour laws.
• Application for environmental clearance, forest clearance, clearance from wildlife board, and Consent to Establish; these are granted subject to terms and conditions, as discussed in 4.3 Terms and Conditions Imposed in Approvals for the Construction and Operation of Generation Facilities.
• Application to the state nodal agency for setting up a solar/wind project.

Key approvals required prior to operating a generating facility are as follows:

• approval for Consent to Operate from the relevant state pollution control board;
• approval for commissioning the project from the Electrical Inspector under the Electricity Act, 2003 and regulations framed thereunder. Approval is subject to compliance with the grid code and technical standards prescribed by the CEA; and
• application to the State/Central Transmission Utility for connectivity and short/medium/long-term open access to the transmission network for the evacuation of power from the project.

Public participation is a mandatory aspect of acquiring land for a project. It may be noted that acquiring Right of Way is a challenge commonly faced by many developers. The LARR Act sets out a detailed procedure relating to conducting public hearings, and stipulates the minimum compensation required to be paid while establishing a project.

As mentioned above, though renewable power projects are exempt from obtaining environmental clearance, the construction and operation of thermal power projects are subject to stringent environmental norms and impact assessments.

Most approvals are required to be renewed from time to time and are subject to terms and conditions, some of which are discussed in 4.3 Terms and Conditions Imposed in Approvals for the Construction and Operation of Generation Facilities.

Common terms and conditions subject to which approvals for the construction and operation of generation facilities are granted include the following:

• land is used for the purpose for which it was allotted/conversion charges were paid;
• environmental clearance is subject to conditions relating to emissions norms, the usage of groundwater, water treatment, waste management, percentage of ash content, ambient noise levels, disaster management, biodiversity conservation, development of green belt, etc;
• commissioning of the power project as per its scheduled commercial operation date;
• undertaking tests and maintaining equipment as per the applicable technical standards and norms;
• adhering to norms relating to grid safety and the conditions of the grid code;
• adhering to the conditions of the power purchase agreement;
• renewal of approvals prior to their expiry;
• payment of applicable fees and charges, and submission of payment security (such as letter of credit, or bank guarantee) for the relevant approval; and
• compliance with emission standards and national air quality standards.

It is relevant to mention that, in recent years, strict norms have been passed with respect to emissions standards for thermal power plants. The Ministry of Environment, Forests & Climate Change notified the Environment (Protection) Amendment Rules, 2015 on 7 December 2015, introducing revised emission standards for thermal power plants. Pursuant to this notification, all thermal power projects are required to install or upgrade various emission control systems. It is noteworthy that the revised environmental norms have been recognised as a “change in law” event under power purchase agreements that were executed before the revised environmental norms were notified. Accordingly, costs arising with respect to the installation of emission control systems in compliance with revised environmental norms will be allowed as pass through in tariff for the respective power plant.

The process for seeking relaxation of a particular term or condition is generally provided in the specific clearance or under the relevant statute.

Right to property is a legal right under the Constitution of India, which can only be restricted by law. A developer may procure land for constructing a generation facility, by the allotment of land from the government, in cases where the government owns the land, or by acquiring land through a sale or on a long-term lease basis from the owner of a private property.

The acquisition of land in India is governed by the LARR Act, which permits both government and private parties to acquire land for “public purpose”, subject to the payment of compensation to landowners and providing rehabilitation and resettlement to affected persons in terms of the legislation. As such, the principle of eminent domain, condemnation or expropriation as traditionally understood is not applicable with respect to obtaining surface rights and access by private entities.

The LARR Act regulates the acquisition of multi-crop irrigated areas and mandates a social-impact assessment before the acquisition of the land. Furthermore, the acquisition of land by private companies will require the consent of 80% of the people affected.

The minimum compensation to be paid to landowners is determined by the Collector on the basis of a multiple of the market value of the land and a combination of other factors, as provided in the LARR Act.

Notably, a delay in the acquisition of land has resulted in a delay in the commissioning of many power projects. One of the ways the government has tried to address this issue, particularly with respect to renewable energy projects, is by setting up solar and wind parks, a concentrated zone of solar/wind power projects, where land is pre-identified by the government and the area is equipped with basic infrastructure and amenities to minimise project risks.

