Projects, Infrastructure And Energy Newsletter | January 2026

We are pleased to present the fourth edition of the Infrastructure, Projects and Energy Newsletter. This edition captures the major judicial pronouncements and key regulatory developments across the renewable energy, road, electricity, power, oil and gas sectors. Through this newsletter, we seek to highlight the shifting regulatory and legal frameworks and equipping stakeholders with strategic insights.

Judicial Pronouncements

CERC orders Reduction of GST Rate on Procurement of Renewable Energy Devices and Parts for Manufacturers.

The Central Electricity Regulatory Commission (“CERC”) issued a suo-motu order on November 4, 2025, addressing the effects of the Government of India's reduction in Goods and Services Tax (“GST”) \ on procurement of renewable energy devices and components, from 12% to 5%. This tax reduction, announced by the Ministry of Finance through Notification No. 9/2025-Central Tax Rate on September 17, 2025, and effective from September 22, 2025, (“Notification”) resulting in a change in cost of the inputs of goods required for renewable projects.

CERC regulates tariff determination for central generating companies and projects supplying electricity across state borders. Whenever there is an amendment to statutory taxes that influences the overall cost of these projects, the Commission adjudicates claims and determines tariff adjustments under the “Change in Law” clauses present in Power Purchase Agreements (“PPAs”).

The Commission has observed that a reduced GST rate of 5% (down from 12%) will apply to projects where bids were submitted before September 22, 2025, provided invoices for goods/services are raised or payments are made on or after that date in part or in whole. This aims to pass on cost savings, necessitating a clear correlation between projects, supplies, and invoices. Consequently, monthly tariffs or charges must be adjusted or refunded in line with Notification from the date of occurrence of such event.

CERC directed that both renewable generating stations and distribution licensees must consider the GST impact of the reduced GST rates before seeking further tariff determination or compensation from CERC under the provision of Change in Law as contained in the relevant provisions of PPAs read with Section 63 of the Electricity Act, 2003.

DLL Analysis

The order signifies a proactive measure to ensure the benefits of tax reductions are effectively passed through to consumers and project developers. By mandating the application of the reduced 5% GST rate CERC aims to safeguard project economics and prevent undue enrichment. CERC encourages procedural transparency, insisting that claims regarding reduced project expenditure be fully documented and verified by independent auditors. By delineating these requirements, the order fosters regulatory predictability and stability for the sector, and it sets clear expectations for how future decreases or increases in indirect taxation will be managed in relation to electricity tariffs.

Case Title: CERC Suo-Moto Order on Reduction of GST Rate on Renewable Devices-Petition No. 13-SM-2025, Order dated November 4, 2025.

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APTEL Dismisses Review Petition, Clarifies Impact of IBC Moratorium on PPA Termination Rights

The Appellate Tribunal for Electricity ("APTEL") dismissed a review petition filed by the Southern Power Distribution Company of Telangana Limited ("Petitioner"), seeking to review the Tribunal's judgment dated January 24, 2024. The original judgment had upheld the Telangana State Electricity Regulatory Commission's order granting M/s Kranthi Ediffice Private Limited ("Respondent No. 2") a 90-day extension to achieving the Scheduled Commercial Operation Date (“SCOD”) for its 10 MW solar power project.

The Petitioner sought review on the ground of discovery of new material facts, specifically that the National Company Law Tribunal (“NCLT”), Hyderabad had admitted an insolvency petition against Respondent No. 2 on June 27, 2022, and imposed a moratorium under Section 14 of Insolvency and Bankruptcy Code, 2016 (IBC). The Petitioner argued that this concealment was material because, under Article 10.1.2(a) of the Power Purchase Agreement (PPA), the initiation of insolvency proceedings constituted an "Event of Default," precluding the PPA amendment directed by the Tribunal.

