Projects, Energy and Infrastructure Quarterly Milestones (April-June 2025)

Partner: Swathy Pisharody, Associates: Padmavathy Nehru, Gregory Paul Bonnie

Key Developments

Draft guidelines for virtual power purchase agreements to enable cost-effective compliance with renewable energy consumption obligations

The Central Electricity Regulatory Commission’s (CERC) Draft Guidelines for Virtual Power Purchase Agreements (VPPA), which were released for public comments till 11 July 2025, introduce a transformative mechanism for electricity distribution licensees, open-access consumers, and captive users to meet their Renewable Energy Consumption Obligation (RCO) targets under the Energy Conservation Act, 2001.

Crucially, these guidelines allow businesses to secure Renewable Energy Certificates (REC) through long-term non-tradeable bilateral contracts with renewable energy (RE) generators. This follows a key clarification issued by the Securities and Exchange Board of India in January 2025, which confirmed that VPPAs structured as Non-Transferable Specific Delivery (NTSD) contracts fall outside the scope of the Securities Contracts (Regulation) Act, 1956.

The guidelines aim to resolve the industry’s challenge of balancing compliance with India’s 500 GW non-fossil fuel target by 2030 against volatile energy market prices. By enabling cost predictability, penalty avoidance, and enhanced sustainability credentials, VPPAs become pivotal for regulatory compliance.

Under the proposed framework, VPPAs are structured as non-transferable, Over-the-Counter (OTC) contracts. RE generators sell electricity through power exchanges (e.g., Day-Ahead or Real-Time Markets) or other channels authorised under the Electricity Act, 2003. Businesses can agree on a fixed VPPA price (strike price) with the generator, settling the difference between the strike price and the market price bilaterally to ensure financial stability. RECs generated are transferred directly to the consumer for RCO compliance or to claim green attributes, provided the RECs are not traded. To operationalise these guidelines, CERC has also proposed amendments to the Power Market Regulations, 2021, to expand the list of permitted OTC contracts to include VPPAs.

A final framework, expected post the stakeholder consultation, could unlock new models for large-scale corporate renewable energy adoption in India. This will streamline compliance processes and provide businesses with strategic flexibility in meeting mandatory renewable energy requirements.

Green hydrogen producers availing of government incentives and benefits mandated to obtain certification

The Ministry of New and Renewable Energy (MNRE) launched the Green Hydrogen Certification Scheme of India (GHCSI) on 29 April 2025. This scheme requires businesses producing green hydrogen, such as those benefitting from incentives under the National Green Hydrogen Mission, to obtain certification to access incentives, subsidies, or exemptions from the central or state governments.

Under the GHCSI, certification is mandatory for producers selling or using green hydrogen in India or receiving government support. Limited exemptions are provided for facilities producing less than 10 tons annually or those exporting 100% without availing of incentives. However, even these exempted entities must report the quantity and emissions of hydrogen produced. The scheme outlines a rigorous process involving Accredited Carbon Verification agencies to monitor and verify emissions, supported by a Technical Committee and an Implementing Agency under MNRE’s oversight. Each certificate will contain a unique identification for every 100 kg of hydrogen produced.

Final certificates are transferable and can be used to claim carbon credits under India’s Carbon Credit Trading Scheme, 2023, subject to additional compliance. Non-core activities such as transport and storage of hydrogen outside plant boundaries, conversion into hydrogen carriers, reconversions, and utilisation, are excluded from the certificate scope.

Non-compliance, such as exceeding the emission threshold or delaying certification, may result in withdrawal of the certificate or temporary disqualification. It is also important to note that this certification does not replace statutory clearances required to establish a green hydrogen facility.

Annual FASTag pass option introduced for frequent travellers, impacting the revenue of private toll operators

The Ministry of Road Transport and Highways (MoRTH) has amended the National Highways Fee Rules, introducing an optional annual toll pass, priced at INR 3,000, for private non-commercial vehicles equipped with FASTag. While designed to benefit frequent commuters with predictable costs, this new pass, allowing up to 200 crossings or one year of usage (whichever is earlier), may present operational and financial challenges for toll operators.

