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Draft open access norms can be a tailwind for new renewable projects

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The Draft Electricity (promoting renewable energy through Green Energy Open Access) Rules, 2021, announced by the Ministry of Power, if implemented as it is, could improve the certainty of cash flows for new renewable energy projects coming up through this route, ratings agency Crisil has said in a report.

In India, power distribution happens through three modes – state distribution companies, captive sources and open access. Under the open access route, which had a total installed capacity of 11 GW as on March 31, 2021, renewable power producers sell electricity directly to commercial and industrial (C&I) consumers. These consumers pay open access charges to state distribution companies (discoms). Such open access projects are hobbled by state-level policy changes that make returns uncertain.

The draft rules aim to provide clarity on such open access charges – including, inter alia, cross-subsidy surcharge (to compensate discoms for loss of high paying C&I consumers), additional surcharge (to recover the fixed power purchase cost for stranded assets), and banking charges (for consuming energy on a later date) – and will help streamline the overall approval process to improve predictability of cash flows for renewable power producers, the report released last week said.

The ministry has sought feedback on the rules from stakeholders, including state regulatory bodies and discoms.

State regulators haven’t been fully backing open access projects fearing their discoms would lose high-tariff paying C&I customers. Consequently, they raise levy of cross-subsidy and additional surcharges, or change banking provisions by removing/lowering the banking period. Since renewable projects have a lifespan of 25 years, uncertainty around open access charges and tightened banking norms make project returns more vulnerable, thereby influencing the viability of these projects.

For instance, some of the key states having a majority share of open access capacities have levied cross-subsidy and additional surcharges of Rs 1.5-2.0 per unit – on average – in the past three fiscals. On the other hand, some states have either removed or lowered the banking period, which affords flexibility to developers (to bank their unsold power with discoms if the offtake of a C&I consumer is affected for a few days).

Ankit Hakhu, Director, CRISIL Ratings, said: “Every 10 paise increase in cross-subsidy and additional surcharges results in a 150 basis points (bps) reduction in returns for open access project developers. Reducing the banking period with state discoms increases the risk to the revenue of developers if the offtake by C&I consumers is affected for a few days.”

Open access projects also face hurdles related to timely approvals and states reneging on policy support. For instance, developers faced approval delays in Uttar Pradesh, Chhattisgarh and Maharashtra, while Karnataka, Haryana and Maharashtra have tried to change their policy support features.

The draft rules propose to address these issues. The document states that cross-subsidy surcharge should not be increased by more than 50 per cent for a 12-year period from the date of project commissioning. Also, any additional surcharge cannot be levied on these projects. This is to ensure predictability on open access charges and thus the cash flows of developers.

The draft rules also proposes to limit how much power can be banked with state discoms – up to 10 per cent of the annual consumption of the consumer. This will allow the C&I consumer to draw banked power from discoms later, thereby providing some stability to the cash flows of developers.

Further, a central nodal agency is to be set up to streamline the approval process. All open access applications have to be submitted on the agency’s portal and subsequently routed to the state nodal agency for approval. If approval is not granted within 15 days, the application will be deemed approved subject to the fulfilment of the technical requirement to ensure timely execution of these projects and minimise any risk of cost escalations.

On an average, cross-subsidy and additional surcharges form 65-70 per cent of total open access charges.

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Nifty, Sensex see firm recovery after RBI’s support to rupee

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Indian equity benchmarks posted a firm recovery, sustaining gains for the second week as investors looked past early inflation worries, especially after the central bank’s special dollar window for oil marketing companies helped the rupee rebound.

Nifty added 2.78 per cent during the week and gained 0.65 per cent on the last trading day to reach 23,146.

At close, Sensex was up 413 points or 0.56 per cent at 74,729. It gained 3.11 per cent during the week.

Market sentiment was dented earlier in the week by consumer inflation hovering near the upper end of the Reserve Bank of India’s tolerance band and a hotter‑than‑expected wholesale price index print that pushed benchmark bond yields to multi‑year highs.

The central bank raised the daily cash reserve ratio maintenance requirement to absorb surplus liquidity, adding to caution. Market confidence, however, improved after the central bank’s special dollar window for oil marketing companies and tighter hedging norms drove a rupee-rebound, analysts said.

“Expectations of a review of LTCG tax and STT, softer crude prices and easing bond yields further revived risk appetite, prompting investors to tilt towards counters with strong Q2FY27 business updates, though the rally remained concentrated in large-caps, with mid-caps posting modest gains and small-caps ending marginally lower,” they added.

“Participants should remain selective, maintain disciplined position sizing and favour a hedged approach amid elevated macroeconomic and earnings-related uncertainty,” the experts said.

Information technology (IT) sector emerged as the standout performer on robust earnings and upbeat management commentary, while healthcare and pharmaceuticals lagged as investors favoured sectors with stronger near-term earnings visibility.

Meanwhile, fast‑moving consumer goods stocks came under pressure amid concerns over margin compression from elevated input costs.

