INDIA Trends and Developments Contributed by: Anuja Tiwari, Mallika Anand, Pranjal Bhattacharya and Antra Shourya, AZB & Partners
Considering that utility-scale power purchase agree- ments do not in most instances set out a mecha- nism for determining compensation in the event of a change in law, power generators are required to approach the regulatory commissions for determina- tion of such compensation. The Indian government has introduced the Electricity (Timely Recovery of Costs Due to Change in Law) Rules 2021, laying down the mechanism for tariff adjustment to mitigate the impact of a change in law by restoring the affected party to the same economic position as before the change in law. iii) Late payment rules Distribution companies in India have historically been debt-laden, with unreliable payment histories, and this continues to be the most critical risk in the energy sector. In order to overcome the hurdles of non-pay- ment to power generators, transmission licensees and trading licensees, the Indian government notified the Late Payment Surcharge Rules 2022, placing a firm obligation on distribution companies to provide a payment security in the form of a letter of credit − failing which, power generators can then reduce the supply of power to the defaulting distribution compa- nies for further resale. The Late Payment Surcharge Rules 2022 also provide a framework for calculating and levying late payment surcharges in the event that distribution companies default or incur a delay in their payment obligation. iv) Must-run provisions Although renewable energy projects in India have been granted “must-run status” (ie, duly commis- sioned projects cannot be directed to back down their generation, except owing to reasons of grid security), there have been instances across the Indian states whereby distribution companies or load despatch centres have issued frequent backdown instructions. In order to address this, the Indian government has notified the Electricity (Promotion of Generation of Electricity from Must-Run Power Plants) Rules 2021 to compensate renewable energy generators even in cases where the power purchase agreements do not specifically provide for relief in the event of grid back- down instructions.
Oil and gas In April 2025, the Indian government implemented the Oilfields (Regulation and Development) Amend- ment Act 2025 (the “ORD Act”), introducing a unified petroleum lease regime. This also consolidated the regulation of exploration, production, infrastructure- sharing and energy-transition activities within a single legislation. The ORD Act has expanded the definition of “min- eral oils” to include unconventional hydrocarbons and, among other things, permits the development of renewable energy projects within oilfields. In align- ment with this legislative reform, the Petroleum and Natural Gas Regulatory Board has operationalised − effective from 1 July 2024 − a uniform levelised gas transportation tariff across the national pipeline grid under the “One Nation, One Grid, One Tariff” initiative to promote equitable market access. Roads and highways In January 2024, the Indian government issued amendments to the model concession agreements for Build-Operate-Toll and Toll-Operate Transfer models of road projects. The amended agreements provide for termination payment and compensation for default payable by the National Highways Authority of India. The termination compensation is payable even before the commercial operation date if 40% or more of the project has been physically constructed prior to the default causing termination of the concession agree- ment. The termination compensation will include direct costs and loss of toll revenue prior to the com- mercial operation date of the project. Another significant amendment to the model conces- sion agreements enables concessionaires to claim monetary compensation and seek extension of the concession period if competing roads or additional tollways are constructed during the concession peri- od. Outlook India’s focus on its green energy transition in order to achieve its COP26 targets (ie, 50% of its energy demands to be met through renewable sources by 2030) – together with the country’s continued focus
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