The amendment aims to streamline toll collection, alleviate congestion at plazas by minimising stops, and boost FASTag adoption through a prepaid, fixed-cost model (replacing variable per-trip collections), aligning with MoRTH’s broader digital infrastructure goals. The pass can be activated through either the Rajmarg Yatra app or the National Highways Authority of India’s (NHAI) website. The fee is also subject to annual revision starting 1 April each year, potentially affecting long-term cost certainty and predictability for operators.

However, the scheme applies only to NHAI-operated roads and is non-transferable, which may limit uptake. Crucially, Crisil Ratings has already noted a potential 4-8% revenue drop for private toll operators due to this scheme. This necessitates the timely development and implementation of compensation mechanisms to mitigate financial losses for operators.

New draft rules proposed for demolition of obstacles near airports

On 18 June 2025, the Ministry of Civil Aviation released the draft Aircraft (Demolition of Obstructions Caused by Buildings and Trees) Rules, 2025. Issued under the Bharatiya Vayuyan Adhiniyam, 2024 (BVA), these rules introduce stricter controls and clearer enforcement mechanisms for managing physical obstructions near airports. This move follows the tragic Air India flight AI-171 incident on 12 June 2025, which underscored the urgency for new regulations. The draft rules were open for public objections until 9 July 2025.

The rules mandate rigorous reporting and verification processes for logistics firms, construction companies, and property managers. Non-compliance could lead to costly demolitions or operational halts, if safety violations are identified.

The BVA empowers the central government to issue demolition or removal notices for any building, structure or tree within a 20 km radius of an aerodrome reference point. The draft rules outline the procedural modalities for reporting of structures in violation of notifications under the BVA by the officer-in-charge to the Director General of Civil Aviation and the due process for issuing demolition orders. If parties fail to comply with a removal or demolition order within 60 days, District Collectors are allowed to enforce demolition, treating it similarly to unauthorised construction. Affected parties can appeal or claim compensation for pre-existing lawful structures.

The move seeks to improve air safety but may impact real estate developers, airport-adjacent landowners, and urban planners, as existing non-compliant structures could face enforced demolition or alteration.

Inter-State Transmission System charges waived for energy storage systems until 30 June 2028

The Ministry of Power (MoP), through an order dated 10 June 2025, has made it more feasible to transport power from battery energy storage systems (BESS). RE companies and developers operating BESS can now benefit from a full waiver of Inter-State Transmission System (ISTS) charges, boosting profitability, until 30 June 2028.

Complementing this, the CERC has amended the Sharing of Inter-State Transmission Charges Regulations, 2020, to extend long-term waivers for RE, BESS, green hydrogen, and green ammonia projects. Full waivers are available for co-located BESS projects commissioned by 30 June 2028, if the power from the BESS is consumed outside the state of commissioning. Offshore wind projects are eligible up to December 2035, and green hydrogen and ammonia plants up to December 2033, if they meet sourcing requirements from RE, hydro, BESS or a hybrid combination of all of these. The MoP clarified that the full ISTS charge is also waived for hydro pumped storage projects where construction is awarded by 30 June 2028.

Projects falling outside these timelines, or non-co-located BESS, will be governed by existing CERC and MoP rules. This shift resolves previous uncertainties around transmission costs, enhancing investment appeal. However, firms are urged to plan strategically before the window closes.

Energy storage operators gain new flexibility under draft electricity rules

On 11 June 2025, the MoP proposed significant amendments to Rule 18 of the Electricity Rules, 2005, through the draft Electricity (Amendment) Rules, 2025. These revisions offer expanded roles and flexibility to energy storage systems (ESS), generating companies, and consumers.

The draft amendment rules redefine ESS ownership, granting it legal status equivalent to the owner, whether co-located or separate, and permitting ownership or operation by any utility, system operator, consumer or independent provider. The amendments allow ESS to operate either as stand-alone systems or as part of generation, transmission, or distribution infrastructure. This opens new avenues for businesses to generate revenue by owning, leasing, or operating ESS.

Regardless of location, the legal status of an ESS will follow its owner; if not co-located, it will still be treated independently for dispatch and scheduling. Owners may also sell, lease, or rent out storage capacity to utilities or load despatch centres, supporting new commercial models for grid services and renewable balancing.

This shift from previous restrictions clarifies ownership rights over the ESS and scheduling rights allowing ESS owners to streamline their participation in injecting and withdrawing electricity from the grid, addressing industry demands for flexibility.

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