Broad market indices performed largely in line with the benchmark indices as Nifty Midcap100 added 0.58 per cent and Nifty Smallcap100 dipped 0.12 per cent during the week.

In addition, foreign institutional investors (FIIs) turned net buyers of Rs 11.66 billion in Indian equities on Friday after overall selling eased sharply this week as market sentiment improved.

FIIs remained net sellers for the ninth straight week but their weekly selling moderated to Rs 89.91 billion from Rs 302.94 billion the previous week. On the other hand, domestic institutional investors (DIIs) stayed net buyers for a ninth consecutive week at Rs 78.13 billion, though they were net sellers of Rs 36.61 billion on Friday.

The sustainability of the recovery will hinge on earnings growth broadening beyond IT with revenue and margin delivery across financials, consumption and industrials under close scrutiny, analysts said.

Investors are keen on India’s October PMI that will offer insight into domestic demand momentum, while US jobless claims and Japan’s inflation print will shape global rate expectations.

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Japanese delegation visits MLFF tolling system near Delhi

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A Japanese delegation visited the Multi-Lane Free Flow (MLFF) tolling system in Mundka-Bakkarwala on Friday on the sidelines of the 12th India–Japan Joint Working Group Meeting on Roads and Road Transportation.

The MLFF system provided insights into India’s technology-driven initiatives for seamless and efficient highway travel.

At the MLFFs, the National Highways Authority of India (NHAI) uses a combination of RFID-based FASTag electronic toll collection, automatic number plate recognition (ANPR) and AI analytics to allow vehicles to pass through charging points without stopping, slowing down or remaining in a designated lane.

MLFFs have already been installed at Choryasi in Gujarat, Mundka in Delhi, Gharaunda in Haryana and Daulatpura and Manoharpura in Rajasthan.

While 12 further locations have been awarded for conversion, tenders have also been launched covering an additional 104 toll plazas around the country.

The MLFF at Choryasi on the Surat–Bharuch section of NH-48 was the first to become operational.

The one at Mundka on Delhi’s Urban Extension Road-II was the second.

The expansion plan represents a significant shift from India’s traditional barrier-based toll plazas.

Rather than moving immediately to satellite-based toll collection, the Indian government has opted to build on the country’s established FASTag system and combine it with ANPR and AI.

Expert committees had recommended further consideration of GPS-based barrier-free tolling because of security, privacy and operational control issues, the Ministry of Road Transport and Highways has indicated.

FASTag and ANPR/AI was thus selected as the technology for the current MLFF programme.

The session of the India–Japan Joint Working Group on Roads and Road Transportation Sector was successfully held at Bharat Mandapam in New Delhi.

Discussions focused on advanced construction technologies, bridge and tunnel engineering, sustainable infrastructure and digital innovations, fostering the exchange of technical expertise and best practices.

“The meeting reaffirmed both nations’ commitment to safe, sustainable and technology-driven road infrastructure, aligned with the vision of Viksit Bharat @ 2047,” the Ministry said in a statement.

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India-US trade deal 98-99 percent done: US official

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Washington, Oct 16: A long-awaited trade agreement between India and the United States is almost complete, with only one or two per cent of negotiations remaining, a senior US official said, signalling that the two countries are approaching a breakthrough after months of high-level discussions.

The official said the biggest issues had already been resolved and that negotiations were continuing at the highest political levels, including between President Donald Trump and Prime Minister Narendra Modi.

“The biggest items have been settled. I mean …., it’s pretty much done. We have that one, one or two per cent left,” the official told reporters during a State Department briefing on Friday.

The remarks came ahead of Secretary of State Marco Rubio’s scheduled visit to India, where he will hold discussions with Indian government officials and leading business executives in Mumbai and Jamnagar.

The official said the two governments remained in constant contact over the proposed agreement.

“We are actively engaged every single week,” the official said, adding that high-level discussions on the trade deal were taking place regularly.

The official cited recent diplomatic engagements involving US Trade Representative Jamieson Greer, India’s Commerce Minister Piyush Goyal and conversations between Trump and PM Modi as evidence of the momentum behind the negotiations.

However, the official also identified a significant complication that had delayed the agreement.

An earlier understanding had been linked to the International Emergency Economic Powers Act, or IEEPA, but the legal framework had to be reconsidered after the law was struck down, according to the official.

The development forced negotiators to revisit elements of the proposed agreement and contributed to several additional months of discussions.

Despite those complications, the official expressed optimism that the remaining differences could be resolved soon.

Rubio is scheduled to travel first to Uzbekistan for meetings with Central Asian leaders before proceeding to India.

In Mumbai, he will meet Indian government counterparts and senior executives from some of the country’s largest companies.

The official said the decision to visit Mumbai rather than New Delhi reflected the administration’s growing emphasis on commercial diplomacy and Indian investment in the United States.

Rubio will also travel to Jamnagar.

The official said Washington was seeking closer engagement with India across information technology, pharmaceuticals, defence cooperation and other sectors.

Further visits by senior American Cabinet officials are also anticipated next year as both governments seek to expand bilateral engagement.

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