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JSA Prism | Energy | June 2024

Please click here to download the Prism as a PDF.

The developer of a SEZ cannot ipso facto be conferred the status of a deemed distribution licensee under the Electricity Act, without scrutiny or application

In a landmark judgment, the Hon’ble Supreme Court of India (“Supreme Court”) in M/s. Sundew Properties Limited v. Telangana State Electricity Regulatory Commission & Anr.[1], has harmoniously interpreted the provisions of the Electricity Act, 2003 (“Electricity Act”) and the Special Economic Zone Act, 2005 (“SEZ Act”) to hold that: (a) A developer of a special economic zone (“SEZ”) is a deemed distribution licensee under the Electricity Act, however, such recognition does not specifically exempt it from making an application for ‘recognition’ as a deemed distribution licensee; (b) 6^th proviso to Section 14 of the Electricity Act and consequently Distribution of Electricity Licence (Additional Requirements of Capital Adequacy, Creditworthiness and Code of Conduct) Rules, 2005 (“2005 Rules”) are not applicable to a developer of SEZ; (c) State Electricity Regulatory Commissions are not empowered to impose extraneous conditions of meeting capital adequacy and/or creditworthiness before recognising a developer of a SEZ as a deemed distribution licensee under the Electricity Act.

Brief Facts

On March 3, 2010, the Ministry of Commerce and Industry, Government of India (“MoCI”) by its Notification No. SO 528(E) (“2010 Notification”) introduced a proviso to Section 14(b) of the Electricity Act, granting SEZ developers the status of deemed distribution licensees under the Electricity Act.
Pursuant to the 2010 Notification, M/s. Sundew Properties Limited (“Appellant”) (a ‘developer’ under the SEZ Act) approached the Andhra Pradesh Electricity Regulatory Commission seeking ‘recognition’ as a deemed distribution licensee under the Electricity Act. Upon the Andhra Pradesh Reorganization Act, 2014 coming into force, the application of the Appellant was transferred to the Telangana State Electricity Regulatory Commission (“TSERC”).
On February 15, 2016, the TSERC passed an order identifying and accorded the status of a deemed licensee to the Appellant. However, the grant of status was made conditional upon the Appellant satisfying the requirements under the 2005 Rules read with the Andhra Pradesh Electricity Regulatory Commission (Distribution Licence) Regulations, 2013 (“2013 Regulations”). Consequently, the promoters of the Appellant were directed to infuse an additional capital of INR 26,90,00,000 (Indian Rupees twenty-six crore ninety lakh) into its Power Distribution business.
Aggrieved by TSERC’s Order, the Appellant filed Appeal No. 3 of 2017 before the Appellate Tribunal for Electricity (“APTEL”). On September 27, 2019, APTEL dismissed the Appellant’s Appeal. Accordingly, the Civil Appeal was filed before the Supreme Court.

Issue

The issues before the Supreme Court were to adjudicate:

whether the designation of an entity as a SEZ developer by the 2010 Notification ipso facto qualifies the entity to be a deemed distribution licensee, obviating the need for an application under Section 14 of the Electricity Act?
whether Regulation 12 of the 2013 Regulations, and by implication Rule 3(2) of the 2005 Rules, apply to a SEZ developer recognized as a deemed distribution licensee under the proviso to Section 14(b) of the Electricity Act read with Regulation 13 of the 2013 Regulations?

Findings

The Supreme Court noted that:

Provisos to Section 14 of the Electricity Act distinguish between entities that are ipso facto deemed distribution licensees and those that merely declared as deemed licensees without clarity on the necessity of making an application to obtain a licence. Thus, entities not explicitly exempted are required to make an application to the appropriate commission.
The 2010 Notification confers ‘deemed licensee’ status on SEZ developers through proviso to Section 14(b) but does not explicitly exempt them from the requirement to obtain a license. Thus, the legislative intent is that the developer of SEZ should obtain a license by making an application in terms of Regulation 13. TSERC is empowered to scrutinize these applications in accordance with the law, to the limited extent of provisions applicable to deemed licensees. Verification and acceptance recognize their status as deemed licensees.
Status of an SEZ developer as a deemed licensee emanates from the 2010 Notification, which introduced the proviso to Section 14(b). Reading anything beyond this would defeat the very purpose of the proviso and the concept of deemed license. Therefore, the sixth proviso to Section 14 does not apply to deemed licensees, and, therefore, the 2005 Rules do not apply to the Appellant.
Regulation 12 of the 2013 Regulations pertains solely to regular distribution licensees as defined under Regulation 2(h), and not to deemed licensees. ‘Reading up’ Regulation 12 to expand its ambit to include within it deemed licensees, especially when the Electricity Act does not stipulate any such inclusion, runs counter to the proviso to clause (b) of Section 14 of the Electricity Act. This would be impermissible.
Hence, the condition stipulated in Rule 3(2) of the 2005 Rules, as imposed by the TSERC with a direction to infuse additional capital of INR 26,90,00,000 (Indian Rupees twenty-six crore ninety lakh), is not justified and contrary to the statutory scheme.

