The Energy Regulation and Markets Review - Stikeman Elliott

India
under other laws for land acquisition, environmental, corporate and labour compliance
must be adhered to.
Electricity distribution activities (except for distribution of electricity in
rural areas) require a licence from the relevant SERC. Electricity trading is a distinct
recognised activity for which a separate licence is required from the CERC or an SERC
(for interstate and intrastate trading respectively). However, distribution licensees can
undertake electricity trading activities without a trading licence. Licences are awarded by
the CERC for interstate transmission activity by way of a competitive bidding procedure
in accordance with CERC regulations. For intrastate transmission services, licences are
awarded by the relevant SERC under relevant regulations.
The DGH awards licences through international competitive bidding for natural
gas exploration blocks under the New Exploration Licensing Policy (‘the NELP’) rolled
out in 1999. The production-sharing contract (‘PSC’) under the NELP programme
stipulates conditions regarding pricing and sharing of total product obtained with the
government. The coal bed methane (‘CBM’) policy (formulated in 1997) offers blocks
for exploitation of CBM through open competitive bidding system, in a manner similar
to the NELP.
Petroleum, natural gas and city gas distribution (‘CGD’) networks can be
developed either through an expression of interest to the PNGRB or under competitive
bids invited by the PNGRB. Under the expression of interest route, upon a receipt of
interest the PNGRB must publicise it to receive proposals or comments from different
entities, and may invite competitive bids or allow for the proposal (with or without
modification).
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Ownership and market access restrictions
Over the past decade, the government has progressively liberalised the energy sector,
although government companies continue to be active players. The government actively
seeks to promote domestic and foreign investment in the energy sector. Up to 100
per cent foreign direct investment (‘FDI’) is permissible in generation (except nuclear
power), transmission and distribution of electricity as well as in the oil and gas sector 5
without prior regulatory approval. Such investments are subject to sector-specific laws
and policies. Interestingly, in comparision, China permits FDI up to 75 per cent in the
electricity sector and up to 85 per cent in the oil and gas sector.
State-owned as well as private entities play a significant role in electricity
generation. The interstate transmission system is mainly owned and operated by Power
Grid Corporation of India Limited (‘PGCIL’), a state-owned company, and the intrastate
transmission system is owned and maintained by state utilities. The government is
looking to increase private participation to strengthen transmission networks with
the aim of bolstering transmission capacity and to cater for the increased generation
capacity through competitive bidding and the recently introduced viability gap funding
5 Investments in petroleum refining under taken by government-owned entities, only up to 49
per cent FDI is permitted subject to approval.
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