APTEL held that the mere existence of the NCLT order imposing a moratorium did not constitute a sufficient ground to exercise review jurisdiction. APTEL noted that while insolvency proceedings are ongoing, no final order has been passed declaring the Respondent No. 2 bankrupt or insolvent. The Tribunal reasoned that the NCLT order prohibited suits against the corporate debtor, whereas the subject appeal was filed by the Petitioner; thus, the continuation of the appeal did not prejudice the Petitioner's rights. Regarding the "Event of Default" argument, APTEL clarified that Article 10.1.2(a) of the PPA requires bankruptcy proceedings to remain uncontested for 30 days or a final bankruptcy order to be passed. As the Petitioner failed to demonstrate that the proceedings were uncontested for the requisite period or that a final insolvency order had been passed, the alleged default was not established. While the Tribunal noted that Respondent No. 2 ought to have disclosed the insolvency proceedings, it concluded that such disclosure would not have altered the outcome of the appeal.

DLL Analysis

This judgment provides critical clarity on the intersection of the IBC and contractual termination rights in infrastructure projects. APTEL has strictly interpreted the "Event of Default" clause, distinguishing between the admission of an insolvency petition (commencement of CIRP) and a final adjudication of bankruptcy or uncontested insolvency proceedings. By ruling that a standard IBC moratorium does not automatically trigger termination rights under a PPA unless specific contractual conditions (like the 30-day uncontested period) are met, the Tribunal has protected the value of the Corporate Debtor's assets in this case, the PPA itself. Furthermore, the decision reinforces the principle that Review jurisdiction cannot be used to re-litigate issues based on "new evidence" unless that evidence is of such a character that it would have fundamentally altered the original decree.

Case Title- Southern Power Distribution Company of Telangana Limited v. M/s Kranthi Ediffice Private Limited & Anr. Review Petition No. 14 of 2025 in Appeal No. 133 of 2021

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Supreme Court Holds Continuous Open-Cycle Supply as “Firm Power”, Upholds Payment of Fixed Charges

The Supreme Court, in Tamil Nadu Generation and Distribution Corporation Ltd. (“TANGEDCO”) v. M/s Penna Electricity Limited, on December 16, 2025 held that electricity supplied on a continuous basis from a gas turbine operating in open cycle mode constitutes “firm power” and not “infirm power”, even if the combined cycle project has not achieved its final Commercial Operation Date (“COD”) under the Power Purchase Agreement (“PPA”).

The dispute arose from an amended PPA dated August 25, 2004 between TANGEDCO and Penna Electricity. Penna Electricity commenced continuous supply from its gas turbine in open cycle mode upon synchronization with the grid on October 29, 2005. TANGEDCO treated such supply as infirm power and paid only variable charges, contending that COD was achieved only on 1 July 2006 when the combined cycle configuration became operational.

The Tamil Nadu Electricity Regulatory Commission and the Appellate Tribunal for Electricity ruled in favour of Penna, holding that the supply during the relevant period was firm power and that fixed charges were payable on pro rata-basis in accordance with the PPA. TANGEDCO appealed to the Supreme Court against the order of Appellate Tribunal for Electricity.

The Supreme Court noted that the amended PPA of August 25 2004 was virtually a new agreement and was executed after the Electricity Act, 2003, came into force and was not approved under Section 86(1) (b). Applying the regulations, the Court concluded that since the Gas Turbine unit was synchronized on October 29, 2005, had completed its trials, and was supplying power continuously and reliably, the power generated was "firm power." Denying fixed charges for this period would be unjust and contrary to the mandate of Section 61(d) of the 2003 Act, which ensures recovery of electricity costs in a reasonable manner. The Supreme Court held that electricity supplied continuously after successful synchronization and completion of trials could not be treated as infirm power and hence, Penna Electricity was entitled to recover the fixed charges for the relevant period.

DLL Analysis

This judgment reinforces that tariff determination and COD classification are governed by statutory regulations, not unapproved or misaligned PPAs. Continuous supply after unit-level commissioning will be treated as firm power, entitling generators to fixed charges. Distribution licensees cannot rely on project-level COD definitions to deny fixed charges once power is drawn and utilised on a firm basis. The ruling underscores the importance of regulatory approval and alignment of PPAs with applicable tariff regulations.

