India: Infrastructure And Energy Sector: Recent Regulatory And Policy Initiatives

Last Updated: 24 October 2016
Article by DSK Legal

In order to give impetus to growth in the infrastructure and energy sector, the Government of India has initiated several changes in the regulatory and policy framework governing the sector during the last financial year. We have in this article discussed the key reforms initiated in the previous financial year.


National Tariff Policy

The amendments in the National Tariff Policy approved by the Cabinet in January are one of the key reforms. As per the official release, "the objective of the amendments is to ensure the 4 Es of Electricity for all, Efficiency to ensure affordable tariffs, Environment for a sustainable future, Ease of doing business to attract investments and Ensure financial viability." The revised tariff policy lays emphasis on the renewable energy production. New coal/lignite projects will have to set up a renewable energy project equivalent to 10% of the generating capacity. The power generated from such renewable energy projects will be allowed to be bundled together with thermal power

for the purpose of determination of tariff and onward sale. Further, the purchase of solar power under Renewable Purchase Obligations (RPO) are proposed to be increased to 8% from the existing 3%, by the year 2019. Further to streamline procurement of renewable energy by Distribution Companies (Discoms), the Central Government is planning to standardize the bidding framework. Inter-state transmission of renewable power will be exempt from transmission charges.

The Government has made procurement of 100% power produced from all the Waste-to-Energy plants in the State by the Discoms mandatory. The Central Electricity Regulatory Commission will determine tariff for composite scheme where more than 10% power is sold outside the State. To avoid taxation ambiguity, any change in domestic duties, levies, cess and taxes in competitive bid projects shall be allowed as pass through cost. The cost of imported coal/e-auction coal for competitively bid power projects will also be allowed as pass through on case to case basis. The State Governments will have to bid out Intra-State Transmission projects exceeding a monetary threshold, which shall be decided by the State Regulator. The cross subsidy surcharge formula has been revised to balance interest of open access consumers and Discoms. It has been envisaged that revision of tariff will be undertaken periodically (monthly / quarterly) which will ensure reduction of the burden on consumer.

UDAY Scheme

The Ujwal Discom Assurance Yojana (UDAY) Scheme aims at operational and financial revival of the state – owned power Discoms including the combined generation, transmission and distribution undertakings. The Scheme seeks to empower Discoms with the opportunity to break even in the next 2-3 years through four initiatives i.e. improving operational efficiencies of Discoms, reduction of cost of power; reduction in interest cost for Discoms and enforcing financial discipline on Discoms through alignment with State finances. 16 states have agreed to join the scheme with ten states having already signed the agreement with the Central Government, latest being Uttarakhand.

PSDF Subsidy Scheme

The Ministry of Power framed a scheme to provide support to stranded gas based power plants and the domestic gas power plants operating at marginal capacity. The scheme has been aimed at providing temporary relief to gas based power plants who are reeling under financial pressure due to non-availability of domestic gas as a result of fall of production in KG basin DG-6 project and high prices of imported gas. The scheme has been sanctioned for two years (2015-17) and the support under the scheme is being provided in the form supply of re-gasified imported liquid natural gas (RLNG), payment of a subsidy from the Power System Development Fund (PSDF) of the Ministry of Power and by various fiscal waivers by the Central and State Government. For each phase, the Ministry conducts auction of the subsidy required from the PSDF on reverse bidding methodology to allocate the available quantity of gas to the power plants. The Ministry has already successfully concluded three phases of the auction under the scheme.

Electricity Amendment Bill, 2015

The bill was drafted with many reforms including splitting of the distribution licence

into separate carriage and content licences. The bill was tabled in Lok Sabha in December, 2014 and later on referred to a standing committee of Parliament. It has been reported that the revised Bill will be reintroduced in Parliament soon.


New Hydrocarbon Exploration and Licensing Policy

The Central Government has approved a new Hydrocarbon Exploration and Licensing Policy (HELP) which will replace the existing licensing policies of New Exploration and Licensing Policy (NELP) and Coal Bed Methane (CBM) Policy. The HELP policy has been designed keeping in mind increasing disputes under the previous policies and recent developments in the sector. The HELP provides for a uniform license for exploration and production of all forms of hydrocarbons, an open acreage policy, an easy to administer revenue sharing model replacing existing model of profit share and marketing and pricing freedom for the crude oil and natural gas produced by the concessionaires.

So far, the exploration licenses for different hydrocarbons were granted separately under separate policy regimes for conventional oil and gas, CBM, shale oil and gas and gas hydrates. Therefore, a concessionaire of an oil field could not extract CBM discovered by it without obtaining a separate licence, which used to increase costs and involved uncertainty of winning that licence. A uniform licence will mean that a concessionaire can extract any kind of hydrocarbon from the field granted to it. It will enable the contractor to explore conventional as well as unconventional oil and gas resources including CBM, shale gas/oil, tight gas and gas hydrates under a single license.

Open acreage policy will give freedom to private participants to come up with a proposal of exploration and development of the fields not identified by the Government. Under the existing system, a private participant can bid for only the fields which are put on auction by the Government. Under the new system, a private participant may request the Government for exploration of any block not already covered by exploration licence. Based on the request of a private participant, the Government may put such blocks on auction.

