Primary Legislation

The Electricity Act, 2003 (“Electricity Act”) is the primary central legislation governing the generation, transmission, trading, supply and distribution of electricity in India. The Act establishes a unified regulatory framework for the power industry and seeks to promote a competitive market structure, protect consumer interests and incentivise investments.

The Electricity Act is supplemented by: (i) the Electricity Rules, 2005, which provide a detailed regulatory framework for the Act’s effective implementation; (ii) the National Electricity Policy, 2005, which lays down guidelines for accelerated development of the power sector; and (iii) the Tariff Policy, 2016, which establishes principles for attracting investment and ensuring reasonable consumer charges.

Electricity is a concurrent subject under the Constitution of India, meaning both Parliament and State Assemblies may legislate on it. State-level regulations issued by State Electricity Regulatory Commissions (SERCs) also apply within individual states.

The Energy Conservation Act, 2001 further governs obligations relating to energy efficiency and renewable energy consumption by designated consumers.

Unbundling

India’s power sector has undergone unbundling since the enactment of the Electricity Act. The former State Electricity Boards (SEBs) have been restructured into separate generation companies and distribution companies (“Discoms”) across most states.

Power trading is recognised as a distinct licensed activity.

System operation has been similarly unbundled. The National Load Despatch Centre (NLDC), Regional Load Despatch Centres (RLDCs) and State Load Despatch Centres (SLDCs) function as independent system operators, managed by Grid Controller of India Limited (“GRID-INDIA”) (formerly, Power System Operation Corporation Limited (POSOCO)).

The Central Transmission Utility (CTU) and State Transmission Utilities (STUs) operate as standalone transmission utilities.

Ownership by Segment

Generation of electricity has seen significant private sector participation, with private generators holding approximately more than 54% of market share.

Transmission is predominantly controlled by central and state-owned entities due to the high capital investment required; however, several private players also undertake transmission activities.

Distribution of power to end users is predominantly controlled by state-owned Discoms, though in some states distribution is also undertaken by private distribution licensees.

Power trading is typically undertaken by licensed intermediary procurers such as the Solar Energy Corporation of India (SECI), NTPC Limited, etc.

Energy Storage

The Electricity Rules were amended in December 2022 to explicitly recognise Energy Storage Systems (ESSs) as an integral part of the power system.

The Ministry of Power (MoP) issued detailed guidelines in 2022 for the procurement of energy from Battery Energy Storage Systems (BESSs).

As of March 2026, India had 7.2 GW of installed pumped storage projects. The Central Electricity Authority (CEA) has projected a requirement of 208 GWh of battery energy storage by 2030 to enable the seamless integration of increasing renewable energy capacity.

Generation

• Central government-owned: National Thermal Power Corporation Limited, National Hydroelectric Power Corporation Limited, Nuclear Power Corporation of India Limited, Neyveli Lignite Corporation Limited.
• State government-owned: Tamil Nadu Power Generation Corporation Limited, Rajasthan Rajya Vidyut Utpadan Nigam Limited, Haryana Power Generation Corporation Limited, etc.

Transmission

• Central government-owned: Power Grid Corporation of India Limited.
• State government-owned: Gujarat Energy Transmission Corporation Limited, Maharashtra State Electricity Transmission Company Limited, Delhi Transco Limited, etc.

Distribution (State Government-Owned)

Tamil Nadu Power Distribution Corporation Limited, Maharashtra State Electricity Distribution Corporation Limited, Uttar Pradesh Power Corporation Limited, etc.

Procurement/Trading (Central Government-Owned)

Solar Energy Corporation of India Ltd. (for Renewable Energy), NTPC Vidyut Vyapar Nigam Limited.

Finance (Central Government-Owned)

Power Finance Corporation Limited, Rural Electrification Corporation Limited.

Investor-Owned

• Generation: Adani Power Limited, Adani Green Energy Limited, JSW Energy Limited, ReNew Power, Torrent Power Limited and Tata Power Renewable Energy Limited, etc.
• Transmission: Adani Energy Solutions Limited and Sterlite Power Transmission Limited, etc.
• Distribution: BSES Rajdhani Power Limited, BSES Yamuna Power Limited, Tata Power Company Limited, Adani Electricity Mumbai Limited, Torrent Power Limited, etc.
• Trading: Tata Power Trading Company Limited, JSW Power Trading Company, GMR Energy Trading Limited.

Governing Framework

Foreign direct investment (FDI) by a person resident outside India is primarily governed by the Foreign Exchange Management Act, 1999 (FEMA), the Reserve Bank of India’s rules and regulations, and the consolidated FDI Policy (together, the “FDI Regulations”). Under the FDI Regulations, a foreign investor’s equity investment in an Indian entity is permitted only through investment in equity shares, share warrants, or other instruments which are fully, compulsorily and mandatorily convertible into equity shares.

FDI Thresholds and Route

100% FDI in Indian entities engaged in the generation, transmission, distribution or trading of electricity (other than atomic energy) is permitted under the automatic route, meaning no prior approval of the Reserve Bank of India or the Government of India is required. FDI in the renewable energy sector is also permitted up to 100% under the automatic route.

Nuclear power remains excluded from FDI under the automatic route; however, the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Act, 2025 (“SHANTI Act”) enables private participation (including foreign entities) in nuclear facilities subject to certain carve-outs/restrictions mentioned under the Act.

Protections for Foreign Investment

Bilateral investment treaties (BITs) are the principal international law instruments protecting foreign investors. India introduced a revised Model BIT in 2016 providing comprehensive protection against direct and indirect expropriation; where expropriation is unavoidable, the government must provide prompt and adequate compensation. A distinctive feature of the 2016 Model BIT is the requirement for investors to exhaust domestic legal remedies for a five-year period before initiating international arbitration under the investor-state dispute settlement mechanism. Foreign investors also have access to Indian domestic courts, and the Constitution protects against unreasonable state action.

Incentives for Foreign Investment

Several government policies incentivise foreign investment: (i) a waiver of Inter-State Transmission System (ISTS) charges for solar and wind projects commissioned by June 2025 (extended for green hydrogen and offshore wind projects); (ii) Production Linked Incentive schemes for high-efficiency solar PV modules and Advanced Chemistry Cell battery manufacturing; (iii) the Viability Gap Funding scheme providing up to 40% capital cost support for BESSs; (iv) a five-year tax holiday for power generating projects, with a 30% deduction of taxable profits for the subsequent five years; and (v) Ultra Mega Renewable Energy Parks to provide land and transmission to developers.