Case title: Tamil Nadu Generation and Distribution Corporation Ltd. v. Penna Electricity Limited

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Regulatory Updates

Guidelines for Virtual Power Purchase Agreements

The Central Electricity Regulatory Commission (“CERC”) published India's first set of Guidelines on Virtual Power Purchase Agreements (“Guidelines”) on December 24 2025. These guidelines were issued under Regulation 54(3) of the Central Electricity Regulatory Commission (Power Market) Regulations, 2021.

Key features include:

• A Virtual Power Purchase Agreement (“VPPA”) has been defined as a non-tradable, non-transferable bilateral over the counter (“OTC”) contract between a Renewable Energy Generating Station (“REGS”) and a consumer or designated consumer.
• Consumers or designated consumers shall enter into VPPAs as a bilateral OTC non-tradable and non-transferrable contract on mutually agreed terms and conditions.
• The VPPA shall have a duration of minimum one year.
• RECs transferred to the Consumer or Designated Consumer shall not be eligible for trading.
• The electricity generated by REGS shall be sold through any mode authorised under the Electricity Act, 2003, or the Power Market Regulations, 2021 as per mutually agreed terms and conditions. Such sale shall be for purposes other than Renewable Purchase Obligation (“RPO”)/ Renewable Consumption Obligation (“RCO”).
• Payment Terms: The difference between the VPPA price and the settlement price shall be settled bilaterally between the contracting parties in accordance with mutually agreed terms and conditions.
• The REGS capacity contracted through VPPA shall be eligible for issuance of Renewable Energy Certificates (“RECs”) upon registering in accordance with and in terms of the eligibility conditions specified in the REC Regulations.
• RECs issued to the REGS shall be transferred to the consumer or the designated consumer with whom such REGS has a contract under VPPA.
• The REGS shall submit an undertaking for capacity contracted through VPPA to the REC Registry to avoid any double accounting of the said REGS capacity.
• Disputes arising from a VPPA must be resolved mutually by the contracting parties as per the terms of the contract.

DLL Analysis

These guidelines establish a transparent and credible framework for contracting renewable energy through bilateral agreements. By defining VPPAs the guidelines ensure traceability and market integrity. The mutual dispute resolution mechanism empowers contracting parties to resolve issues collaboratively, fostering trust and accountability. By defining eligibility, pricing mechanisms, settlement procedures, and REC treatment, these guidelines are expected to foster a more transparent and robust market, ultimately accelerating India's transition to renewable energy.

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Government Introduces the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANETI) Bill, 2025.

The Government of India introduced the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANETI) Bill, 2025 (“Bill”) on December 15, 2025, with an aim to replace the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010, establishing a comprehensive structure to support India's clean-energy transition and the target of achieving 100 GW nuclear capacity by 2047.

Key features of the Bill are as follows:

• The Bill introduces a significant paradigm shift by permitting private sector participation in the nuclear sector, allowing private companies including any company except a company incorporated outside India; joint ventures between government entities and private companies and any other person expressly permitted by the central government to undertake building, owning, or operations a nuclear plant or reactor and fabrication, transport, trade or storage of nuclear furl. However, the Central Government retains exclusive control over sensitive fuel-cycle activities, including enrichment, reprocessing of spent fuel, and heavy water production.
• The Bill strengthens the regulatory landscape by granting statutory status to the Atomic Energy Regulatory Board (“AERB”), ensuring its independence and authority to issue licenses and safety authorizations for nuclear energy production and radiation applications. It also provides a framework for regulating applications of nuclear and radiation technology in healthcare, food, and agriculture, industry, research and other non-power uses.
• The Bill integrates and refines the liability regime. The operator of a nuclear installation is held liable for nuclear damage caused by a nuclear incident detailed under Clause 11 of the Bill. The maximum liability for each nuclear incident shall be the rupee equivalent of 300 million Special Drawing Rights (“SDRs”) or such higher amount as the Central Government may specify by notification. The operator's specific liability is detailed in the Second Schedule based on the installation's category. The Central Government shall take additional measures if the compensation exceeds rupees equivalent to 300 million SDR including seeking funds under the Convention on Supplementary Compensation for Nuclear Damages. Further Central Government shall also be liable for damages exceeding the operator's liability limit and in cases of grave natural disasters or acts of armed conflict. The operator retains a right of recourse where it is expressly provided for in a written contract or if the incident results from an intentional act to cause damage. The Bill establishes a clear process for adjudicating claims for compensation in respect of nuclear damage through a designated Claims Commissioner or, in severe cases, a specially constituted Nuclear Damage Claims Commission.
• The Bill introduces a new, structured mechanism for dispute resolution. The Atomic Energy Redressal Advisory Council will be established to review orders and decisions from the Central Government or the Board. Furthermore, the Appellate Tribunal for Electricity will serve as the designated appellate body for hearing appeals against orders from the Council, ensuring a specialized and expedited hearing process.

