Projects and Infrastructure | April – June 2024

Regulatory Updates

Guidelines for monitoring of projects and issuance of Provisional Certificate of Completion/ Completion Certificates

In order to address concerns regarding erroneous issuances of provisional certificate of completion (“PCC“) and completion certificates (“CC“), the National Highways Authority of India (“NHAI“) has issued the ‘Guidelines for monitoring of Projects and issuance of Provisional Certificate of Completion (PCC)/ Completion Certificate (CC)’ dated 24 May 2024, with the following key features:

NHAI’s engineers/ independent engineers will be required to prepare and share at the time of the kick off meeting in consultation with the regional officer / project director, a detailed checklist based on the indicative checklist shared by the NHAI;

During site visits, the regional officer / project director shall review the checklist along with the routine test to be conducted at the site and laboratory;

A meeting and site visit shall be carried out by the regional officer / project director, three months prior to the probable issuance of the PCC or CC to assess the preparedness of the site for the PCC or CC; and

Upon successful compliance of all items of the checklist, contractual requirements and successful tests on completion, the PCC/ CC shall be issued.

Ministry of Power issues clarifications regarding Guidelines for operationalizing the optimum utilization of Energy Stations

The Ministry of Power (“MoP“), on 22 April 2024, has issued certain clarifications regarding the ‘Guidelines for operationalizing the optimum utilization of generating stations as perthe requirement in the Electricity Grid’dated 8 October 2021. The clarifications have been provided amid concerns that certain power generators are not offering surplus power in the power market, leading to unused power capacity.

It has been clarified that power stations must always be ready and available to dispatch power according to the Tariff Policy, 2016, and the power generators can sell surplus power in the power market for optimum usage of the unutilized generation capacity.

Further, Section 9 (5) of the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 permits generators to sell surplus power which is within their declared generation capacity but not requisitioned by distribution companies. In light of feedback from power utilities highlighting certain restrictions in existing agreements, the MoP has clarified that generating companies, including those with long term coal linkages under fuel supply agreements can offer un-requisitioned surplus power in the market.

Directions to Gas-based generating stations

MoP has, vide its order dated 12 April 2024 (“Order“), issueddirections to gas-based generating stations (“GBSs“) for optimum utilization of the operational capacity of GBSs during the hot weather season (till June 2024) having high power demand. According to the Order, GRID-INDIA will inform the GBSs about expected high demand and stress in advance, and the number of days they are required to generate in a week shall be informed at least fourteen days in advance. According to the Order, the GBSs notified and scheduled on D-1 basis shall be guaranteed for dispatch at a minimum of 50% capacity round-the-clock during the designated high-demand period. Further, the GBSs holding power purchase agreements (“PPAs“) shall offer their capacity on the basis of energy charge rate (“ECR“) while GBSs not holding PPAs must offer their capacity on the basis of the benchmark ECR determined by the concerned committee unless there is a mutually agreed price. The payments will be made on a weekly basis by the procurer and the payment security mechanism under the Late Payment Surcharge Rules, 2022 shall apply.

The Order was valid for generation and supply of power from 1 May 2024 to 30 June 2024.

Guidelines for Payment of Compensation for right of way (RoW) for transmission lines

The MoP has issued guidelines on 14 June 2024 for determining compensation for damages regarding the Right of Way (“RoW“) for laying transmission lines. The states/ union territories may adopt these guidelines in entirety or issue their own modified guidelines. In the absence of state government’s guidelines, these guidelines by the MoP shall apply for determining the compensation. The key guidelines provided by the MoP are as follows:

The compensation shall be payable only for transmission lines supported by a tower base of 66 Kv voltage level and above.

District magistrate or the district collector or the deputy commissioner shall be the determining authority for compensation.

The compensation shall be based on the circle rate, guidelines value, or stamp act rates of the land, except where the market rate of land exceeds the circle rate, guidelines value or stamp act rates.
The compensation for the tower base area (i.e. the area enclosed by the four legs of the tower at ground level plus an additional one-meter extension on each side) shall be 200% of the land value.

The compensation amount for RoW corridor shall be 30% of the land value. Land within the RoW corridor, as defined in Schedule VII of the Central Electricity Authority (Technical Standards for construction of Electrical Plants and Electric Lines) Regulations, 2022, shall be eligible for compensation.

Compensation payment shall be one-time and upfront and whenever possible, shall be paid through digital payment methods.

Amendment in Scheme Guidelines for Implementation of strategic Intervention for Green Hydrogen Transition (SIGHT) Programme- Component II

The Ministry of New and Renewable Energy (Hydrogen Division) (“MNRE“), vide its order dated 16 January 2024, issued ‘Scheme Guidelines for Implementation of Strategic Intervention for Green Hydrogen Transition (SIGHT) Programme- Component II: Incentive for Procurement of Green Ammonia Production (under Mode- 2A) of the National Green Hydrogen Mission'(“Scheme Guidelines“). The MNRE has, vide its letter dated 21 June 2024, amended the Scheme Guidelines to increase the capacity available for bidding of green ammonia under tranche I of mode 2A to 75,000 MT per annum, as against the earlier existing capacity of 5,50,000 MT per annum.

The amendment was brought to achieve greater participation from industry players and foster an environment conducive to innovation and growth in the green energy sector.