A generating facility may be decommissioned by informing the CEA about such decision by the developer of such facility. The written notice must be accompanied by a copy of the board approval (board resolution) of the decision to decommission the plant. Thereafter, the capacity of the project is deleted from the national database of installed capacity maintained by the CEA, followed by a notice from the CEA to the developer to this effect.

Transmission is a regulated activity requiring a licence, unless exempt or falling within the purview of deemed licensees under the Electricity Act, 2003. To construct and operate an “inter-state transmission system” (ie, a transmission system for conveying electricity from one state to another), a licence is required to be obtained from the CERC, while a licence must be obtained from the SERC for an intra-state transmission system. No transmission licence is required in respect of a dedicated transmission line – ie, a supply line used to connect a power plant to the transmission network, substation or load centre.

A transmission licensee is governed by the terms of its licence, the Electricity Act, and the rules and regulations framed thereunder. Furthermore, transmission project developers are required to obtain many approvals, consents and clearances from various state, central and statutory authorities. The authorisation requirements may vary between inter-state transmission systems and intra-state transmission systems, and also from state to state. The key authorisations required to construct and maintain a privately developed inter-state transmission network include the following:

• an application to the Ministry of Corporate Affairs online or offline for the incorporation of a company;
• approval to lay overhead lines from the Ministry of Power;
• approval for right of way from the Ministry of Power, without prior approval from landowners;
• clearance for laying transmission lines in forest areas from the Ministry of Environment, Forests and Climate Change;
• clearance for laying lines through wildlife sanctuaries from the Chief Wildlife Warden;
• approval for the charging of a transmission line/element of the transmission system from Central Power & Telecommunication Co-ordination Committee (PTCC);
• no objection with respect to the height of transmission towers;
• approval for energisation from the Chief Electrical Inspector; and
• approval to create security over the assets in terms of the financing/security documents from the CERC.

An application for a transmission licence is required to be made, and is granted as per the procedure for the grant of such licences prescribed by the respective regulatory commission. As a part of the process, a transmission licensee is required to enter into a Transmission Service Agreement with the transmission customers, setting out the terms on the basis of which the transmission licensee will provide its services.

In order to obtain approval to lay overhead lines, an application is required to be made to the CEA, setting out the scope of the works. Typically, the scope of the works is discussed in regional standing committee meetings and accordingly approval is granted. Once the preliminary approval to lay overhead lines is obtained, the next step is to file an application for right of way under Section 164 of the Electricity Act. The application process requires the applicant to publish in two local newspapers the transmission scheme, providing two months to any interested person to make any representation with respect to the scheme. The applicant is obliged to take into consideration the objections received before finalising the route alignment. Along with the application, the applicant is required to submit the newspaper publication of the scheme, maps showing the route alignment and justification for it to the CEA. Approval for right of way, therefore, requires the developer to engage with the public that will be affected by the project, to develop the transmission route considering their grievances and to pay compensation, as discussed in 5.4 Eminent Domain, Condemnation and Expropriation Rights.

A transmission licensee is required to comply with the Electricity Act, and the rules and regulations made thereunder (particularly the standards of performance and grid code issued by the ERC, and the technical standards for operation and maintenance specified by the CEA) and the terms and conditions laid down in the transmission licence. The ERC may specify any general or specific conditions that will apply either to a licensee or to a class of licensees. The ERC is also vested with the power to amend the licence and also to revoke it in certain stipulated circumstances, if the public interest so requires.

Common terms and conditions to be imposed upon a transmission licensee are as follows:

• to plan and co-ordinate its functions with the Central Transmission Utility/State Transmission Utility, generating companies, regional power committees, etc;
• to commission the project on time in an efficient, co-ordinated and economical way;
• to provide non-discriminatory open access to the transmission system as per the Electricity Act and regulations thereunder;
• to not engage in the business of trading in electricity;
• to pay the transmission licence fee in accordance with the regulations and the transmission licence;
• to comply with the directions of the load despatch centre for maintaining the availability of the system;
• to not undertake any business other than transmission business without obtaining prior permission from the ERC;
• to obtain prior approval from the ERC before undertaking any transaction relating to mergers and acquisitions, or assigning its licence;
• to comply with the metering regulations issued by the CEA; and
• to not use assets of the transmission business for any purpose other than the transmission business without obtaining prior permission from the ERC.