Governing Legislation

The sale, amalgamation and merger of power sector entities and assets are governed primarily by:

• the Electricity Act, including its provisions on licences, open access, and the power of regulatory commissions to act on adverse effects on competition (Section 60);
• the Competition Act, 2002, which mandates competition review of all combinations meeting specified thresholds;
• the Companies Act, 2013, which governs schemes of arrangement, mergers, and demergers; and
• FEMA, which governs the transfer of assets or shares to foreign persons.

Electricity Sector-Specific Regulatory Approvals

Section 60 of the Electricity Act empowers an appropriate electricity regulatory commission to issue directions where an acquisition or combination will cause an adverse effect on competition in the electricity market.

Competition Law

Transactions meeting the prescribed thresholds under the Competition Act, 2002 require prior notification to and approval from the Competition Commission of India (CCI). The CCI reviews whether the proposed transaction is likely to cause an appreciable adverse effect on competition in India.

Corporate and Other Regulatory Approvals

Schemes of arrangement, mergers and demergers require the approval of the National Company Law Tribunal under the Companies Act, 2013. Listed entities must also comply with the applicable regulations of the Securities and Exchange Board of India, while cross-border transactions are subject to FEMA and the applicable regulations.

Typical Conditions and Purchaser Requirements

The Electricity Act does not prescribe uniform statutory eligibility criteria for purchasers. For projects awarded through tariff-based competitive bidding, the applicable bidding documents prescribe minimum financial and technical qualification requirements, including net worth and sector experience.

The Electricity Act establishes a multi-tier institutional framework for planning, regulation and operation of the electricity sector. The principal authorities include:

• the Ministry of Power (MoP), which formulates the National Electricity Policy and Tariff Policy, issues policy directions under the Electricity Act and oversees the overall development of the electricity sector;
• the Ministry of New and Renewable Energy (MNRE), which formulates policies and schemes for the development of renewable energy, including solar, wind, bioenergy, green hydrogen and energy storage, and supports renewable capacity addition and grid integration;
• the CEA, which acts as the principal technical planning authority, prepares the National Electricity Plan and resource adequacy plans, plans generation and transmission capacity, prescribes technical, grid and safety standards, and advises the Government of India on technical matters;
• CERC and SERCs, which regulate the electricity sector by granting licences, determining tariffs, regulating power procurement and open access, promoting competition and adjudicating disputes within their respective jurisdictions;
• the CTU and STUs, which plan, develop and co-ordinate the inter-state and intra-state transmission systems, respectively;
• GRID-INDIA, which, through the NLDC, RLDCs and SLDCs, ensures secure, reliable and integrated operation of the power system with real-time scheduling and dispatch of electricity; and
• the Appellate Tribunal for Electricity (APTEL), which hears appeals against orders of CERC and SERCs, with further appeal to the Supreme Court of India on questions of law.

The past year has seen significant regulatory developments in India’s power sector, particularly in relation to transmission access, renewable energy procurement, energy storage, captive generation and carbon markets. Key developments include:

• CERC (Connectivity and General Network Access to the Inter-State Transmission System) (Third Amendment) Regulations, 2025: Introduced solar-hour access and non-solar-hour access, enabling renewable energy and energy storage projects to share inter-state transmission capacity based on their generation profiles, thereby improving utilisation of the transmission network.
• CERC (Sharing of Inter-State Transmission Charges and Losses) (First Amendment) Regulations, 2025: Introduced a framework for extension of the Scheduled Commercial Operation Date (SCOD) for eligible renewable energy and battery energy storage projects.
• Guidelines for Virtual Power Purchase Agreements, 2025: CERC introduced India’s first regulatory framework for virtual power purchasing agreements (VPPAs), enabling consumers to procure the environmental attributes of renewable energy without physical delivery of electricity.
• CERC (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2026: Established the regulatory framework for trading Carbon Credit Certificates under India’s Carbon Credit Trading Scheme, creating a regulated market for carbon credits.
• Electricity (Amendment) Rules, 2026: Significantly revised the group captive framework by recognising group company structures for ownership and consumption requirements and introducing a streamlined verification mechanism for captive status.
• CERC (Terms and Conditions of Tariff) (Second Amendment) Regulations, 2026: Introduced a supplementary tariff framework for co-located energy storage systems, providing regulatory certainty for investment in storage assets and enabling monetisation of storage services.
• CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) (First Amendment) Regulations, 2026: Introduced a framework for Renewable Energy Certificates (RECs) under VPPAs, expanded REC eligibility and revised certificate multipliers.
• CERC Supplementary Tariff Framework for Co-Located Energy Storage, 2026: Established a supplementary tariff framework for Integrated Energy Storage Systems co-located with thermal generating stations or inter-state transmission systems.

The government and the CERC have announced several policy initiatives that, if implemented, are expected to materially reshape the power sector. Key initiatives include:

• Draft National Electricity Policy, 2026: Proposes a comprehensive overhaul of the National Electricity Policy, 2005, including greater renewable energy integration, expansion of nuclear capacity, deployment of energy storage, introduction of capacity markets, establishment of Distribution System Operators and measures to improve distribution efficiency and grid reliability.
• Pumped storage hydropower initiative: The MoP has announced a target of developing 100 GW of pumped storage capacity by 2035–36, recognising pumped storage as a critical resource for balancing renewable energy and enhancing grid flexibility.
• National Green Hydrogen Mission and offshore wind programme: The Government continues to implement the National Green Hydrogen Mission targeting 5 million metric tonnes of green hydrogen production by 2030, alongside a roadmap for 37 GW of offshore wind capacity by 2030.
• Capacity market framework: CERC has issued a staff paper proposing the introduction of capacity markets to ensure long-term resource adequacy and incentivise the availability of generation capacity.
• Market coupling: CERC has proposed amendments in the draft CERC (Power Market) (Second Amendment) Regulations, 2026, formally designating GRID-INDIA as the Market Coupling Operator, with the objective of introducing a uniform market-clearing price across power exchanges and improving market efficiency.
• Draft Electricity (Rights of Consumers) Amendment Rules, 2026: Propose a formal demand response framework and phased implementation of Time-of-Day tariffs, enabling greater consumer participation in demand-side management and grid balancing.