CERC (Procedure, Terms and Conditions for grant of Transmission Licence and other related matters) Regulations, 2024

On 23 May 2024, the Central Electricity Regulatory Commission (“CERC“) notified the CERC (Procedure, Terms and Conditions for grant of Transmission Licence and other related matters) Regulations, 2024. The regulations regulate the process for granting transmission licenses, including eligibility criteria, application processes, and the conditions of a license. Somes key features of these regulations are as follows:

The application for the grant of licence shall be made to the CERC. The CERC shall, before granting licence or rejecting the application, provide an opportunity of hearing to the applicant.

The transmission licence shall, unless revoked earlier, continue to be in force for a period of 25 years from the date of issue.

In case of default by a licensee in debt repayment, the CERC may, on an application made by the lenders of the licensee, assign the licence to a nominee of the lenders.

Clarification to Revised Policy for Biomass Utilisation for Power Generation through Co-firing in Coal based Power Plants

On 14 May 2024, the MoP issued a clarification with regard to the ‘Revised Policy for Biomass Utilisation for Power Generation through Co-firing in Coal based Power Plants’ (“Biomass Policy“), dated 8 October 2021. According to paragraph 3(viii)(b) of the Biomass Policy, for projects set up under Section 63 of the Electricity Act, 2003, increase in energy charge rate due to biomass cofiring can be claimed under ‘Change in Law’ provisions. However, under the provisions of the PPAs signed under section 63 of the Electricity Act, 2003, compensation is payable only if cost to the power plant exceeds 1% of the letter of credit each year.

The MoP has examined the above issues and clarified that for projects established through competitive bidding under Section 63 of the Electricity Act, 2003, wherein ‘fuel cost pass through’ is provided in their PPAs, the cost of biomass pellets shall also be pass through in the Energy Charge Rate.

CERC (Connectivity and General Network Access to the inter-State transmission System) (Second Amendment) Regulations, 2024

The CERC, vide notification dated 19 June 2024, amended the CERC (Connectivity and General Network Access to the inter-State Transmission System) Regulations, 2022 (“Connectivity Regulations“). Such amendments shall come into force on a date as central government may notify. The key amendments introduced are as follows:

REIA: Renewable Energy Implementing Agency has been introduced in the Connectivity Regulations to aid government entities in procuring power from renewable sources.

Minor deficiencies: Applicants will now be notified of minor deficiencies in the application for grant of connectivity or general network access within 10 working days of application (as against the earlier timeline of 7 days), and which need to be rectified within 7 working days thereafter, failing which the application shall be closed along with levy of monetary penalties.

Revised minimum capacity for some regions: A different minimum capacity requirement of 25 MW has been introduced for connectivity applications in the north-eastern region and Sikkim.

Documents for land rights: The requirements for documentation of land rights for connectivity have been updated, allowing government orders as valid proof towards land use rights under certain conditions. Furthermore, the financial guarantee thresholds based on project capacity has been revised.

Submission of land documents: The deadline for submission of documents for land has been stipulated as 18 months post in-principle grant of connectivity or 12 months of issuance of a final grant of connectivity, whichever is earlier.

Consequence of failure of financial closure: Steps following a failure to achieve financial closure within the stipulated period, including potential revocation of connectivity have been provided.

CERC Notifies Renewable Energy Tariff Regulations, 2024

On 12 June 2024, the CERC introduced the CERC (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2024, effective from 1 July 2024 until 31 March 2027 unless reviewed earlier or extended by the CERC. Key aspects of these regulations include:

Scope and Application: These regulations apply to cases where the tariff, for a grid connected generating station or a unit thereof which is commissioned during the contract period (i.e. 01 July 2024 to 31 March 2027) and based on renewable energy sources, is to be determined by the CERC. The regulations specifically outline the eligibility criteria for various types of renewable projects like wind, solar, biomass and hybrid energy systems.

Tariff Determination: The regulations establish a mechanism for generic tariffs applicable to certain renewable projects (such as small hydro project) and project-specific tariffs for other projects (such as solar and wind projects). The regulations specify components like return on equity, interest on loan, and depreciation for tariff computation for renewable energy sources.

Operational and Financial Norms: The regulations stipulate provisions for the calculation of operation and maintenance expenses, capital cost considerations, and incentives or subsidies impact from governmental bodies.

Advisory to generating companies for timely import of coal for blending purposes and maximizing production in captive coal mines

The MoP, vide an advisory dated 4 March 2024, provided for blending of imported coal at 6% (by weight) till June 2024. The MoP, vide advisory dated 27 June 2024, has extended the abovementioned advisory until 15 October 2024. Further, the MoP has modified the requirement for blending of imported coal from 6% (by weight) to 4% (by weight).

Despite a robust growth of power demand in the country and a significant improvement in rake loading as well as receipt of domestic coal, a gap between receipt and consumption of coal at the domestic coal based (“DCB“) plants has been observed.

Therefore, to bridge this gap and to meet the power demand during the crucial monsoon months, the MoP has instructed all GENCOs and independent power producers to firm up their imported coal contracts for ensuring supplies till 15 October 2024. The GENCOs have also been instructed to continuously review the stock positions of their DCB plants and opt for blending. It is to be noted that the advisory dated 27 June 2024 will not be applicable to DCB plants located within a radius of 200 kms from the linked mine/coal source.

For more information contact:

Jhinook Roy
Practice Head – Projects & Infrastructure
jhinook.roy@veritaslegal.in

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