DLL Analysis

The SHANETI Bill, 2025, represents a critical modernization of India's nuclear energy governance, moving away from a strict state monopoly to a hybrid model that leverages private sector efficiency while retaining sovereign strategic control. The shift to a graded liability framework offers a more practical and equitable approach to risk management, likely encouraging greater private investment in advanced technologies.

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Ministry of Power Issues Comprehensive Policy for Biomass & Torrefied for Power Generation through Co-Firing.

Ministry of Power released a consolidated policy, mandating the co-firing of biomass pellets and torrefied charcoal derived from municipal solid waste (“MSW”) in coal-based thermal power plants (“TPPs") on November 7, 2025, titled as the Comprehensive Policy for Utilization of Biomass & Torrefied Charcoal made from Municipal Solid Waste for Power Generation through Co-firing in Coal based Thermal Power Plants (“Policy”). This new framework supersedes the earlier policies issued in October 2021 and June 2023, aiming to integrate unmanaged municipal waste and surplus agricultural residue into the energy mix to support the Swachh Bharat Mission and reduce carbon emissions.

The Policy establishes distinct compliance mandates based on location effectively from the financial year 2025-26. TPPs located within the National Capital Region (“NCR”) are required to use a 5% blend of biomass pellets along with an additional 2% blend of either biomass pellets or torrefied MSW charcoal annually. For TPPs location in the NCR and Adjoining Areas, the policy stipulates that at least 50% of the raw material in these pellets must consist of stubble, straw, or rice paddy crop residue sourced exclusively from the NCR and adjoining regions. TPPs other regions are mandated to co-fire 5% blend either from biomass pellets and/or torrefied MSW charcoal along with coal. TPPs seeking exemptions/relaxation from the above mandate may be considered on a case-by-case basis, based on recommendations for Central Electricity Authority (“CEA”) and subject to examination by a committee comprising representatives from the CEA, Commission for Air Quality Management (“CAQM”), National Thermal Power Corporation Limited (“NTPC”), Bharat Heavy Electricals Limited (“BHEL”), Central Power Research Institute (“CPRI”), Ministry of Agriculture and Scheme for Capability Building in Textile Sector (“SAMARTH Mission”).

To address financial viability, the policy outlines tariff determination mechanisms. For TPPs governed under Section 62 of the Electricity Act, 2003, the costs due to co-firing of biomass pellets/torrefied MSW charcoal shall pass through the Energy Charge Rate (“ECR”). For plants under Section 63, increase in ECR can be claimed under "change-in-law" provisions or passed through the ECR if the Power Purchase Agreement permits. Additionally, obligated entities can fulfill their Renewable Purchase Obligations (“RPO”) by purchasing power generated from such co-firing.

DLL Analysis

The Policy represents an aggressive push to solve crises like agricultural stubble burning and unmanaged municipal waste through a single energy intervention. By mandating the use of NCR-sourced crop residue, the government aims to target the region's severe air pollution issues. The success of this policy will likely depend less on the mandate itself and more on whether the government can build a "clean" supply chain ecosystem for MSW segregation and processing, similar to the National Biomass Mission, to prevent shifting pollution from landfills to power plant chimneys.

