Recent Developments

A year marked by distribution reforms, renewable auctions and transparent coal allocation norms

There have been a number of noteworthy developments in the power sector in the past twelve months. Policies and programames in the generation segment such as the new coal linkage policy — the Scheme to Harness and Allocate Koyla Transparently in India (SHAKTI) and amendments in the Mega Power Policy, 2009, that broadly aim to ensure optimal coal utilisation at power plants as well as reduce stress for independent power producers (IPPs). On the other hand, key distribution segment developments such the release of the Merit Order Despatch of Electricity for Rejuvenation of Income and Transparency (MERIT) portal aim to lower the power procurement cost for discoms and to strengthen their operational and financial performance. Meanwhile, in the transmission segment, the focus has been on expanding the network and lowering congestion in the country.

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


  • In June 2017, the Cabinet Committee on Economic Affairs approved the new coal linkage policy  – SHAKTI – for the transparent allocation of coal linkages via auctions. Under this, Coal India Limited/Singareni Collieries Company Limited will allot linkages to IPPs through auctions. While IPPs with power purchase agreements (PPAs) will bid for discounts on the existing tariff, IPPs without PPAs will bid at a premium above the notified coal price.
  • Another significant development in the coal-based power generation segment was the notification of the methodology for the use of domestic coal allocated to states by IPP plants in February 2017. The state supplying the coal will invite tariff bids from IPPs for the use of domestic coal from its aggregated coal allocation and the IPPs will supply power to the state in lieu of the transfer of such coal. This policy is in continuation of the Ministry of Power’s (MoP) June 2016 notification as per which the ministry had allowed flexibility in coal utilisation among state and central generating stations.


  • In March 2017, giving a major lease of life to stressed projects, the MoP amended the Mega Power Policy, 2009, for 25 provisional mega power projects aggregating about 32 GW. The time period for furnishing the final mega certificates to the tax authorities to avail of the benefits for importing equipment duty-free has been extended to 120 months (instead of the earlier 60 months) from the date of import. The policy was due to end on March 31, 2017, but has now been extended up to 2022. In the absence of the amendment, developers would have required additional debt or the sponsors would have had to inject equity to settle bank guarantee obligations.
  • Giving a shot in the arm to boiler, turbine and generator (BTG) equipment manufacturers, in January 2017, the MoP extended the timeline for the Central Electricity Authority’s (CEA) advisory to central and state generating companies to incorporate the condition of setting up phased indigenous manufacturing facilities in their bid documents. The advisory (originally issued in February 2010) had expired in October 2015. It has now been extended by three years up to January 2020. Even though the advisory is applicable only to central and state utilities and private sector firms are free to choose BTG suppliers, the changes are expected to have a positive impact on equipment providers.
  • Another key development in the power generation segment was the Supreme Court’s order in March  2017 disallowing Tata Power Company and Adani Power to charge compensatory tariffs on account of the Indonesian coal price hike pertaining to the companies’ respective power plants in Mundra, Gujarat. The court had set aside earlier orders by the Appellate Tribunal for Electricity (April 2016) and the Central Electricity Regulatory Commission (CERC) (December 2016), which allowed compensatory tariffs to the two companies to cover the difference in the coal prices – the price based on coal sales agreements and the price of coal ex-Indonesia. The Supreme Court has directed the CERC to use a fresh approach to resolve the matter.


  • In the renewable energy segment, a key development was the nosediving of solar power tariffs in the various rounds of auctions. In May 2017, in the bidding for the 500 MW Bhadla Phase III solar park in Rajasthan conducted by the Solar Energy Corporation of India, solar power tariffs recorded a new low of Rs 2.44 per unit. ACME Solar bagged 200 MW of capacity (at Rs 2.44 per unit), and SBG Cleantech secured the balance 300 MW (at Rs 2.45 per unit).
  • Meanwhile, in the wind energy segment, the key development was the introduction of the competitive bidding regime. The first reverse auction for wind energy was conducted in February 2017 for 1,000 MW of capacity, which saw prices falling to a record low of Rs 3.46 per unit. Meanwhile, the second round of wind power auctions undertaken in July 2017 for allotting 1,000 MW of wind power capacity attracted bids for 2,898 MW.