Concurrent Constitutional Status

Electricity is a concurrent subject under the Seventh Schedule to the Constitution of India, meaning both Parliament and State Assemblies may legislate on it. This creates a layered legal and regulatory regime where central and state laws co-exist and applicable regulatory frameworks vary by state, a distinctive feature requiring practitioners to navigate both central and state-level requirements for any single project.

Scale and Growth Trajectory

India is the third-largest producer and consumer of electricity in the world, with total installed capacity of 520.51 GW as of January 2026. India’s renewable energy sector added 22 GW of capacity in the first half of 2025 alone (56% year-on-year increase). By July 2025, approximately 50% of installed capacity came from non-fossil fuel sources, achieving a COP26 commitment five years ahead of the 2030 target. India’s solar power capacity has grown from 2.82 GW in 2014 to approximately 140 GW as of January 2026, a 42-fold increase.

International Solar Alliance and Carbon Markets

India leads the “One Sun, One World, One Grid” initiative under the International Solar Alliance, proposing a globally interconnected renewable energy grid.

India’s wholesale electricity market is a hybrid market governed by the Electricity Act, comprising long-term procurement and a short-term market. Most electricity is procured under long-term power purchase agreements (PPAs), with tariffs either determined by the appropriate Commission (CERC/SERC) under Section 62 or adopted under Section 63 following tariff-based competitive bidding. The balance is traded through bilateral transactions and licensed power exchanges.

Power Exchanges

The short-term market operates through the Indian Energy Exchange Limited (IEX), Power Exchange India Limited (PXIL) and Hindustan Power Exchange Limited (HPX), which are regulated by CERC under the CERC (Power Market) Regulations, 2021.

Capacity and Energy Markets

India currently operates an energy-only market and does not have a formal capacity market. Capacity payments are embedded in long-term PPAs through availability-based tariffs.

Pricing and Congestion Management

Electricity traded on power exchanges is cleared at a uniform market-clearing price, while transmission congestion is managed by GRID-INDIA.

High-Load Consumers

Large consumers are served through: (a) Open Access under Section 42 of the Electricity Act; (b) Dedicated Transmission Lines, which allow consumers with loads exceeding 25 MW (ISTS) or 10 MW (intra-state) to build their own lines; and (c) Captive Generation under Section 9.

Electricity Imports and Exports

Imports and exports of electricity are expressly permitted under Indian law. The Electricity Act does not prohibit cross-border trade. Section 66 of the Act empowers CERC to promote market development including cross-border trade, and Section 79 vests CERC with tariff-regulatory power over inter-state trading. The primary subordinate instrument is the Guidelines for Import/Export (Cross Border) of Electricity, 2018, issued by the MoP, with subsequent amendments in 2023 and 2024. CERC issued the Cross Border Trade of Electricity Regulations, 2019.

Cross-Border Trade

India currently imports and exports electricity with Bhutan, Nepal, Bangladesh and Myanmar through dedicated cross-border interconnections. Imports are predominantly hydropower from Bhutan and Nepal, while exports are primarily supplied to Bangladesh.

Approvals

Cross-border transactions require approval from the designated authority under the Guidelines for Import/Export (Cross Border) of Electricity, 2018 (as amended) and compliance with the applicable eligibility conditions. The NLDC acts as the system operator for cross-border electricity trade.

Pricing

Cross-border electricity is traded under long-term government-to-government arrangements, bilateral PPAs, competitive bidding or power exchanges, depending on the nature of the transaction. Tariffs may therefore be government-negotiated, competitively discovered, market-based or determined by CERC, as applicable.

India’s total installed electricity capacity reached 520.51 GW as of January 2026. By July 2025, approximately 50% of installed capacity came from non-fossil fuel sources. Solar power capacity has grown from 2.82 GW in 2014 to approximately 140 GW, a 42-fold increase, making India the third-largest solar power generator globally.

Thermal generation (predominantly coal, supplemented by gas and diesel) continues to account for the largest share of actual electricity generation, even as its share of installed capacity declines relative to renewables. Nuclear power is operated by NPCIL under the Department of Atomic Energy, with the SHANTI Act now opening the sector to private participation. Hydropower remains a significant component, with NHPC as the principal state-owned generator.

India does not prescribe a single fixed numerical percentage cap limiting any one entity’s control of electricity supply. Instead, market concentration is governed through a dual-layer legal architecture: a sector-specific regulator (CERC/SERCs) under the Electricity Act, and a cross-sectoral competition regulator (CCI) under the Competition Act, 2002, both operating concurrently as confirmed by judicial precedent.

Sector-Specific Law

Section 60 of the Electricity Act empowers the appropriate Commission to direct licensees in case of likely abuse of dominant position for inhibiting competition. The CERC (Power Market) Regulations, 2021 use the Herfindahl-Hirschman Index as the primary concentration metric: below 0.15 indicates an unconcentrated market, 0.15–0.25 indicates moderate concentration, and above 0.25 indicates high concentration. These are monitoring tools, not hard statutory caps.

Cross-Sectoral Framework

Section 4 of the Competition Act prohibits abuse of dominant position (being dominant is not prohibited; abusing dominance is). Sections 5 and 6 regulate combinations, with the 2023 amendment introducing a deal value threshold of INR2,000 crore.

Anti-competitive conduct in the electricity sector is principally governed by the Competition Act, 2002, which prohibits anti-competitive agreements (Section 3), prohibits abuse of dominant position (Section 4) and regulates combinations (Sections 5 and 6). In addition, Section 60 of the Electricity Act empowers the appropriate Commission to issue directions where the conduct of a licensee or generating company adversely affects competition.

Regulatory Authorities

The CCI is the primary enforcement authority. It may initiate inquiries suo motu or on receipt of information (Section 19 of the Competition Act), direct the Director General to investigate (Sections 26 and 41), and exercise powers to summon witnesses, require production of documents and, with judicial approval, conduct search and seizure. CERC undertakes surveillance of the power markets (Section 60 of the Electricity Act).

Enforcement and Penalties

The CCI may issue cease-and-desist orders and impose financial penalties (Section 27 of the Competition Act), grant interim relief (Section 33), and enforce settlement and commitment mechanisms (Sections 48A and 48B). Appeals lie to the NCLAT, with a further appeal to the Supreme Court.