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CERC (Cross Border Trade of Electricity) (Second Amendment) Regulations, 2025

The Central Electricity Regulatory Commission (“CERC”), on December 9, 2025, notified the CERC (Cross Border Trade of Electricity) (Second Amendment) Regulations, 2025 (“Amendment Regulations”) in exercise of its powers under Sections 66 and 178 of the Electricity Act, 2003. The Amendment Regulations comprehensively revise the regulatory framework governing cross-border electricity trade between India and neighboring countries, with the objective of aligning cross-border transactions with India's domestic transmission access and market regime.

The Amendment Regulations, inter alia, provide for:

• Replacement of the existing long-term, medium-term and short-term open access framework with the General Network Access (“GNA”) and Temporary GNA (“T-GNA”) regime;
• Detailed regulatory framework for connectivity, GNA and T-GNA for cross-border entities and utilization of spare capacity in Indian portions of dedicated cross-border transmission systems developed, operated and maintained by generating station located in neighboring county, by other entities under open access subject to payment of transmission charges;
• Introduction of a comprehensive bank guarantee and financial discipline framework for grant of connectivity or GNA or T-GNA, including application and access bank guarantees, along with clear consequences for withdrawal, delays, or relinquishment of access;
• Codification of risk allocation and liability in cases of delay in commissioning of generation or transmission assets, including liability for transmission charges prior to COD in specified circumstances;
• Strengthening of operational, communication, and cyber-security obligations applicable to cross-border transmission assets and users, aligned with domestic grid governance standards. The Amendment Regulations also introduce a structured curtailment priority framework for cross-border transactions, integrating bilateral and market-based transactions under real time market;
• Designating the Central Transmission Utility (“CTU”) as the nodal agency for procedural implementation.

DLL Analysis

The Amendment Regulations represent a significant overhaul of India's cross-border electricity trade regime by fully integrating such transactions into the GNA-based access and transmission framework applicable to domestic users. By harmonising access rights, charges, curtailment principles, and financial discipline, the Regulations enhance transparency, predictability, and grid security for cross-border power flows. The reforms are expected to improve utilisation of cross-border transmission infrastructure, facilitate greater participation by traders and generators, and strengthen India's position as a regional electricity trading hub, while providing long-term regulatory certainty for cross-border power projects and investors.

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Draft Guidelines for Implementation of Battery Pack Aadhaar System

The Ministry of Road Transport & Highways (“MoRTH”) released draft Guidelines for Implementation of Battery Pack Aadhaar System (“Guidelines”) on December 31, 2025, an initiative designed to give every battery a unique digital identity. Much like the Aadhaar card for Indian citizens, this system aims to assign a unique 21-character alphanumeric code to battery packs known as the Battery Pack Aadhaar Number (“BPAN”), ensuring they can be traced from the moment they are manufactured until they are recycled or disposed of. This framework is primarily focused on electric vehicle (“EV”) batteries and large industrial batteries, addressing the need for safety, transparency, and sustainability in India's rapidly growing green energy sector.

The key features of the Guidelines are as follows:

• The Guidelines will initially apply to key battery categories, including EV Batteries for L, M and N category vehicles; and industrial batteries with a capacity greater than 2kWh.
• The primary goal of the Battery Pack Aadhaar system is to create a transparent digital record of a battery's journey, from raw material to end-of-life; act as a "digital spine" for regulations like the Battery Waste Management Rules, 2022 and verify compliance with schemes like the Production Linked Incentive (“PLI”) for domestic manufacturing; and provide reliable data to facilitate second-life applications, remanufacturing, and efficient recycling of materials.
• A unique 21-character BPAN will be physically marked on each battery. This allows public access to basic identification details without needing an internet connection.
• A scannable QR code will provide access to a richer set of static data, including material composition, battery chemistry, descriptor, carbon footprint parameters and other specifications. This is designed to give stakeholders like recyclers and service providers essential information for efficient handling and processing.
• The most sensitive and evolving information, such as the battery's State of Health (“SoH”), operational history, and current status will be stored securely on a central server. This dynamic data will be updated throughout the battery's life by authorized entities.
• The system shall work by dividing data into Static and Dynamic categories. Static data refers to information that never changes, such as the manufacturer's name, battery chemistry, and capacity, which will be physically marked on the battery pack and accessible via a QR code even without internet access. Dynamic data tracks the battery's changing health throughout its life, including its charging history, performance status, and maintenance records.
• To ensure a smooth transition for the industry, the government has proposed a phased rollout strategy. Phase 1 will focus simply on identification and key descriptors, establishing the digital ID. Phase 2 will expand this to include detailed material composition and dynamic lifecycle events, such as the battery's SoH, and end-of-life reporting with time stamp which is crucial for determining if a battery is still good enough for a vehicle or needs to be retired. Finally, Phase 3 will introduce advanced environmental tracking, requiring disclosures about the battery's total carbon footprint, ensuring that India's green mobility push is genuinely environmentally friendly.