Transmission lines that intersperse through forest areas are given right of way for a prescribed area, depending on the voltage of the transmission line. In such cases, the felling of trees is subject to obtaining permission from the local forest officer to maintain electrical clearance, and natural regeneration is to be allowed after stringing. Furthermore, only insulated conductors are to be used for transmission lines passing through national parks/wildlife sanctuaries.

A transmission licensee may obtain easement rights over lands for constructing and operating transmission lines in two ways:

• in terms of Section 67 of the Electricity Act, 2003, where prior consent will have to be obtained from the owner of the land for the right of way; or
• obtaining approval under Section 164 of the Electricity Act, 2003, where right of way may be obtained without prior consent from the landowner or occupier.

In both these cases, the landowners are required to be compensated fairly. Under Section 67, compensation will be determined by the district magistrate or commissioner of police. With respect to Section 164, the central government has issued guidelines for the payment of compensation to landowners for obtaining right of way. The guidelines are applicable for transmission lines of a voltage of 66 kV and above. As per the guidelines, the compensation payable will be equal to 85% of the land value as determined by the district magistrate for the land required for the construction of the tower base area. Furthermore, a maximum of 15% of the land value will be payable as compensation for any diminution of land value in the width of right of way corridor, due to construction of the transmission lines.

One of the key aims of the Electricity Act is to promote competition in the electricity sector, including transmission. There is no legal provision that allows a transmission project developer to have monopolistic rights over a geographical territory. The licence issued for constructing a transmission project only sets out the geographical scope of the project. Given the significant cost involved and the economies of scale associated with transmission projects, transmission companies are “natural monopolies”. However, as discussed in 5.4 Eminent Domain, Condemnation and Expropriation Rights, transmission is a licensed and highly regulated activity and hence a regulated monopoly in India. Furthermore, a transmission licensee is also required to provide non-discriminatory open access to its transmission system for use by any licensee, generating company or any consumer. See 5.7 Open-Access and Non-discriminatory Transmission for more detail.

The Ministry of Power, Government of India, has issued “Guidelines for Encouraging Competition in the Development of Transmission Projects” to encourage competition and private sector participation in the transmission sector. The Central Transmission Utility at the central level and the State Transmission Utility at the state level are responsible for network planning and development, while an Empowered Committee constituted by the Ministry of Power identifies projects to be developed under a Scheme. A developer may propose the construction of a line (which is not a dedicated transmission line), which may be developed after it is included in the network plan.

Although transmission has been open for private sector participation, government-owned company PGCIL, which holds the dual role of transmission planning (as Central Transmission Utility) and execution of inter-state transmission projects, holds a majority share of the inter-state transmission network. However, the government has been taking many initiatives to encourage private sector participation, including encouraging the introduction of electronic competitive bidding for transmission projects and a viability gap funding model on a PPP structure for setting up intra-state transmission networks. Additionally, initiatives such as the National Smart Grid Mission, a green corridor project connecting the southern grid to the national grid, have been undertaken to strengthen and expand India’s transmission networks.

As mentioned in 5.1 Regulation of the Construction and Operation of Transmission Lines and Associated Facilities, transmission business is primarily governed by the Electricity Act, 2003 and the rules and regulations framed thereunder. Depending on whether the project is an inter-state transmission project or an intra-state transmission project, it will also be governed by regulations issued by the respective ERC. Furthermore, the terms of service of a transmission project developer are also subject to its licence conditions and regulations issued by the CEA.

Transmission charges may either be determined by the appropriate ERC or discovered through a competitive bidding process. The tariff determined by the ERC is to be in accordance with the Electricity Act and the regulations notified by said ERC. The general principles for the determination of tariffs are as follows:

• the generation, transmission, distribution and supply of electricity are conducted on commercial principles;
• the factors that would encourage competition, efficiency, economical use of the resources, good performance and optimum investments;
• the safeguarding of consumers’ interest and, at the same time, recovery of the cost of electricity in a reasonable manner;
• the principles rewarding efficiency in performance;
• multi-year tariff principles;
• that the tariff progressively reflects the cost of supply of electricity, and also reduces and eliminates cross-subsidies within the period to be specified by the state or central electricity commission, as the case may be;
• the promotion of co-generation and the generation of electricity from renewable sources of energy; and
• the National Electricity Policy, 2005 and Tariff Policy, 2016.