The principal legislation governing the construction and operation of generation facilities in India is the Electricity Act. Nuclear power generation is additionally governed by the SHANTI Act. The regulatory framework is supplemented by regulations issued by CERC and the respective SERCs, technical standards prescribed by the CEA, and policies, guidelines and directions issued by the Central and State Governments. The principal regulatory framework includes the following:

• Technical standards: The CEA prescribes technical standards relating to the construction, operation, maintenance, connectivity and safety of generating stations and associated electrical infrastructure.
• Grid Codes: The Indian Electricity Grid Code, 2023 and the applicable State Grid Codes prescribe the technical and commercial framework for scheduling, dispatch, grid security and operation of the power system.
• Connectivity and transmission access: Connectivity to the ISTS is governed by the CERC (Connectivity and General Network Access to the Inter-State Transmission System) Regulations, 2022. Connectivity to the intra-state transmission system is governed by the applicable SERC regulations and procedures issued by the relevant STUs.
• Tariff regulation: Tariffs are regulated under the Electricity Act and the applicable tariff regulations issued by CERC and the respective SERCs. Tariffs are either determined by the appropriate Commission or adopted where discovered through competitive bidding.
• Project development and operation: Generation facilities are also subject to regulations, notifications, procedures and directions issued by the MoP, the MNRE, the Department of Atomic Energy, the CEA, CERC and the SERCs. 

Required Approvals

Obtaining approvals to site, construct and operate a commercial generation facility in India involves a multi-layered regulatory process involving central, state and local authorities. The approvals required vary depending on the nature, size and location of the project. Broadly, the approvals may be categorised as follows.

(a) Pre-establishment (land, environment and project development)

• Land use: Developers must secure rights over the project land and ensure that it can be lawfully used for the proposed purpose. Where applicable, approvals for land conversion, diversion of forest land and other land-related permissions must also be obtained. For example, agricultural land may require conversion for industrial use under the applicable state laws, while projects proposed on forest land require prior approval for diversion of such land under the applicable legal framework.
• Environmental approvals: Conventional generation projects, including thermal, nuclear and specified hydroelectric projects, are subject to a comprehensive environmental approval process. Depending on the nature of the project, this may include an Environmental Clearance from the Ministry of Environment, Forest and Climate Change (MoEFCC) or the State Environment Impact Assessment Authority (SEIAA), Consent to Establish and Consent to Operate from the relevant State Pollution Control Board, and other approvals prescribed under applicable environmental laws. Renewable energy projects are generally subject to a comparatively simplified environmental approval framework, although project-specific approvals may still be required depending on the nature and location of the project.

(b) Grid connectivity and commercial arrangements

• Grid connectivity: Generation projects must obtain connectivity to the ISTS or the intra-state transmission system, as applicable. Connectivity to the ISTS is governed by the CERC (Connectivity and General Network Access to the Inter-State Transmission System) Regulations, 2022, including the General Network Access (GNA) framework.
• Power off-take and open access: Depending on the project structure, developers may be required to obtain tariff adoption or procurement approvals, where applicable, and approvals relating to open access. Electricity may be supplied under PPAs, through open access arrangements or on power exchanges.

(c) Construction and safety approvals

• Construction approvals: Depending on the project, additional approvals may be required for laying associated transmission infrastructure, rights of way, groundwater extraction, highway and railway crossings, aviation clearance and other project-specific requirements.
• Fire and safety approvals: Developers must also comply with applicable fire safety, labour and building requirements during construction.

(d) Pre-operation and commissioning

• Electrical safety: Prior to energisation, approval must be obtained from the Chief Electrical Inspector to Government or the competent electrical inspector.
• Commercial operation: Before commercial operation, the project must also obtain complete testing and grid synchronisation approvals in accordance with the applicable Grid Code and the procedures prescribed by the RLDC or the SLDC, as applicable.

Environmental Impact Assessment

Projects requiring prior environmental clearance are subject to an environmental impact assessment and public consultation under the Environmental Impact Assessment Notification, 2006, unless specifically exempt. Public consultation comprises a public hearing conducted by the relevant State Pollution Control Board and consideration of written representations from affected persons and other stakeholders. The outcome of the public consultation forms part of the environmental appraisal undertaken before environmental clearance is granted by the MoEFCC or the SEIAA, as applicable. Separate public notice requirements may also arise under statutory frameworks.

The terms and conditions imposed under regulatory approvals vary depending on the nature of the generation facility and the approval concerned. Typical conditions include the following:

• Environmental approvals: Compliance with the conditions specified in the Environmental Clearance, including requirements relating to emissions, effluents, water use and conservation, waste management, biodiversity and forest conservation, as applicable, together with periodic monitoring and submission of compliance reports.
• Project development: Compliance with conditions relating to land use, forest diversion, statutory timelines and other project-specific approvals, where applicable.
• Grid connectivity: Compliance with the applicable connectivity regulations, the CEA technical standards, the Indian Electricity Grid Code, the relevant State Grid Code and, where applicable, project implementation milestones prescribed under the GNA framework.
• Technical and safety requirements: Compliance with the applicable electrical safety standards, technical specifications and inspection requirements prescribed under the Electricity Act and the regulations framed thereunder.
• Commercial and operational requirements: Compliance with the applicable tariff framework, commissioning obligations and performance standards, where applicable.

Amendment or Relaxation of Approval Conditions

The procedure for seeking an amendment or relaxation depends on the nature of the approval and the authority that granted it. Where the request relates to a regulatory approval or requirement, the developer may be required to approach the appropriate Commission. For example, developers may seek an extension of the SCOD under the applicable power procurement framework or seek relaxation of connectivity and project implementation timelines under the CERC (Connectivity and General Network Access to the Inter-State Transmission System) Regulations, 2022. Similarly, amendments to environmental approvals are considered by the MoEFCC or the SEIAA, as applicable.

A developer of a generation facility does not have inherent powers of eminent domain or compulsory acquisition. Land required for generation projects is obtained through private negotiations with landowners or through allotment or lease of government land, depending on the nature and location of the project.

Privately owned land is acquired through contractual arrangements, including sale deeds, lease deeds or other conveyance instruments. Government land may be allotted or leased by the relevant state authority in accordance with the applicable land allotment policies. In limited circumstances, where the project is undertaken for a public purpose, land may be acquired by the appropriate government under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“LARR Act”), subject to compliance with the prescribed statutory procedure.