DLL Analysis

The implementation of the Battery Pack Aadhaar System in India is poised to significantly enhance the country's battery ecosystem by ensuring end-to-end traceability, transparency, and sustainability throughout the battery lifecycle.

DLL Analysis

By providing a unique digital identity for each battery, the system will enable better monitoring of performance, durability, and environmental impact, while supporting second-life usage and efficient recycling. The Guidelines are a cornerstone of India's strategy to address the challenges of battery waste management, promote a circular economy, and support its ambitious electric mobility goals. By maintaining a tamper-proof digital record, the Battery Pack Aadhaar will allow buyers of second-hand EVs to verify the actual condition of the battery before purchase, rather than relying on guesswork. This initiative will serve as a digital backbone for a circular economy by supporting India's goal of becoming a global leader in clean mobility.

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Gujarat Integrated Renewable Energy Policy - 2025

The Gujarat Renewable Energy Policy 2025 (“Policy”) was notified on December 24, 2025, establishing a detailed framework to accelerate Gujarat's transition to a clean energy adoption, align with India's climate goals, and position itself as a renewable energy hub. This Policy replaces the 2023 policy and remains effective until December 31, 2030, and offers incentives for up to 25 years from the date of commissioning or the lifespan of the Renewable Energy (“RE”) project. The Policy also aims at promoting green manufacturing, energy security, agricultural solarisation, and large-scale Battery Energy Storage Systems (“BESS”) for grid stability.

The key highlights of the Policy are as follows:

• The RE projects that are under implementation under the 2023 policy may be allowed to complete the project within the time period mentioned in the project agreement/sanction letter or six months from the notification of the Policy. Thereafter the RE projects shall be governed by the Policy.
• The policy covers a wide array of technologies, including ground-mounted and rooftop solar, floating solar, wind, rooftop wind, rooftop wind-solar hybrid and wind-solar hybrid projects, with or without BESS including an independent grid-connected BESS. It also extends to emerging technologies like ocean and geothermal energy, Concentrated Solar Thermal (“CST”), Building Integrated Photovoltaics (“BIPV”), Rail/Road-Integrated Photovoltaics (“RIPV”), Agriphotovoltaics (“AgriPV”), vertical-axis wind turbines and other RE advancements. Eligibility under the Policy is broad, allowing any individual or corporate entity to set up projects for captive use, third-party sale, or sale to Distribution Companies (“DISCOMs”) subject to provisions of the Electricity Act, 2003.
• A significant focus of the policy is on optimizing infrastructure through wind-solar hybrid projects. It defines two categories:
  • Type-A Projects: Conversion of existing or under-construction wind, solar or BESS plants into hybrid projects.
  • Type-B Projects: Development of new wind-solar hybrid power generation projects.
• The Policy allows integration of co-located or independent BESS projects for existing or proposed RE projects in accordance with existing regulations/ guidelines as amended from time to time.
• To maximize the potential of existing sites, the Policy introduces a detailed framework for the repowering and life extension of old wind projects. Wind turbines not in compliance with the quality control order issued by Ministry of Renewable Energy (“MNRE”)/Government of India (“GoI”); wind turbines with a rated capacity below 2 MW; those that have completed their design life are eligible for repowering or any other wind turbines qualified for repowering. Incentives include the extension of existing PPAs for the repowering period subject to a maximum period of 24 months and a relaxation of micro-siting norms to facilitate the installation of larger, more efficient turbines.
• DISCOMs will primarily procure power through a competitive bidding process. However, to encourage smaller projects, the Policy allows DISCOMs to purchase power from solar projects up to 4 MW and wind projects up to 10 MW at a pre-fixed levelized tariff. This tariff will be calculated as the simple average of tariffs discovered in the preceding six-month period, plus a premium of 20 paisa/unit for solar projects.
• The policy reinforces the state's commitment to ease of doing business through streamlined processes. Gujarat Urja Vikas Nigam Ltd. (“GUVNL”) will act as the implementing agency of the Policy. A 'Single Window Web-System' will be developed by the State Nodal Agency, Gujarat Energy Development Agency (“GEDA”) for faster project registration and approvals.