  • The chief highlight of the power transmission segment in the past one year has been the award of new projects under the tariff-based competitive bidding (TBCB) mode. Key transmission projects awarded under the TBCB mode in the past 12 months include the Eastern Region Strengthening Scheme XVIII bagged by Power Grid Corporation of India Limited and the Transmission System for North Eastern Region System Strengthening Scheme II (Part B) and V bagged by Sterlite Grid Limited.
  • Other key developments in the transmission segment were in the merger and acquisition space. In October 2016, Adani Transmission Limited (ATL) completed the acquisition of a 74 per cent stake in Maru Transmission Services Company Limited and a 49 per cent stake in Aravali Transmission Services Limited, both of which were owned by GMR Energy. Meanwhile, later in December 2016, ATL executed a share purchase agreement with Reliance Infrastructure Limited for the 100 per cent acquisition of transmission assets of the Western Region System Strengthening Scheme (about 3,100 ckt. km).
  •  With regard to new transmission line projects, the key project commissioned during 2016-17 is the 1,500 MW Pole I of the ±800kV Champa-Kurukshetra transmission system. The project will enable the transfer of power from upcoming IPPs in Chhattisgarh to demand centres in the northern region. Further, amongst state transcos, those of Tamil Nadu, Uttar Pradesh and Telangana added the highest line length during 2016-17. In the private sector, Sterlite Power added the maximum transmission line length. A key project commissioned by the company was the 400 kV DC Purulia-Kharagpur transmission project (January 2017) secured under the TBCB route.


  • Key developments in the power distribution segment pertain to various government schemes that aim to strengthen the segment. In the past 12 months, 13 states/ union territories (UTs), namel,y Madhya Pradesh, Puducherry, Maharashtra, Himachal Pradesh, Assam, Telangana, Tamil Nadu, Sikkim, Meghalaya, Kerala, Tripura, Arunachal Pradesh and Mizoram, have joined the Ujwal Discom Assurance Yojana (UDAY). Meanwhile, with Uttar Pradesh, the most recent entrant in the power for all scheme, the total number of states/UTs under the scheme is 36. Besides this, under the Integrated Power Development Scheme, Rs 165.16 billion has been sanctioned and Rs 33.85 has been released, and under the Deendayal Upadhyay Gram Jyoti Yojana, Rs 414.09 billion has been sanctioned and Rs 41.68 billion has been released.
  • Meanwhile, under the household electrification programme, 24 per cent of the households (42 million) remain to be electrified. Further, in order to track household electrification in the country, the MoP, in December 2016, launched the GARV-II mobile application and web portal.
  • With respect to the performance of various state discoms, as per the MoP’s Fifth Annual Integrated Rating of State Distribution Utilities (covering 41 discoms) released in April 2017, Gujarat’s state discoms have retained the topmost position. In addition, Uttarakhand Power Corporation Limited has also moved to the top slot alongside the Gujarat utilities.
  • Apart from this, in order to enable discoms to optimse their power procurement strategies, in June 2017, the MoP inaugurated the MERIT portal. Jointly developed by the MoP, Power System Operation Corporation Limited and the CEA, the portal provides information on a number of parameters such as the all-India power demand and source-wise generation, the power procurement portfolio of each state, the daily state-wise marginal cost of all power plants, etc.

Conclusion and the way forward

  • Another significant development was the launch of the draft National Electricity Policy by NITI Aayog. Structured in five broad sections covering energy demand, supply (both fossil fuel and non-fossil fuel-based sources), facilitating mechanisms (such as regulators, infrastructure, technology, human resources and overseas engagements), air quality and India’s Vision 2040, the policy aims to chart out a new agenda for the Indian power sector consistent with emerging trends in the energy world.
  • Besides this, some of the key developments that are on the cards in the coming months include the introduction of a new hydropower policy, the launch of the National Open Access Registry and the tweaking of power purchase agreement norms to remove contractual requirements for buyers to pay a fixed cost even if no power is purchased.


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