Newsletter | October 2018
Infra News
 

India and Japan sign MOC on technology, railways and urban transport projects
India and Japan committed to working together to promote peace, stability, and prosperity, through economic growth and development... More

India heading to become world’s leading aviation market
Indian Aviation market has been on a roll for the last decade or so. The growth trajectory has been phenomenal to say the least, all thanks to the dedication and perseverance.... More

ADB, India Sign $150 Million Loan to Improve Regional Connectivity
The Asian Development Bank (ADB) and the Government of India on 1st Oct. signed a $150 million loan to finance continued improvements to road connectivity and efficiency of the international trade corridor in northern part.... More

Riding on high coal volumes, major Indian ports register 5.1% growth during 5MFY19
ICRA believes that on all four pillars of Sagarmala, there has been some progress especially on the port capacity enhancement.... More

MNRE Issues Requirements for Compulsory Registration of Solar Manufacturers
Taking a step ahead after the recent quality control order, the Ministry of New and Renewable Energy (MNRE) has now issued another order.... More

India to attract upto $80 billion investment in renewable energy in 5 years
Prime Minister Narendra Modi today said India has made an investment of $42 billion in the renewable energy sector over the past four year.... More

Cabinet approves electrification of 13,675 km non-electrified rail routes at a cost of Rs 12,134 crore
The Union Cabinet chaired by Prime Minister Narendra Modi today approved electrification of 13,675 km of non-electrified railway routes.... More

India Invests in Russia's Arctic Offshore Oil and Gas Industry
When people discuss Indo-Russian relations, they generally focus on Russia’s arms sales to India. However, India’s energy relations.... More

Softbank's CEO pledges to give India and other solar alliance members free power in 25 years
In a move that is bound to get more countries to sign up for the International Solar Alliance (ISA), the CEO of Softbank, Masayoshi Son.... More

GMR Infra emerges as H1 bidder for Nagpur airport project
GMR Airports Limited, a subsidiary of GMR Infra Limited has informed the exchanges that it has emerged as the highest bidder.... More

India signs $5 bn-worth of pacts to give impetus to iron and steel industry
The pacts were signed between 20 technology providers, capital goods manufacturers and steel producers for manufacturing of capital goods... More

PM Modi says OPEC will be replaced by India's initiative International Solar Alliance
In future, when people talk of organisations for the welfare of mankind established in the 21st century, ISA will be at the top of the list, he said... More

Indian Coal Mining Companies Plan $1.6 Billion Solar Investment
The world’s largest coal mining company, Coal India Limited (CIL), and India’s largest lignite mining company, NLC India Limited (NIL), have announced a joint venture to set up 3 gigawatts.... More

India's logistics industry to be worth $215 bn by 2020-21: CARE Ratings
The country's logistics industry is projected to be worth $215 billion by 2020-21, recording a 10 per cent compounded annual growth rate (CAGR) over its approximate size of $160 billion in 2016-17.... More

Visakhapatnam Port Trust turns 86, draws up plans to become most preferred in South Asia
VISAKHAPATNAM: As it turned 86 Sunday, the Visakhapatnam Port Trust (VPT), which is acclaimed as the Eastern Gateway of India has drawn up a vision to become the most-preferred ... More

India needs Rs 50-tln investments in infrastructure: CII
Bengaluru, Sep 11 The infrastructure sector in India would require about Rs 50 trillion ($778 billion) by 2022 as a key growth driver for sustainable development across the country.... More

PowerGrid sees ₹50,000-cr opportunity in green transmission corridors
PowerGrid Corporation of India Limited (PGCIL) expects a market opportunity of ₹50,000 crore for setting up Green Energy Evacuation Corridors in India by 2022..... More

India’s largest dry dock to come up at Cochin Shipyard
Kerala’s Cochin Shipyard will be equipped to make vessels to provide impetus to the government’s Make in India scheme, the shipping ministry announced on Monday..... More

 
Firm News
 

Mr. Atul Sharma, our Managing Partner shares his views on the topic “Infrastructure Arbitrations - Expediting the Dispute Resolution and unwinding the road for Robust India” at the 6th Edition of The Economic Times Infra Focus Summit.
Economic Times recently held its 6th Edition of The Economic Times Infra Focus Summit in Delhi... More

India Infrastructure Magazine invites Mr. Atul Sharma, Managing Partner as a speaker on the topic “Arbitration Experience and New Amendment”
India Infrastructure Magazine recently organised a Conference on “Legal Issues in Infrastructure”... More

Link Legal India Law Services partnered with National Law Institute University, Bhopal (NLIU) to organise the first edition of NLIU - Link Legal National Client Counselling Competition at the NLIU, Bhopal
As part of our campus outreach program, Link Legal India Law Services partnered with National... More

Link Legal hosts an interactive session for the students of Welhams Boys’ School, Dehra Dun
Link Legal recently hosted an interactive session for the senior students of Welhams Boys’ School... More

Anuj Trivedi joins Link Legal as a Partner
Anuj Trivedi has joined Link Legal as a Partner in the firm’s corporate practice... More

Darshika Singh joins Link Legal as an Associate Partner
Darshika Singh has joined Link Legal as an Associate Partner in the Corporate team in Delhi... More

 
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Previous Issues:
September 2018
July 2018
June 2018
May 2018
January 2018
November 2017
October 2017
September 2017
August 2017
July 2017
June 2017
May 2017
April Part I 2017
April Part II 2017
March 2017
December 2016
November 2016
October 2016
September 2016
August 2016
April 2016
March 2016
February 2016
 
AMENDMENTS TO ELECTRICITY ACT, 2003


The Electricity (Amendment) Act, 2018 (‘Draft Amendments’) proposed by Ministry of Power for amending the Electricity Act, 2003 (‘the Act’), aims to keep at pace with the changing market dynamics, increasing renewable capacity and challenge of providing quality power supply. Below we explain the major changes introduced in the 2018 avatar of the torch-bearing Act for the power sector and its impact. The Draft Amendments would need comment from the industry and stakeholders before being placed on the floor of the Parliament.