DLL Analysis

The Policy aims at fast-tracking the state's shift to clean energy, supporting India's climate targets by promoting large-scale adoption of renewables and fostering sustainable economic growth. This Policy provides a comprehensive and attractive framework for investment. By promoting hybridization, energy storage, and the repowering of older assets, while also simplifying procurement and administrative processes, Gujarat is poised to accelerate its clean energy transition and attract significant capital into its renewable energy sector.

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Draft Electricity (Amendment) Rules, 2026

Ministry of Power (“Ministry”) has introduced draft amendments to Rule 3 of the Electricity Rules, 2005 (“Rules”), on January 2, 2026, which govern the requirements for Captive Generating Plants (“CGPs”) in India.

The changes proposed are as follows:

• Introduction of “assessment period,” definition to provide flexibility for captive users to opt for a financial year or any continuous period within a financial year for compliance verification under the Rules.
• The draft rules broaden the definition of “captive user,” to include consumption of electricity either directly or through an Energy Storage System (“ESS”) used to store power generated from the Captive Generating Plant. For captive users being a company, the subsidiaries, holding company, of such company and their subsidiaries namely shall be deemed to be a single captive user, thereby formalizing group captive structures.
• The draft rules broaden the concept of “ownership,” to include proprietary interest and control or equity share capital carrying voting rights by indirect ownership and control through subsidiaries and holding companies, moving beyond direct equity.
• The draft rules provide clarity by defining “Special Purpose Vehicle” (“SPVs”), restricting such entities to the sole business of owning, operating, and maintaining a generating station, and expressly treat SPVs as an Association of Persons (“AoP”) for the purposes of the Rules.
• For a power plant to be classified as a Captive Generating Plant, the Draft Rules stipulate two conditions, consistent with the Electricity Act, 2003: captive user(s) must hold a minimum of 26% ownership, and at least 51% of the electricity produced within the designated assessment period must be utilized for captive purposes.
• In generating stations, including SPVs, the assessment of captive ownership and consumption applies solely to the designated captive generating unit(s). This necessitates a 26% proportionate equity stake and 51% consumption from those specific units, rather than the entire station. For captive power plants established by co-operative societies or AoP, the ownership and consumption thresholds are evaluated collectively. However, individual captive users within these structures are limited to consuming power in proportion to their equity holding, except where a single captive user possesses 26% or more ownership, which then waives this proportionate consumption restriction
• Captive users must continuously satisfy ownership and minimum captive consumption requirements during the assessment period. Failure to comply will reclassify the plant's entire electricity output as supply from a generating company, attracting applicable regulatory charges.
• To streamline the verification of captive status, the draft rules assign specific responsibilities. Where the plant and captive users are situated within the same state, state-designated nodal agencies will conduct the verification, whereas for captive arrangements spanning multiple states, the National Load Despatch Centre (“NLDC”) will be responsible for verification, guided by a procedure sanctioned by the Central Government.
• Captive users can temporarily avoid the levy of cross-subsidy and additional surcharges pending verification, contingent upon their submission of a declaration, thereby easing cash-flow pressures. However, if the power plant's captive status for the assessment period is not verified after this declaration, the entire surcharge liability, plus carrying costs at the Late Payment Surcharge base rate (specified in the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022), must be paid.
• An appeal mechanism has been introduced allowing challenges to verification decisions before a Grievance Redressal Committee constituted by the Appropriate Government.