The LARR Act requires payment of compensation to affected landowners and interested persons. Compensation is determined in accordance with the statutory framework prescribed under the LARR Act. The quantum of compensation is calculated based on:

• Base market value: The District Collector determines this based on the average sale price of similar types of land in the vicinity, the registered sale deeds of the preceding three years, or the local minimum guidelines (whichever is higher).
• Multipliers: The base market value is multiplied by a factor (which varies by state and whether the land is rural or urban).
• Add-ons and solatium: Damages for loss of standing crops or trees along with a mandatory solatium.

Power generation is a de-licensed activity, meaning specific regulatory frameworks for decommissioning depend primarily on the energy source and environmental guidelines rather than a single unified statute. Plant closures are largely driven by techno-economic or commercial considerations. Consequently, owners of thermal/renewable facilities currently bear no legal requirement to keep funds set aside during the plant’s operational lifecycle, subject to the following:

• Environmental compliance and waste management: Facility owners must adhere to the Hazardous Waste Management Rules, 2016, the Solid Waste Management Rules, 2016, and the E-Waste Management Rules, 2022. Dismantling requires a comprehensive Environmental Management Plan to manage hazardous materials.
• Nuclear facilities: Unlike thermal and renewable facilities, nuclear plants have strict, federally mandated decommissioning requirements. For instance, Section 10(3)(e) of the SHANTI Act mandates the developer to maintain sufficient financial security to, inter alia, ensure safe disposal of radioactive substances and decommissioning of the facility.

The ownership, construction and operation of transmission lines and associated facilities (including energy storage) is a distinct licensed activity under Section 14 of the Electricity Act. The Act also establishes the framework for transmission planning, open access and non-discriminatory access to the transmission system, while the CEA prescribes the applicable technical and safety standards.

Regulatory Oversight

Inter-state transmission is regulated by CERC, while intra-state transmission is regulated by the respective SERCs. The applicable regulatory framework includes the National Electricity Policy, the Tariff Policy, the CERC (Procedure, Terms and Conditions for Grant of Transmission Licence and Other Related Matters) Regulations, 2024, the CERC (Connectivity and General Network Access to the Inter-State Transmission System) Regulations, 2022, the Indian Electricity Grid Code, 2023 and the applicable State Grid Codes.

Land Acquisition and Right of Way

Section 164 of the Electricity Act empowers the government to confer the powers of a “Telegraph Authority” on transmission licensees. This bypasses the need to acquire land ownership, granting authority to lay lines and build towers over private properties with minimal physical acquisition.

Where permanent acquisition of land is required, such as for substations or certain energy storage facilities, acquisition is governed by the LARR Act.

Environmental Reviews

The grant of a transmission licence is not subject to a separate environmental review. However, transmission projects may require project-specific statutory approvals under Environment (Protection) Act, 1986 and Forest (Conservation) Act, 1980 depending on their location and nature, including approvals relating to forest land, wildlife, coastal regulation zones and other environmentally sensitive areas under the applicable legal framework.

Required Approvals

To construct and operate a transmission line in India, developers broadly require the following approvals.

Techno Economic Clearance

Before applying for Techno Economic Clearance (TEC), the developers must conduct a route alignment survey to minimise the impact on forests, populated areas and the existing infrastructure. A Detailed Project Report (DPR) must be prepared. For inter-state lines, developers are required to obtain TEC from the CEA. The CEA broadly evaluates the DPR, tower design and compliance with grid standards.

Transmission licence

A transmission licence must be obtained under the Electricity Act from CERC for inter-state transmission systems or the relevant SERC for intra-state transmission systems. Applicants are required to satisfy the eligibility criteria prescribed under the applicable licensing regulations, including the requisite technical and financial capability.

Statutory and environmental approvals

• Forest and environmental approvals: Depending on the location of the project, transmission licensees may be required to obtain approvals for the use of forest land, protected areas and other environmentally sensitive locations, and tree felling. For example, where a transmission line traverses forest land, prior approval from the MoEFCC is required under the applicable forest laws.
• Land access and rights of way: Where appropriate, the Government may, under Section 164 of the Electricity Act, confer upon a transmission licensee the powers of a Telegraph Authority to place and maintain transmission lines and associated infrastructure. In addition, where applicable, approval under Section 68 of the Electricity Act may be required for the installation of overhead transmission lines. Compensation for crop loss, tree cutting and other damage is payable in accordance with the applicable legal framework.
• Infrastructure crossings: Depending on the project alignment, additional approvals may be required from the National Highways Authority of India, Indian Railways, airport authorities, defence authorities and other utility agencies where transmission lines cross roads, railway corridors, flight paths or other public infrastructure.

Construction and commissioning

• Safety approval: Before energising, the installation must be inspected and approved by the Chief Electrical Inspector to ensure compliance with electrical safety guidelines.
• Grid integration: Developers are required to co-ordinate with the State Load Despatch Centre (SLDC) or Regional Load Despatch Centre (RLDC) for trial runs and final synchronisation into the grid.

Public Participation

Applications for a transmission licence are subject to the public consultation process prescribed under the applicable licensing regulations. The applicants are required to publish notice of their application in the newspapers. Public comments/suggestions are considered before grant of transmission licence. The regulator (such as CERC/SERC) may approve or reject the application after considering the same. Further, if a transmission project traverses ecologically sensitive forest lands, it triggers environmental reviews where public consultation is mandated.

Role of Regulator

The role of the regulator is primarily economic and market-oriented. It determines transmission tariffs, grants licences for inter-state trading and ensures non-discriminatory open access to the transmission grid. It does not have the jurisdiction to issue environmental clearances or authorise the physical route alignment of transmission lines.