Conclusion

The Supreme Court’s Judgment puts to rest a decades old controversy of Electricity Regulatory Commissions applying additional regulatory stipulations while identifying deemed distribution licensees. The judgment clarifies the role of Regulatory Commissions in identifying such deemed licensees and the scrutiny required while processing such applications.

It provides an impetus to expeditious operationalizing of distribution licensee status by SEZ developers, and therefore providing a choice of supplier to consumers in SEZs. In Telangana and Andhra Pradesh, no SEZ had operationalized their deemed distribution licensee status due to this overhang, which now stands resolved. SEZ developers (and the units in such SEZs) now gain a significant competitive edge since the incumbent non-SEZ distribution licensee’s tariff is typically higher.

Before the Supreme Court, the JSA team was represented by:

Abhishek Munot
Partner

Kunal Kaul
Partner

Malcolm Desai
Principal Associate

Samikrith Rao Puskuri
Senior Associate

This Prism has been prepared along with:

Aditya Ajay
Senior Associate

Simran Kohli
Associate

For more details, please contact [email protected]

[1] Civil Appeal No. 8978/2019, dated May 17, 2024.

Tags Electricity Act, Energy, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Supreme Court

JSA Prism | Climate Change | June 2024

Please click here to download the Prism as PDF.

Exemption for Renewable Energy plants located inside special economic zone or export-oriented units supplying power exclusively for production of Green Hydrogen

The Ministry of New and Renewable Energy (“MNRE”), vide 2 (two) office memorandums each dated May 27, 2024, has issued exemptions for renewable energy (“RE”) plants located inside a special economic zone (“SEZ”) or export oriented unit (“EOU”) and supplying power exclusively for production plants of green hydrogen (or its derivatives), which are located inside a SEZ or set up as an EOU (either the same or different SEZ/EOU) from purview of the following:
- the Approved List of Models and Manufacturers (“ALMM”) for Solar PV Modules, issued by MNRE under the Approved Models and Manufacturers of Solar Photovoltaic Modules (Requirements for Compulsory Registration) Order, 2019, including all clarifications/amendments and guidelines thereunder; and
- the Revised List of Models and Manufacturers (“RLMM”) for Wind Turbine Models, issued by MNRE under the Guidelines for Development of Onshore Wind Power Projects issued vide F.No.66/183/2016-WE dated October 22, 2016, including all clarifications/amendments and procedures thereunder.
The ALMM mandate requires solar project developers to purchase modules from an approved list, serving as a non-tariff measure to promote domestic manufacturing. Similarly, the RLMM provides a list of type and quality certified wind turbine models eligible for installation in the country.
These exemptions are intended to facilitate the swift deployment of renewable energy infrastructure, which is essential for the production of green hydrogen and its derivatives within SEZ/EOU. Further, these exemptions will apply to the RE plants to be commissioned before December 31, 2030, to supply power to plants for production of green hydrogen and its derivatives

Conclusion

From an industry perspective, these exemptions represent a significant and welcome action by the MNRE. By removing the requirement for RE plants within SEZs or EOUs to adhere to the ALMM for solar PV modules and the RLMM for wind turbine models, the MNRE has effectively lowered barriers to the rapid deployment of renewable energy infrastructure critical for green hydrogen production. This move is expected to result in reduced costs for green hydrogen producers, as they will have greater flexibility in sourcing power. Consequently, these producers can access more competitively priced options, thereby enhancing their ability to produce green hydrogen and its derivatives economically. Overall, this initiative not only supports the industry’s growth but also aligns with India’s broader renewable energy and sustainability goals.

