Projects and Infrastructure | January – March 2025

Regulatory Updates

Insurance Surety Bonds for Mobilization Advance in EPC Contracts for road projects

The Ministry of Road Transport and Highways has, vide circular dated 2 January 2025, provided that Insurance Surety Bonds shall be accepted as security for mobilization advance in Engineering Procurement and Construction (“EPC“) contracts with immediate effect, in replacement of the existing requirement of submission of bank guarantees. The relevant existing clauses vis-à-vis amended clauses of the standard documents for EPC shall be modified accordingly, and compliance with the same is required by all concerned parties.

Circular on Interest Rate Applicable for HAM Projects

The National Highways Authority of India (“NHAI“) has, vide circular dated 6 January 2025, addressed the interest rate applicable under Clause 23.6.4 of the Model Concession Agreement (MCA) for Hybrid Annuity Model (HAM) projects. The abovementioned clause inter alia stipulates that interest shall be due on the reducing balance of the completion cost at a rate equal to the average of the one-year Marginal Cost of Funds-based Lending Rate (“MCLR“) of the top five scheduled commercial banks plus 1.25%. The list of such banks is to be declared annually by the NHAI on 1 September, based on banks’ balance sheet sizes as reported in their annual reports.

Accordingly, for the period from 1 January 2025 to 31 March 2025, the average one-year MCLR of the top five scheduled commercial banks has been computed and average applicable interest rate for the said period shall be 10.36% (i.e. 9.11% per annum plus 1.25%).

Amendment to the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024

The Central Electricity Regulatory Commission has, vide notification dated 4 February 2025, notified the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) (First Amendment) Regulations, 2025 (“Amendment Regulations“) and brought amendments to the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024 (“Principal Regulations”). Some of the key amendments are set out below:

Interest Rate Payment: In the Principal Regulations, interest rates for certain charges and payments under Regulations 9, 10 and 27 (e.g. payment of interest on the recovery or refund of tariff, interest applicable in case of determination of supplementary tariff, etc.) were calculated based on the SBI MCLR-linked rate. Such references to the SBI MCLR-linked rate have now been replaced with the ‘bank rate’, which means the one year marginal cost of the lending rate as specified by the State Bank of India from time to time or any replacement thereof for the time being in force plus 100 basis points.

Self-insurance premium: The permissible self-insurance premium has been increased from 0.09% to 0.12%. Additionally, the Amendment Regulations provide that self-insurance premiums be transferred to a separate fund, with utilization details to be provided to the Central Electricity Regulatory Commission as and when directed.

Interim Input Coal Price: The Principal Regulations did not provide for interim input coal prices. Subsequent to the amendment, generating companies are now allowed to request interim input prices up to 90% of the claimed amount after the first hearing of the application, with adjustments made later based on the final or adopted price.

Coal Price Adjustment: The Principal Regulations provided for coal price adjustments based on the notified price of Coal India Limited (“CIL“). The Amendment Regulations provide for the “price of alternative coal available” rather than the “notified price of CIL” for determining coal price adjustments. An explanation defines “alternative coal” as the least-cost option coal available to the generating station in case of shortages from linked mines.

Compensation for the operation of generating station below normative plant availability factor: There was no specific mechanism for compensating generating stations for operational inefficiencies due to operating below the normative Plant Availability Factor (PAF) under the Principal Regulations. The Amendment Regulations provide a mechanism for compensating generating stations for operational inefficiencies (eg., degradation of station heat rate, auxiliary energy consumption, and additional secondary fuel oil consumption) due to operating below the normative PAF. The financial gains computed, after considering compensation, will be shared between the generating station and beneficiaries.

Tariff Based Competitive Bidding Guidelines for Procurement of Storage Capacity/ Stored Energy from Pumped Storage Plants

The Ministry of Power has, vide resolution dated 6 February 2025, notified Tariff Based Competitive Bidding Guidelines for Procurement of Storage Capacity/ Stored Energy from Pumped Storage Plants (“Guidelines“). The Guidelines apply to developers, intermediary procurers, and end procurers, and are applicable for the procurement of storage capacity or stored energy by the procurers from existing, under-construction or new Pumped Storage Plants (“PSPs“).

Some of the key provisions of the Guidelines are as follows:

Bidding parameters: The Guidelines prescribe a single-stage, two-part (technical and financial) bidding process. Contract allotment shall be based on the tariff based competitive bidding process. The bidding agency may prescribe relevant bidding parameters specified under the Special Conditions of Bid (“SCoB“) in the Request for Selection (“RfS“). Tariffs shall be quoted at the delivery point and specified in the RfS.

Mode of procurement: The Guidelines provide 2 (two) modes of procurement. Under the first, PSPs will be developed on procurer-identified sites following the Build-Own-Operate-Transfer model. The second model allows procurement from PSPs developed on bidder-identified sites or existing PSPs under the Build-Own-Operate model.

Contractual framework: PPAs will be signed between the procurer and the successful bidder or a special purpose vehicle. If an intermediary procurer is involved, it shall sign a PPA with the developer and a power supply agreement with the end procurer.

Transmission connectivity: The developer shall be responsible for securing transmission connectivity to the networks at its own cost. The developer shall bear transmission charges and losses up to the delivery point, while the end procurer shall bear beyond the delivery point.

Amendment to the Tariff Based Competitive Bidding Guidelines for Grid Connected Solar PV Power Projects

The Ministry of Power has, vide resolution dated 12 February 2025, notified an amendment to the Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar PV Power Projects (“Guidelines“) dated 28 July 2023. Some of the key amendments to the Guidelines are:

It shall be deemed as a default if the generator fails to maintain the minimum Capacity Utilisation Factor (“CUF“) declared in the PPA for 2 consecutive years excluding the first contract year ending on 31 March immediately after commercial operation date of the project. Prior to the amendment, the time period of 2 years was not provided in the Guidelines. The generator’s minimum yearly CUF obligation shall be reduced to the average CUF achieved during those two default years, with lump-sum damages payable equal to 24 months or the remaining PPA period (whichever is less) of the tariff for the reduced CUF obligation. Non-payment of these damages may also constitute an event of default under the PPA.

The amendment newly introduces that the PPA and Power Sale Agreement should be signed within 30 days from the issuance of the Letter of Award (“LoA“). Extension of up to 12 months from the LoA date can be made, beyond which the LoA will be cancelled.

The timeline for application by distribution licensee or intermediary procurer to the appropriate commission, for the purpose of the adoption of new tariffs has been revised to 30 days of discovering tariffs (as compared to 15 days, prior to the amendment) after completion of the transparent competitive bidding process.

New instruments for establishment of earnest money deposits and performance bank guarantees have been introduced to allow insurance surety bonds which would be payable unconditionally like bank guarantees.

The technical specifications have now been modified to include maintenance of GPS-enabled automatic weather stations by developer, adherence to applicable cybersecurity regulations by the developer, etc.

The Performance Bank Guarantee or alternative payment security is required to be returned to the generator within 45 days from the actual commencement of supply date of the project instead of the scheduled commencement of supply date as stipulated prior to this amendment.
The term ‘Change in Law’ was not defined in the Guidelines. It has now been defined as occurrence of any event related to the project from 7 days prior to the last date of bid submission.

Amendment to the Tariff Based Competitive Bidding Guidelines for Grid Connected Hybrid Projects

The Ministry of Power has, vide resolution dated 12 February 2025, notified an amendment to the Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Wind Solar Hybrid Projects (“Guidelines“) dated 21August 2023. Some of the key amendments to the Guidelines are:

It shall be deemed as a default if the generator fails to maintain the minimum Capacity Utilisation Factor (“CUF“) declared in the PPA for 2 consecutive years excluding the first contract year ending on 31 March immediately after commercial operation date of the project. Prior to the amendment, the time period of 2 years was not provided in the Guidelines. The generator’s minimum yearly CUF obligation shall be reduced to the average CUF achieved during those two default years, with lump-sum damages payable equal to 24 months or the remaining PPA period (whichever is less) of the tariff for the reduced obligation. Non-payment of these damages may also constitute an event of default under the PPA.

The technical specifications have now been modified to include maintenance of GPS-enabled automatic weather stations by developer, adherence to applicable cybersecurity regulations by the developer, etc.

The amendment newly introduces that the PPA and Power Sale Agreement should be signed within 30 days from the issuance of the Letter of Award (“LoA“). Extension of up to 12 months from the LoA date can be made, beyond which the LoA will be cancelled.

The timeline for application by distribution licensee or intermediary procurer to the appropriate commission, for the purpose of the adoption of new tariffs has been revised to 30 days of discovering tariffs (as compared to 15 days, prior to the amendment) after completion of the transparent competitive bidding process.

New instruments for establishment of earnest money deposits and performance bank guarantees, have been introduced to allow insurance surety bonds which would be payable unconditionally like bank guarantees.