In the case of the project being developed under a competitive bidding process, the tariff discovered through such bidding is adopted by the respective ERC under Section 63 of the Electricity Act.

As mentioned above, transmission tariffs may be either discovered through a competitive bidding process, which is required to be adopted by the relevant ERC, or determined by the appropriate ERC (the CERC in the case of inter-state transmission and the relevant SERC in the case of intra-state transmission). The relevant ERC determines the tariff in accordance with the tariff regulations issued by it and considers factors including return on equity, interest on loan capital and working capital, depreciation, operation and maintenance expenses, and allowances for any renovation and modernisation.

In the case of inter-state transmission projects, once the charges are determined or discovered, the CERC adopts a “point-of-connection” method for calculating charges to be paid by each user in the transmission system, based on the actual usage. The objective of the “point-of-connection” method is to develop a uniform transmission charge-sharing mechanism among grid constituents. To encourage the deployment of renewable energy, wind and solar projects have been exempted from the payment of transmission charges. However, with declining tariffs of renewable energy, the government is gradually scaling back some of the benefits extended to promote renewable energy. In the above context, exemption from the payment of inter-state transmission charges have been limited to projects being commissioned before 30 June 2025 and supplying power to distribution companies.

For the determination of tariffs, the transmission licensee is required to file an application in the prescribed format with the appropriate ERC, and to publish it. The ERC issues a tariff order considering the proposal made by the licensee and suggestions and objections received in response to the public notice. A tariff order issued by an ERC may be challenged in appeal before the Appellate Tribunal for Electricity.

A transmission licensee is required to provide non-discriminatory open access to its transmission system for use by any licensee, generating company or any consumer. Open access is to be provided upon the payment of transmission charges. The application for open access is required to be made to the Central Transmission Utility/State Transmission Utility as per the regulation issued by the appropriate ERC in this regard. An applicant is first required to apply for connectivity to the transmission network, followed by submitting an application for small/medium/long-term open access, depending on the duration for which access to the transmission network is required. The application for open access is required to be processed within the timeframe provided in the regulations. An open access customer may relinquish its access rights before the expiry of its term by giving notice, and upon the payment of compensation for stranded capacity, as provided in the regulations.

Distribution is primarily governed by the Electricity Act and the rules and regulations framed thereunder (particularly the standards of performance, grid code and the electricity supply code issued by the SERC).

A licence is required for undertaking distribution (other than for the distribution of electricity in rural areas notified by the relevant state government and for distribution by notified exempted entities, such as local authorities and non-governmental organisations). Such a licence will be issued by the appropriate SERC, and the distribution licensee is required to comply with the conditions of the licence.

Other approvals may also be required for the construction and operation of distribution facilities, including:

• approval for laying overhead lines from the appropriate state government;
• a grant of connectivity to the transmission network;
• a grant of open access/permission to use the transmission network;
• approval from the electricity inspectorate for the energisation of electricity installations;
• approvals for electrical installation under the Central Electricity Authority (Measures relating to Safety and Electric Supply) Regulations 2010; and
• approval relating to land acquisition under the LARR Act.

For the purpose of obtaining a distribution licence, an application is required to be filed before the appropriate SERC as per the regulations framed by that SERC. The application would typically require details regarding the area of distribution, the capital proposed to be expended for the business, annual accounts of the applicant, the details of the promoters, and the experience of the company. The application is required to be accompanied by the applicable fee.

The applicant is required to issue a public notice regarding the application in widely circulated newspapers, and any person may file objections in this regard to the SERC. Another public notice is required to be published by the SERC before the granting of the distribution licence.

General and specific conditions may be imposed upon a distribution licensee. The typical terms and conditions imposed in approvals to construct and operate electric distribution facilities include the following:

• the licensee will procure power in an economical manner and as per the applicable regulations;
• the licensee will require prior approval before engaging in any other business, holding any beneficial interest in a trader, making any loans, merging with any other utility, acquiring or taking over the utility of any other licensee, transferring or assigning its licence, or creating any encumbrance on the assets of the licensed business;
• electricity must be supplied in accordance with the regulations specified by the CEA; and
• applications must be made seeking the determination of tariffs in accordance with the regulations issued by the SERC.