The revenue sharing model aims at reduction of disputes on recovery of cost and determination of profit. Under the existing Production Sharing Contracts (PSCs) under NELP, the concessionaires were required to share profits. So the Government did not get its share till the profit was made, other than royalties and cesses. The determination of profit required the cost to be accounted for and checked by the Government. The exaggeration of expenses and correctness of the cost used to become contentious. This process of approval and determination had become a major reason for delays and several times led to disputes between the Government and the concessionaires. Therefore the old system of 'profit share' has been replaced with the 'revenue share', which will not require the Government to inquire into the cost to get its share. Further, the Government will start to receive its share from the very first day of the start of the commercial production.

It is expected that the HELP will enhance transparency and reduce administrative discretion.

Policy for extension of PSCs of discovered small and medium sized fields

This policy which has been approved recently, aims at enabling the concessionaires to plan their future investment which will help in optimal exploitation of discovered hydrocarbon for long terms. For extension of PSCs, a contractor is required to make an application to Ministry of Petroleum and Natural Gas (MoPNG) at least 2 years before the expiry date but not more than 6 years in advance. The extension will be subject to changed fiscal parameters. The Government's share of profit for the extended period will be 10% higher than the existing share. The royalties and cess will be payable at prevailing rates and not at concessional rates. For extension of the PSCs, the contractor should be able to demonstrate the availability of balance recoverable reserves through a third party reserves audit report. The extension of these PSCs would be considered for a maximum term of 10 years or remaining economic life of the field, whichever is less. The MoPNG will consider the application based on recommendation of the Director – General of Hydrocarbons (DGH). The DGH is expected to make its recommendation within a period of 6 months and the Government will take a decision within a period of 3 months from receipt of DGH's recommendation.


The Government is contemplating corporatization of the major ports. In this regard, a new bill is being proposed i.e. Major Port Authorities Bill, 2015 to replace the existing Major Port Trusts Act, 1963. Currently, major ports function under a trust structure with a Board of Trustees. The Board of Trustees will be replaced by a corporate body of Port Authority constituted under the new legislation. The new legislation will apply to all major ports of the Central Government i.e. the ports of Chennai, Cochin, Jawaharlal Nehru Port, Kandla, Kolkata, Mumbai, New Mangalore, Mormugao, Paradip, VO Chidambaranar and Visakhapatnam. The bill makes detailed provisions for constitution of management of the Port Authority and its functioning. Under the existing framework, the tariff are based on scale of rates sanctioned by the Tariff Authority for Major Ports. Under the new legislation, each port will have freedom to decide its own tariffs.


In the end of March, National Highway Authority of India (NHAI) has notified a new hybrid annuity model to tackle lack of interest in development of highways under BOT (Toll) models. Under the new model, the life cycle cost (Net Present Value of the quoted project cost and Net Present Value of the Operations and Maintenance (O&M) cost for operation period) will be the bid parameter for selection of the concessionaire. NHAI will pay 40% of the project cost in five equal installments during the project construction. The concessionaire will have to initially bear the balance 60% of the project cost through a combination of equity and debt, which will be paid by the NHAI in semi-annual installments after the completion of the project construction along with an interest at Bank Base Rate plus 3%. The concessionaire will carry out O&M for the concession period for the fees quoted as part of the bid. The concession period has been fixed at construction period plus 15 years. However, the toll collection will be responsibility of the NHAI.

The Cabinet has also approved one time fund infusion by NHAI to revive and physically complete languishing BOT projects. NHAI will provide bridge funding at Bank Base Rate plus 2%. The funding provided will have a first charge on the toll receivables of these projects. For this bridge financing, only projects which have achieved at 50% physical completion will be eligible.

To free up existing investment and promote new investment, the Government has also allowed 100% divestment of equity after two years of construction completion for all BOT projects which were granted before 2009. However, the said divestment will require prior approval of NHAI. The proceeds of such divestment can be utilized by the promoters for completion of other highway projects, power projects or to retire their debt to financial institutions in any other infrastructure project.


While the Government is keen on delivering on reforms, key legislations like Land Acquisition Amendment Bill, Electricity Amendment Bill, etc. are still pending. The Land Acquisition Amendment Bill has faced stiff resistance form the opposition parties and therefore, the Government has already dropped the plan to amend the same and asked the States to take lead in this. Land Acquisition as a subject – matter of legislation falls in concurrent list of the Seventh Schedule of the Constitution of India and therefore, the State Legislatures can also amend the same with approval of the Central Government. The restriction on transfer of captive mines introduced by the Mines and Minerals (Development and Regulation) Amendment Act, 2015 has become roadblock in merger and acquisitions activity in the power sectors and steel sectors. To overcome this, the Government has introduced the Mines and Minerals (Development and Regulation) Amendment Bill, 2016 which is pending in Parliament.

Change in the economic circumstances have led to various disputes between the Government and the concessionaire. This has also forced the concessionaire who had bid aggressively to reconsider their projects' economic considerations. Therefore, in this year's budget, the Government has announced a legal framework for dispute resolution for the sector and a separate policy for re-negotiations of Public Private Partnership (PPP) projects and public utility projects.

The Government must keep the momentum with respect to reforms going to bolster the infrastructure and energy sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions