Energy & Infrastructure: Legal Milestones in 2019 and a Look Ahead

THE YEAR THAT WAS

The year 2019 was eventful for the Indian energy and infrastructure sector. While the re-opening of signed power purchase agreements by state governments and cancellation of various tenders hampered investor confidence, various structural reforms were proposed by the government to combat the low growth rate of renewable energy generation and ease investment norms for the infrastructure sector.

This update summarises some of the key developments in the past year and gives a brief overview of what can be expected in 2020.

MAJOR DEVELOPMENTS IN 2019

• Investments in Energy and Infrastructure Sector

  Experts estimate that India requires an investment of nearly Rs. 50,000 billion in the infrastructure sector by 2022 to ensure sustainable development at healthy growth rates. However, overall investments in the core sector have declined as compared to previous years, as evidenced by the graph below.

  To counter this, the government has attempted to stimulate investments by having a larger proportion of public sector capital expenditure outlay in the early phases of project development and through corporate tax cuts.

• Renewable Power

  According to the Ministry of New and Renewable Energy (MNRE), 7.59 GW of grid-connected renewable energy capacity was added in FY 2019-20, against a target of 11.8 GW, with a cumulative renewable energy capacity standing at 85.9 MW as of December 2019. Whilst impressive in its own right, the shortfall in capacity addition is likely to mean that the government will fall short of its target of installation of 175 GW of renewable energy capacity by 2022, comprising 100 GW of solar power, 60 MW of wind power and 25 MW of biomass and small hydel. According to CRISIL’s projections, India will only have 59 GW of solar plants and 45 GW of wind turbines by March 2022.

  However, there were some positive policy developments on the policy front in the renewable energy sector in 2019. MNRE issued the Draft Offshore Wind Energy Lease Rules for offshore wind projects. Further, a 150 MW floating solar project on the Rihand dam was awarded by the Uttar Pradesh government. The Central Government also directed state electricity distribution companies (Discoms) to put in place a payment security mechanism for generators.

  While these developments were a step in the right direction, certain developments in the sector have hurt investor confidence, such as:

Download PDF to read more