The terms and conditions imposed under approvals vary depending on the nature of the approval and the transmission project. Such conditions include the following:

• Financial: Transmission licensees are required to, inter alia, pay the prescribed licence fee and maintain the requisite technical and financial capability. For projects developed through tariff-based competitive bidding, the project documents may additionally require achievement of financial closure within the prescribed timelines, furnishing of a Contract Performance Guarantee and maintenance of the prescribed shareholding in the project special purpose vehicle for a specified period following commercial operation.
• Government approvals: Transmission licensees are primarily bound to obtain all necessary consents, clearances and permits. This includes securing land for substations, navigating Right of Way issues and obtaining forest, environmental and aviation approvals, as well as approvals for railway or highway crossings.
• Timelines: Transmission licensees are required to commission the transmission system by the prescribed SCOD. Failure to achieve the SCOD may result in contractual and regulatory consequences, including liquidated damages or other remedies under the applicable project documents.
• Availability norms: The transmission facilities are typically required to maintain a near perfect Normative Annual Transmission Availability Factor for AC systems to secure full tariff recovery.
• Safety and quality: The transmission facility must strictly comply with the CEA’s technical, safety and grid connectivity standards. A comprehensive site safety framework is required to be put in place to cover fire prevention, public health and security.
• Regulatory oversight: The transmission licensee is required to submit detailed monthly progress reports to the relevant nodal agency, ie, the CTU for inter-state networks or the STU for intra-state lines, and the CEA throughout the construction phase.
• Project-specific conditions: Additional conditions may be imposed under project-specific statutory approvals. For example, where a transmission line traverses forest land, the approval may require compensatory afforestation, compliance with wildlife protection measures and other environmental mitigation requirements.

The appropriate Commission may amend the terms and conditions of a transmission licence either on its own motion, in the public interest, or upon an application made by the transmission licensee, in accordance with the applicable licensing regulations. Proposed amendments are published for comments or objections before being finalised.

Transmission licensees do not have inherent powers of eminent domain or compulsory acquisition under Indian law. Land required for substations and other permanent infrastructure is generally acquired through negotiated purchase or lease, allotment of government land or, where applicable, acquisition by the appropriate government under the LARR Act.

For transmission lines, the appropriate government may, under Section 164 of the Electricity Act, confer upon a transmission licensee the powers of a Telegraph Authority to place and maintain transmission lines over private or public land without acquiring ownership of the land. The landowner retains ownership, while the transmission licensee is granted a statutory right of user for construction, operation and maintenance of the transmission system.

Compensation

Transmission licensees are required to compensate affected landowners for damage caused during construction and maintenance of the transmission line. Under the MoP’s Right of Way Guidelines, compensation is payable for the tower base area and for diminution in the value or use of land within the transmission corridor, with the applicable rates determined in accordance with the relevant state policy. In practice, transmission licensees generally seek to negotiate rights of way with landowners before invoking powers under Section 164. Disputes relating to access or compensation are ordinarily dealt with by the District Magistrate (DM) or the competent court, as applicable. The DM is empowered to enforce the Right of Way and mandate police protection.

Transmission entities do not enjoy exclusive or monopoly rights to provide transmission services within a specified geographical territory in India. The Electricity Act adopts a non-exclusive licensing framework and does not prohibit multiple transmission licensees from developing or operating transmission systems within the same geographical area, subject to the applicable regulatory approvals. Transmission licences expressly provide that the grant of a licence to one entity does not preclude the appropriate Commissions from granting a licence to another entity for a different transmission system within the same area.

The authority to construct, own and operate transmission facilities is derived from the Electricity Act and is obtained in one of the following ways:

• Deemed transmission licensees: The CTU and the STUs along with certain other entities notified under the Electricity Act are recognised as deemed transmission licensees and are not required to obtain a separate transmission licence.
• Transmission licence: Other entities must obtain a transmission licence from CERC for inter-state transmission systems or the relevant SERC for intra-state transmission systems. Transmission projects are typically awarded either through tariff-based competitive bidding, following which the successful bidder is granted a transmission licence, or under the regulated tariff mechanism in accordance with the applicable regulatory framework (detailed in 4.1 Constructing and Operating Transmission Lines and Associated Facilities).

Notwithstanding the absence of exclusive territorial rights, transmission licensees are required to provide non-discriminatory open access to their transmission systems in accordance with the Electricity Act and the applicable regulatory framework.

Transmission charges and the terms of transmission service are governed by the Electricity Act, the applicable tariff regulations and the regulatory framework prescribed by CERC and the respective SERCs.

Transmission Charges

• Regulated tariff: For transmission projects developed under the regulated tariff mechanism, transmission charges are determined by the appropriate Commission based on the Aggregate Revenue Requirement (see 5.6 Electricity Distribution System Charges and Terms of Service) of the transmission licensee in accordance with the applicable tariff regulations.
• Tariff-based competitive bidding: For transmission projects developed through tariff-based competitive bidding, transmission charges are discovered through the bidding process and adopted by the appropriate Commission under Section 63 of the Electricity Act.
• Sharing and recovery of inter-state transmission charges: The sharing and recovery of inter-state transmission charges are governed by the CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2020 (along with amendments). The Regulations also address the allocation of transmission charges where there is a mismatch between the commissioning of the generating station and the associated transmission system. As a general principle, the entity responsible for the delay bears the corresponding transmission charges.

Terms of Service

Transmission licensees are required to execute transmission service agreements (TSAs) with: (a) their long-term customers or the CTU, in the case of inter-state transmission; and (b) their long-term customers, in the case of intra-state transmission, which provide the terms of the services to be provided by the licensee (in addition to the terms provided in the transmission licence). TSAs govern the commercial terms of transmission service and typically address conditions precedent and subsequent, achievement of financial closure, commissioning milestones, transmission availability obligations, payment mechanisms, change in control restrictions and lenders’ substitution rights.

Transmission service is statutorily mandated to be provided on an open-access and non-discriminatory basis. The CTU and STUs are obligated to grant open access without bias, subject only to available transmission capacity and technical parameters. Users pay transparent, commission-approved transmission charges and wheeling charges to utilise the grid, rather than paying the utility for the electricity itself.

Statutory Framework

Section 38 (for the CTU) and Section 39 (for STUs) of the Electricity Act mandate that all transmission entities must provide non-discriminatory open access to their transmission lines and associated facilities. Transmission licensees cannot arbitrarily refuse access. They function as a public utility; their sole purpose is to plan, operate and maintain the network. A power generator can request transmission access to evacuate power from its plant to the grid for sale. Similarly, a distribution licensee or an open-access bulk consumer can request transmission service to receive electricity supply sourced directly from a generator or a power exchange. Access is granted strictly on the condition that the user pays the applicable wheeling and transmission charges (and, in the case of consumers, an additional open-access surcharge to subsidise state utilities).