A distribution licensee does not have condemnation or expropriation rights to obtain surface rights. In terms of Section 67 of the Electricity Act, read with the Works of Licensees Rules, 2006, a distribution licensee is required to obtain prior consent from landowners/occupiers of land to place electric supply lines, and must pay the requisite compensation or annual rent as determined by the District Magistrate.

If the distribution licensee seeks to acquire land to construct electric distribution facilities, such acquisition will be subject to the provisions of the LARR Act. For further details regarding the procedure under the LARR Act, please see 4.4 Eminent Domain, Condemnation or Expropriation Rights.

A distribution licence is granted for a demarcated geographical area, as per the Electricity Act, but a licence may be granted to two or more persons for the distribution of electricity within the same area. The grant of such licence is subject to the applicant complying with any additional requirements that may be prescribed, including the capital adequacy, credit-worthiness, or code of conduct. While no applicant will be refused the grant of a distribution licence on the ground that there is already a licensee in the same area for the same purpose, there is ambiguity regarding whether parallel distribution licensees are required to set up their own distribution system to distribute electricity in their licensed area.

In 2012, the Appellate Tribunal for Electricity held that a parallel distribution licensee is obliged to lay down a distribution network to supply electricity to consumers. However, the requirement of laying a parallel network was subsequently relaxed by the Appellate Tribunal for Electricity in 2014, which held that in view of Right of Way constraints and techno-economic feasibility, the use of other licensees’ wires is permitted, and the laying of a network is warranted in the case of a new connection or to improve the reliability of the existing distribution network.

It may be noteworthy that the draft amendment to the Electricity Act proposes to segregate distribution and supply activities. If and when it comes into force, distribution licences will be required in order to operate and maintain the distribution network, while the supply licensees will be responsible for the supply of electricity to consumers.

As discussed in 6.1 Law Governing the Construction and Operation of Electricity Distribution Facilities, the distribution of electricity is governed by the Electricity Act, 2003 and the rules and regulations framed thereunder, such as the Indian Electricity Grid Code, the Electricity Supply Codes issued by the SERC, the terms of the distribution licence, etc. Besides the guiding principles set out under the Electricity Act, distribution charges are determined according to the regulations framed by the respective SERCs in this respect. The terms of service of the distribution licensee are as per the provisions of the Electricity Act, 2003, which include the following:

• the licensee must develop and maintain an adequate and efficient distribution system in their area of supply;
• the licensee must establish a forum for the redressal of consumers’ grievances;
• there is a mandatory requirement to provide open access and supply on request, as per Sections 42 and 43 of the Electricity Act, 2003;
• the requisite distribution licence fee must be paid; and
• there is power to recover charges in lieu of supply.

The tariff for electricity distribution, which is a mixture of wheeling charges and cost of supply, is determined by the relevant SERC through the issuance of multi-year tariff orders. In addition, the distribution licensees are required to file tariff petitions before the respective SERCs. These petitions include an analysis of previous years’ tariff regulations, a review of the performance of distribution licensees and approval for the revenue requirement of the distribution licensee for the upcoming year. On the basis of this petition filed by the distribution licensee, the relevant SERC may alter the tariff mentioned in the tariff order.

Tariffs are determined in accordance with the regulations issued in this regard. Please see 5.6 Transmission Charges and Terms of Service regarding the principles that are considered in tariff determinations. Tariff petitions filed by distribution licensees are uploaded on the SERC’s website, inviting objections and suggestions from consumers and other stakeholders. Tariff orders are passed after a prudence check of the claims made by the distribution licensee is carried out, and taking into consideration any objections received by the SERC. Distribution tariffs can differ based on the following:

• the consumer’s load factor;
• the power factor;
• voltage;
• the total consumption of electricity during a specified period;
• the time at which the supply is required;
• the geographical location;
• the nature of the supply; and
• the purpose for which the supply is required.

A tariff order issued by an ERC may be challenged in appeal before the Appellate Tribunal for Electricity.