 
Cheer for Consumers
A key change in this regard is that the Draft Amendments have proposed that in case of power cuts, other than due to force majeure conditions or technical faults, an appropriate penalty will be levied on the distribution company and credited to the account of the respective consumers. In another major change, the draft amendments have proposed that the benefit of reduced tariffs after assets have fully depreciated should be mandatorily passed on to the consumers. Typically, these benefits are retained by the generating companies, and do not result in a lowering of tariff, and therefore, it will be interesting to see what approach the power industry takes with respect to this proposed change.
 
Direct Benefit Transfer of Subsidy
Breaking the cycle of subsidy and losses incurred by the Distribution Companies (‘DISCOMS’), the Draft Amendments have introduced DBT in electricity as well. The Act says: if the State Government or Central Government desires the grant of any subsidy to any consumer or class of consumers, such subsidy shall be directly transferred to the beneficiary by direct benefit transfer into the bank account of the beneficiary.” The same will apply if subsidy is given through any government scheme as well.
 
Separation of content & carriage
The long-pending demand to separate the infrastructure builder for power distribution to consumers and the licensee to supply has been introduced in the Draft Amendments. This would entail more than one electricity supplier in an area and consumer will have options to choose their preferred electricity supplier. Allied to it is introduction of time of the day tariff – power rate as per the energy source, season, time and demand.
 
Getting smarter
For the first time, Draft Amendments have mentioned Smart Meter and Prepaid Meters and regulations related to the same, making it mandatory to install smart meter. This would help proper accounting of power consumption and wastage.
 
Obligation to supply power 24x7
The Draft Amendments propose that 24x7 power supply is an obligation on DISCOMS and the State Electricity Regulatory Commission can penalise the DISCOMS, if it fails to do so. The Commission can suspend or revoke the license of the DISCOMS as well, which has been mandated for the first time.
 
Violation of PPA to be penalised
The Draft Amendments states that, “Violation of PPA will lead to penalties which may be as determined by the Appropriate Commission which may be fines which may extend to Rupees One crore per day, and, in case of licensees may also extend to suspension and cancellation of licence.” This comes as a major relief for power generators which lately have been facing brunt of states cancelling PPA citing high cost or lack of funds.
 
Big Boost for Renewable Sector
Several amendments are favourable to the Renewable Energy (‘RE’) sector. Some of these are:
  • Definition of Renewable Purchase Obligation (‘RPO’) and Renewable Generation Obligation (‘RGO’) introduced.
  • Introducing policies in order to support RE sector like National Renewable Energy Policy to promote smart grid, ancillary support, and decentralized distributed generation in accordance with the provisions of the Act;
  • A penalty of maximum Rs. Fifty lakhs for non-compliance of RGO. (Reduced from 1 Cr. to 50 Lakh for RE, the earlier penalty was on 1 lakh.)
  • For non-compliance of RPO, an additional penalty is proposed, which shall be minimum of Rs 1 per unit with a maximum of Rs 5 per unit depending on the extent of the shortfall.
  • Generation and supply of renewable energy will not require any license for such generation and supply.
 
Cross-subsidy
The Draft Amendments proposes (a) time-bound reduction in cross-subsidies (CSS), and (b) CSS to be not more than 20% of the wheeling charge. These provisions are nothing new. The prevailing Act also included provisions for reduction of CSS. But these were watered down later.

The proposal that CSS be 20% of wheeling charges is significant, and if implemented, it will reduce CSS significantly. Also, the provision for charging “additional surcharge” is proposed to be deleted – this will also have a significant impact as in recent years states have used high additional surcharge as a tool to discourage open access.
 
Conclusion
We believe that the proposed changes will have a wide and deep impact on the electricity sector. The promotion of RE and removal of roadblocks for development of RE in the country is a welcome step and one that was long overdue.

The separation of distribution and supply function also signifies a fundamental shift in the way electricity is distributed in the country. However, by watering down the provisions for the same and giving states the choice to implement is a pragmatic way the government has adopted to allow the passage of Draft Amendments. In any case, this change is likely to take a long time to start showing on the ground.

Another radical change proposed is of paying subsidies through “Direct Benefit Transfer” only. This can be a potential game-changer for the sector and can pave the way for genuine DISCOM reforms on commercial principles.

Author: Dinesh Pardasani is a Partner with the Firm’s Projects, Infrastructure and Energy law practice. He has earned considerable recognition for his work on Smart Cities projects from Chambers and Partners Asia pacific. He also has extensive experience in renewable energy space and is presently advising Softbank on their solar projects in India. Apart from this, he is an expert on metro rail, roads and industrial corridor related sectors.
 
 
 
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