Regulatory Approval and Charges

Access must be routed through the relevant nodal agency, such as the CTU for inter-state networks or the STU for intra-state lines, subject to regulations laid down by CERC or the SERC. While the procurement of energy through open access can be cheaper, open access consumers must still pay specific regulated charges to local utilities to use the infrastructure. These include wheeling charges, cross-subsidy surcharges and additional surcharges.

Transmission service rights are non-exclusive. If there are grid or transmission constraints, services are curtailed in an order of priority; namely, short-term open access customers are cut first, followed by medium-term open access customers, while GNA users have the highest priority. Under recent reforms, states and generating stations have the flexibility to acquire, hold and transfer transmission capacity to other parties as market conditions change.

What Constitutes a “Distribution System”?

Under Section 2(19) of the Electricity Act, a “distribution system” is the system of wires and associated facilities between the delivery points on the transmission lines (or the generating-station connection) and the point of connection to the consumer’s installation.

Who May Construct and Operate?

• Distribution companies (“Discoms”): In the ordinary course, these facilities are built and operated by the distribution licensee or deemed licensee, which carries the duty under Section 42 and the powers under Sections 67 and 68.
• Consumers and developers: High Tension or Extra High Tension consumers, such as industrial units, malls, group-housing societies, Special Economic Zones or developers, may construct, own and operate the distribution facilities on their own premises (substation, transformers and internal network) only below a particular delivery voltage. This is permitted provided the conditions in the CEA regulations and the State Supply Code (see below) are met.

Principal Laws

Under the Electricity Act, distribution is a licensed activity (Sections 12 and 14), and the distribution licensee has a statutory duty to develop and maintain an efficient distribution system (Section 42) and a universal obligation to supply on request (Section 43). The distribution licensee is empowered to lay lines and carry out works (Sections 67 and 68). The SERC regulates intra-state distribution under Section 86.

Rules and CEA Technical Standards

• Electricity Rules, 2005: As amended by the Electricity (Amendment) Rules, 2024 (dedicated lines and open-access charges) and 2025 (legal status of energy storage), these govern several aspects of ownership and classification of the distribution network.
• CEA construction and safety standards: The CEA (Technical Standards for Construction of Electrical Plants and Electric Lines) Regulations, 2022 and the CEA (Measures relating to Safety and Electric Supply) Regulations, 2023 prescribe how distribution plant and lines are built, operated and energised.
• Electricity (Rights of Consumers) Rules, 2020: These prescribe service levels for the operation of the distribution system, including connection timelines, metering and time-of-day tariff.

State Supply Codes

Each SERC notifies a Supply Code that specifies the definition of the distribution system and prescribes the technical and commercial conditions of construction and supply.

Storage and Microgrids

• Energy storage: The Electricity (Amendment) Rules, 2025 clarify that an energy storage system may be established independently or as part of the distribution system, and that storage co-located with a distribution asset carries the same legal status as that asset.
• Microgrids and distributed resources: Governed by state mini- and micro-grid policies, SERC Grid Codes, net-metering and rooftop-solar regulations, and CEA connectivity standards for distributed generation resources.

Distribution of electricity is regulated by the SERCs. Therefore, the regulatory process and approvals for constructing and operating distribution networks vary from state to state.

Approvals Required

Approvals vary based on the specific requirements under the applicable regulations of the SERC. Generally:

• for a licensee, the process typically involves:
1. capital-investment approval before the SERC under its licence conditions and/or tariff regulations;
2. municipal and local-authority permissions for street works and right of way under Section 67 of the Electricity Act read with the Works of Licensees Rules, 2006;
3. forest clearance where forest land is passed through; and
4. the Electrical Inspector’s approval; and
• for a consumer or developer, the process typically involves: 
1. sanction of load and a connection agreement with the licensee (for High Tension/Extra High Tension consumers, the Agreement may have to be approved by the SERC concerned);
2. approval of substation drawings;
3. execution through an approved contractor, testing; and
4. the Electrical Inspector’s approval before the licensee energises the installation.

Public Participation

Public participation arises at the licensing stage, where the application for grant of a licence is published and objections from the public are invited (Section 15 of the Electricity Act). 

Also, in tariff determination proceedings where the licensee submits its petition for determination of tariff along with the capital expenditures under Section 62, the SERC directs the licensee to invite comments on the petition through publication and conduct a public hearing under Section 64.

Environmental Clearances

Distribution has a limited environmental footprint and is not ordinarily subjected to a project environmental assessment, a clearance being required only for forest land. SERC grants licence and approves investment itself, rather than merely recommending, while safety approvals rest with the CEA and the State Electrical Inspectorate. If electricity connections are granted to premises that are not approved or are in violation of the environmental clearances, the authorities concerned issue directions to the licensees to disconnect the electricity supply to such premises.

Timelines

The licence is ordinarily granted within a few months if all conditions are satisfied. Different SERCs have their own specified timelines and processes for grant of electricity connections. Where a new substation or augmentation is required, the period is longer.

There are separate conditions governing the construction, operation and maintenance of distribution assets. These conditions bind not only the distribution licensee but also a consumer or developer that builds and operates distribution facilities on its own premises.

Construction Conditions

Construction must conform to the CEA (Technical Standards for Construction of Electrical Plants and Electric Lines) Regulations, 2022 and the technical conditions of the State Grid Code and Supply Code. The person carrying out the execution of the works is required to obtain approval for the drawings through licensed electrical contractors.

A licensee’s network expansion additionally requires capital-investment approval from the SERC under its licence conditions and tariff regulations.

Operation, Maintenance and Grid Security

Operation and maintenance is governed by the SERC Grid Code, Supply Code, Performance Standard Regulations and CEA Safety Regulations, 2023 providing the requirements for maintenance, periodic inspection, testing and clearances, namely:

• Compliance with the State Grid Code notified by the SERC and, to the extent applicable, the Indian Electricity Grid Code notified by CERC, which govern planning, connectivity and secure operation.
• The directions of the SLDC are binding under Section 33, and those of the RLDC under Sections 28 and 29, for integrated operation, scheduling and dispatch.
• Demand management, estimation and forecasting, drawal of power within schedule, adherence to the Merit Order Despatch, load-shedding directions, and compliance with the CEA Grid Connectivity Standards. Deviations attract charges under the deviation-settlement mechanism and may invite penal action.