The Performance Bank Guarantee or alternative payment security is required to be returned to the generator within 45 days from the actual commencement of supply date of the project instead of the scheduled commencement of supply date as stipulated prior to this amendment.
The term ‘Change in Law’ was not defined in the Guidelines. It has now been defined as occurrence of any event related to the project from 7 days prior to the last date of bid submission.

Amendment to the Guidelines for Tariff Based Competitive Bidding Process for Procurement of Firm and Dispatchable Power from Grid Connected Renewable Energy Power Projects with Energy Storage Systems

The Ministry of Power has, vide resolution dated 12 February 2025, notified an amendment to the Guidelines for Tariff Based Competitive Bidding Process for Procurement of Firm and Dispatchable Power from Grid Connected Renewable Energy Power Projects with Energy Storage Systems (“Guidelines“) dated 9June 2023. Some of the key amendments to the Guidelines are:

It shall be deemed as a default if the generator fails to maintain the minimum Capacity Utilisation Factor (“CUF“) declared in the PPA for 2 (two) consecutive years excluding the first contract year ending on 31 March immediately after commercial operation date of the project. Prior to the amendment, the time period of 2 years was not provided in the Guidelines. The generator’s minimum yearly CUF obligation shall be reduced to the average CUF achieved during those two default years, with lump-sum damages payable equal to 24 months or the remaining PPA period (whichever is less) of the tariff for the reduced obligation. Non-payment of these damages may also constitute an event of default under the PPA.

The technical specifications have now been modified to include maintenance of GPS-enabled automatic weather stations by developer, adherence to applicable cybersecurity regulations by the developer, etc.

The amendment newly introduces that the PPA and Power Sale Agreement should be signed within 30 days from the issuance of the Letter of Award (“LoA“). Extension of up to 12 months from the LoA date can be made, beyond which the LoA will be cancelled.

The timeline for application by distribution li,censee or intermediary procurer to the appropriate commission, for the purpose of the adoption of new tariffs has been revised to 30 days of discovering tariffs (as compared to 15 days, prior to the amendment) after completion of the transparent competitive bidding process.

New instruments for establishment of earnest money deposits and performance bank guarantees, have been introduced to allow insurance surety bonds which would be payable unconditionally like bank guarantees.

The Performance Bank Guarantee or alternative payment security is required to be returned to the generator within 45 days from the actual commencement of supply date of the project instead of the scheduled commencement of supply date as stipulated prior to this amendment.

The Battery Waste Management Amendment Rules, 2025

The Ministry of Environment, Forest and Climate Change has, on 24 February 2025, notified the Battery Waste Management Amendment Rules, 2025 to amend the Battery Waste Management Rules, 2022. The following are the key amendments:

Producers whose packaging of battery or battery packs are covered under rule 26 of the Legal Metrology (Packaged Commodities) Rules, 2011, have been exempted from marking these with the Extended Producer Responsibility (“EPR“) registration number.

Producers are now permitted to fulfil the labelling requirement of marking their battery or battery packs with the EPR registration number by printing a barcode or a QR code containing the EPR registration number on (a) battery or battery pack; or (b) equipment having battery or battery pack; or (c) packaging of battery or battery pack; or (d) packaging of the equipment having battery or battery pack; or (e) bulk packaging of batteries or battery packs, not for retail sale, and by printing the EPR registration number on the product information brochure.

Batteries containing cadmium concentrations less than or equal to 0.002% (20 parts per million) or lead concentrations less than or equal to 0.004% (40 parts per million) by weight are now exempt from the mandatory chemical symbol markings, i.e. ‘Cd’ or ‘Pb’.

Supplementary Guidelines for Payment of Compensation in regard to Right of Way for Transmission Lines

The Ministry of Power has, vide notification dated 21 March 2025, issued supplementary guidelines for payment of compensation regarding Right of Way (“RoW“) for transmission lines (“Supplementary Guidelines”). The said guidelines shall apply to inter-state transmission system (“ISTS“) lines in cases where landowners have objected to the compensation because the circle rates are below the market rates, and only in those cases where state governments have not yet specified the manner of determination of market value of land.

The Supplementary Guidelines have, inter alia, laid down the following:

Composition of the Market Rate Committee (“MRC”), which will determine the market rate of land based on the valuation by independent land valuers.

The land valuation methodology, which provides for the appointment and qualifications of the valuers and how the market rate will be arrived at in case of differences in the market rates worked out by the said valuers.

The compensation amount for RoW corridor for ISTS lines.

The district collector may allow construction of ISTS lines to proceed without obstruction on the condition that compensation would be paid based on the market rate determined by the MRC (to be ideally completed within a month from the date of application by the transmission system provider).

For more information contact:

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

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