By Arun Sharma, Chief Executive Officer, Infrastructure Business, Sterlite Power
Prompted by the ambitious goals set out in the National Electricity Plan, a revolutionary transformation is taking place in India’s energy sector. The Central Electricity Authority (CEA) introduced the plan in September 2023 to tackle the rising electricity demands through the expansion of generation and transmission infrastructure. The CEA proposal will add 129,000 ckt km of lines and 710,000 MVA of capacity using HVDC-bipole systems. This will improve grid reliability, in turn, providing consistent power, and reducing fluctuations and blackouts. With this, private developers will be drawn in by cost-effective choices and increased return on investment. However, regulatory hurdles and land acquisition issues may delay projects and increase financial risks for private entities. Overcoming these obstacles is crucial for facilitating ease of doing business, safeguarding the power grid and ensuring continued private sector involvement.
Key areas and solutions for ease of doing business by enhancing capital efficiency
Compliance with rules due to change in law: When changes in law (CIL) affect expenses, these costs are recovered through appropriate judicial orders. Until these orders are finalised, funding comes from high-interest sources, thereby emphasising the need for prompt resolution of CIL disputes. However, several challenges hinder this process. One such hindrance arises during the petition-filing process.In cases of CIL being established due to prevailing judicial precedents, all claims are validated within 60 days of the petition being filed. Non-compliance with the timeline leads to high carrying costs which affects customers.
The recent decision by the Central Electricity Regulatory Commission (CERC) to adjudicate all contract claims (for the entire construction period) into one petition complicates timely verification within the 60-day timeline and improperly places CIL and other contractual claims on the same pedestal. Transmission projects are phased according to the transmission service agreement (TSA) specifications for tariff recovery. In such cases, CIL claims should not be disqualified from compliance with the 60-day verification timeline simply because all elements of the project or the overall project commercial operation date (COD) have/has not been achieved. Therefore, to ensure efficiency and clarity in implementing CIL rules, the Ministry of Power (MoP) may issue appropriate directions with clarifications to simplify the verification and resolution process.
Second amendment to CERC’s sharing regulations: The second amendment to the Sharing Regulations conflicts with the MoP’s directions under the Electricity Act and the TSA. The TSA ensures fair compensation for transmission licensees, even if the CODs of transmission systems and associated generation facilities don’t align. The MoP directions imply that full transmission charges are to be paid to the transmission licensee upon completion of an ISTS element, regardless of the readiness of associated upstream/downstream elements. Current regulations impose extra payments on the transmission licensee for delays beyond COD, despite provisions in the TSA, which the MoP directions uphold. The amendment also fails to address bilateral payments if a transmission element achieves deemed COD, but the power generator does not.
To resolve these discrepancies, transmission licensees should recover 100 per cent of the full tariff for the first six months after achieving deemed COD. Defaulting parties should face only liquidated damages specified in the TSA, with no additional penalties. Also, tariff recovery due to mismatches should be handled via a pool account instead of the current bilateral system to ensure timely payment.
Right-of-way (RoW) portal: Securing RoW clearances is complex and lengthy, often delaying projects. Revised financial RoW compensation guidelines also impact projects significantly. Therefore, it is recommended that the MoP should develop an online RoW management portal jointly with the Department of Telecommunications. Any increase in capital costs due to the introduction of such RoW guidelines should be treated as a deemed CIL event, and relief given accordingly.
Acquisition of substation lands: Substation land for transmission projects should also be eligible for the same benefits given to private renewable energy developers in Gujarat and Rajasthan, such as the deemed NA status. Gujarat categorises renewable energy projects as “bonafide industrial purpose” under Section 65B of the Gujarat Land Revenue Code, 1879, granting 30-year non-cultivation permission for leasehold land.
To conclude, as India’s energy sector advances towards sustainability and improved transmission networks, addressing regulatory uncertainties, streamlining RoW clearances and ensuring smooth land acquisitions are crucial. These measures are vital for grid reliability, achieving national climate goals, ease of doing business and economic growth – ultimately benefiting all stakeholders, including end consumers.