Licence Conditions

The distribution licence itself stipulates conditions for supply of electricity and binds the licensee to the universal service obligation under Section 43, subject to:

• Compliance with the Supply Code, the State Distribution Code and the standards of performance, with automatic compensation to consumers for specified failures.
• Compliance with the Electricity (Rights of Consumers) Rules, with grievance redressal through the Consumer Grievance Redressal Forum and the Electricity Ombudsman under Section 42.
• Annual filing of the Aggregate Revenue Requirement and adherence to the capital-investment guidelines and procurement guidelines, including obligations under the Revamped Distribution Sector Scheme for the state-owned Discoms.

Amendment, Relaxation and Revocation

A licence may be amended under Section 18, on the licensee’s application or by the SERC on its own motion, after publication and the inviting of objections. It may be revoked under Section 19 or surrendered under Section 20.

Relaxation of a licence condition or a condition under the applicable regulations is sought by petition before the SERC. Relaxation of a technical condition other than the licence or the SERC regulations is sought from the authority that imposed it (for example, the CEA or Electrical Inspector).

No Expropriation Rights

A distribution licensee does not acquire land by eminent domain or expropriation. Rights to use the land for installation of distribution assets are obtained:

• through right of way for the network from the municipal or land-owning agencies concerned;
• through a licence for the right to use the land granted by the State Government; and
• from the consumers who request the installation or shifting of the distribution assets on their premises.

What the Statutory Works Powers Are

The Electricity Act confers on a licensee the right to carry out the work of installation and repair of distribution assets including the following:

• Works in streets: In terms of Section 67 read with the Works of Licensees Rules, 2006, the licensee may open and break up streets and lay cables, mains and poles with the consent of the appropriate Government or local authority.
• Telegraph Authority powers: Under Section 164, the appropriate Government may grant the licensee powers of a Telegraph Authority under the Indian Telegraph Act, 1885 to place and maintain lines and posts over private and public land without acquiring it.
• Overhead lines: Under Section 68, a licensee is empowered to install and maintain overhead electric lines, subject to prior approval by the appropriate Government.

The Land-Licence Model

Most land underlying the distribution network is held not in ownership but under a land licence from the Government. The terms may differ between public and privatised utilities:

• Where the licensee is a government department or a state-owned company, the State Government makes land available to it on a concessional or economical basis under a government policy.
• Where a private company takes over the distribution business, the right to use the existing government land has been transferred to it through a statutory Transfer Scheme. The Discom uses the land under a licence from the Government on payment of a licence fee.

Compensation

Compensation for damage to trees, crops and structures is determined under Section 67 of the Electricity Act read with the Works of Licensees Rules, 2006 and Sections 10 and 16 of the Indian Telegraph Act, 1885.

A distribution licensee is allowed to supply and distribute electricity to consumers in a specified area of supply within which it carries the universal obligation to supply. This is not an absolute monopoly, because the Electricity Act permits the SERC to grant licences to more than one distribution licensee (a parallel licence) in the same area.

How the Rights Are Obtained

• By licence: The right is conferred by the SERC through a licence under Section 14 specifying the area of supply.
• Deemed licensees: State distribution utilities are deemed licensees under the provisos to Section 14 without a separate grant.
• Parallel licensees: The sixth proviso to Section 14, read with Section 15, permits the SERC to license more than one distribution licensee in the same area.

Capital Adequacy and Eligibility

An applicant seeking a distribution licence or parallel licence must satisfy the Distribution of Electricity Licence (Additional Requirements of Capital Adequacy, Creditworthiness and Code of Conduct) Rules, 2005. These require a minimum area of supply (a municipal corporation area, three adjoining revenue districts, or a smaller area as notified), capital adequacy of at least 30% equity of the capital investment required for the network in that area, and the creditworthiness to raise the balance.

Parallel Licence, Franchisees and Trading

The exclusivity is further qualified by alternative supply structures including the following:

• A parallel licensee may serve the same area by laying its own network or by supplying over the existing Discom’s network on payment of wheeling charges and a surcharge.
• A distribution franchisee may be appointed by a licensee under Section 14 to distribute in part of its area without a separate licence.
• A licensee may trade or sell electricity to another licensee.
• Open access allows large consumers to source supply from third parties.

Even within its area, a licensee is subject to competition discipline under the Electricity Act itself.

Section 60 empowers the appropriate Commission to act against abuse of a dominant position, anti-competitive agreements or combinations, and Section 66 directs it to develop the market, including trading. The Electricity Act is a self-contained code under which the specialised regulators secure transparency, competition and consumer protection, so that competition issues intrinsic to electricity are addressed by the Commissions.

Charges Are Set by the State Regulator

Distribution charges and terms of service are determined by the SERC under Sections 62 and 86 of the Electricity Act, not by the utility. The principal charges are the retail supply tariff payable by consumers, the wheeling charge for use of the distribution network by open-access consumers, and the cross-subsidy and additional surcharges under Section 42.

Regulatory Principles

Rate-setting principles are laid down in Section 61, read with the National Electricity Policy and the Tariff Policy. Rates must reflect the cost of supply, allow a reasonable return, safeguard consumers, progressively reduce cross-subsidies, and be just, reasonable and non-discriminatory as between consumers of the same category supplied on similar terms.

Methodology

Tariffs are set on a cost-of-service basis under SERC’stariff regulations. The licensee files an Aggregate Revenue Requirement comprising power-purchase cost, operation and maintenance expenses, depreciation, interest and a regulated return on equity, net of non-tariff income; costs are classified as controllable and uncontrollable and trued-up annually against actuals.

Process, Appeal and Complaints

• Tariff process: Under Sections 62 to 64, the petition is published, objections are invited and a public hearing is held before the SERC issues a tariff order. SERCs have framed their respective tariff and business plan regulations, which detail the entire process for determination of the tariff. An alternative route for tariff adoption is provided under Section 63, whereby the parties can undertake competitive bidding and arrive at a discovered tariff which is then adopted by the regulator concerned.
• Right of appeal: Any order passed by the SERC or CERC may be appealed before the APTEL under Section 111, and thereafter to the Supreme Court on a substantial question of law under Section 125.
• Complaints: Individual grievances are addressed by the Consumer Grievance Redressal Forum and the Electricity Ombudsman under Section 42(5) to (7) read with the applicable SERC regulations.