DLL Analysis

The draft Rules propose important clarifications and updates to the regulatory framework governing CGPs in India. By explicitly defining SPVs used for captive generation as AOPs, and grouping subsidiaries and holding companies as Captive Users, the amendments aim to streamline compliance and eligibility criteria. The rules also clarify that any consumption exceeding proportionate entitlement will not qualify as individual captive consumption. These changes are expected to enhance regulatory certainty, promote transparency in captive generation arrangements, and support the efficient operation of CGPs within India's evolving electricity sector.

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Draft National Electricity Policy, 2026

The Draft National Electricity Policy 2026 (“Draft NEP”) was released by the Ministry of Power on January 20th, 2026, with an aim of replacing the existing National Electricity Policy, 2005 (“NEP 2005”). The Draft NEP sets forward-looking targets of 2,000 kWh per capita electricity consumption by 2030 and over 4,000 kWh by 2047, increase the share of non-fossil capacity to achieve the Nationally Determined Contribution (“NDC”) targets, ensure availability of reliable and quality power, strengthen grid resilience to enable renewable generation, supply of electricity at competitive prices and strengthen the dispute resolution mechanism under this sector .

Key features of the Draft NEP 2026 are as follows:

• To facilitate necessary capacity expansion through decentralized advance planning, Distribution Companies (“DISCOMs”) and State Load Despatch Centres (“SLDCs”) shall prepare Resource Adequacy plans at utility and state levels, in accordance with the regulations of State Commissions. Central Electricity Authority (“CEA”) will formulate a national plan to ensure adequacy at the national level.
• State Commissions must ensure that tariffs fully reflect the cost of service from Financial Year (“FY”) 2026-27, without creating new regulatory assets. Tariffs are required to be linked to an appropriate index allowing for automatic annual revision, which operates if the State Commission does not issue a tariff order. These tariffs shall recover fixed costs through demand charges, thereby preventing cross-subsidisation between the tariff components as well as among various consumer categories.
• To enhance the economic competitiveness of Indian products and decrease logistics expenses, manufacturing industries, railways, and metro railways will be exempted from cross-subsidies and surcharges. Furthermore, Regulatory Commissions in consultation with the relevant Governments, may exempt distribution licensees from the Universal Service Obligation for consumers with a contracted load of 1 MW or greater.
• The policy promotes the growth of Renewable Energy (“RE”) through market-based mechanisms and encourages hybrid projects combining RE with energy storage systems (ESS) for improved reliability. It places significant emphasis on developing Pumped Storage Projects (PSPs) and Battery Energy Storage Systems (BESS) to manage the variability of renewables.
• The policy outlines a vision to expand nuclear capacity to 100 GW by 2047 by involving the private sector in developing modular reactors. It also aims to accelerate the development of India's vast untapped hydropower potential by streamlining clearances and providing innovative financing options.
• It calls for strengthening intra-state transmission networks, adopting advanced technologies like Flexible AC Transmission Systems (“FACTS”), and making competitive bidding the default mode for transmission projects.
• The policy mandates the implementation of smart meters, GIS-based asset mapping, and suggests for establishment of a Distribution System Operator. Recognizing emerging threats, it establishes a robust cybersecurity framework, with Computer Security Incident Response Team (“CSIRT”) Power as the central agency for cyber-incident response and coordination across the power sector.
• CEA shall formulate regulations on cybersecurity, measures for the power sector, covering prevention, detection, response and recovery protocols.
• The policy prioritizes consumer needs by mandating 24x7 supply, specifying standards of performance with compensation for failure, and establishing robust online grievance redressal mechanisms.

DLL Analysis

Draft NEP is a comprehensive and ambitious policy that has the potential to enhance power supply reliability, boost the financial position of distribution companies, and drive modernization in the industry. Its success, however, will rely on effective stakeholder coordination and the practical execution of the reforms. Draft NEP represents a strategic shift towards a more market-oriented, financially disciplined, and competitive power sector. By ensuring timely cost recovery for utilities while simultaneously lowering the cost burden on key economic drivers, Draft NEP aims to create a virtuous cycle of financial health and industrial growth.

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