This Prism has been prepared by:

Vishnu Sudarsan
Partner

Sugandha Somani Gopal
Partner

Asmita Maan
Associate

For more details, please contact [email protected]

Tags Climate Change, Green Hydrogen, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Renewable Energy

JSA Prism | Energy | May 2024

Please click here to download the Prism as PDF.

Supreme Court upholds the decision of APTEL directing that there is no statutory basis to levy additional reliability charge for uninterrupted power supply to bulk consumers.

The Hon’ble Supreme Court of India (“Supreme Court”), in Maharashtra State Electricity Distribution Company Limited v. M/s. JSW Steel Ltd. & Anr. (“Civil Appeal”)[1], has upheld the decision of the Appellate Tribunal for Electricity (“APTEL”) that the Maharashtra State Electricity Distribution Co. Ltd. (“Appellant”) had no statutory basis to impose an additional reliability charge for uninterrupted power supply to bulk consumers.

Brief Facts

In terms of the Tariff Order dated October 20, 2006, passed by the Maharashtra Electricity Regulatory Commission (“MERC”), the Appellant imposed an additional supply charge for uninterrupted power supply to its bulk consumers, including Respondent No. 1 / JSW Steel Ltd. (“JSW Steel”).
On June 20, 2008, MERC by its Tariff Order discontinued the imposition of additional supply charges and directed the Appellant to refund the additional supply charge collected during Financial Year (“FY”) 2006-07 and FY 2007-08 from bulk consumers. Pursuant to this, the Appellant preferred a petition before the MERC seeking approval for recovery of reliability charges for implementing ‘Zero Load Shedding’ in the Pen Circle area in Maharashtra.
On June 15, 2009, MERC by its order allowed the imposition of a reliability charge for the period June 16, 2009, till March 31, 2010, (“Order”) which was made payable by all the consumers in the Pen Circle area, including JSW Steel.
Aggrieved by the Order, JSW Steel challenged the said Order before APTEL in Appeal No. 135 of 2009. On December 14, 2009, APTEL by its Judgment inter alia set aside the Order. Subsequently, the Appellant challenged the Judgment of APTEL before the Supreme Court in the present Civil Appeal.
The Appellant contended that:
- The MERC has adequate powers to bring in schemes to improve the nature of Supply in a particular area in terms of Section 62(3) of the Electricity Act, 2003 (“Electricity Act”).
- Non-participation of JSW Steel in the public hearing held by MERC, despite consuming about 45% of the electricity in Pen Circle area, amounts to deemed consent given by JSW Steel to pay the reliability charges. Similar charges are being paid by the High Tension (“HT”) industrial consumers in other regions of Maharashtra.
JSW Steel contended that:
- JSW Steel, being a continuous process industry and a large-scale consumer, was not subjected to load shedding by the Appellant.
- JSW Steel was already paying higher tariffs compared to those for HT non-continuous process industries.

Issue

The issues before the Supreme Court were to adjudicate:

Whether imposition of reliability charge by the Appellant was legal?
Whether JSW Steel was liable to pay the reliability charge?
Whether JSW Steel, being affected by the levy of the reliability charge, had a right to appeal against MERC’s Order under Section 111 of the Electricity Act?

Findings

While upholding the decision of APTEL in favour of JSW Steel, the Supreme Court observed that:

There is no statutory basis, either under Section 62(3) of the Electricity Act or the Rules and Regulations framed thereunder by the MERC, which supports the levy of reliability charges. Thus, the Appellant did not have any statutory basis for imposition of reliability charge.
Vidharba Industries Association, of which JSW Steel is a member, had already objected to the imposition of the reliability supply charge, thereby representing the interest of JSW Steel.
Section 111 of the Electricity Act provides for a statutory appeal against an Order of the Appropriate Commission. JSW Steel, being directly affected by the levy of the reliability charge, was a “person aggrieved” within the purview of Section 111 of the Electricity Act and hence was entitled to challenge the legality of the Order passed by MERC.
Nothing in the Electricity Act suggests that a consumer who does not participate in the Appropriate Commission’s public hearing and is aggrieved by an order of the Appropriate Commission is disentitled to prefer an appeal.
JSW Steel, being a continuous process industry on express feeder, had paid a higher tariff during the period from July 2009 till April 2010 to get supply without load-shedding. Thus, JSW Steel had already paid a higher tariff for uninterrupted supply, negating the need for an additional reliability charge.

Conclusion

The Supreme Court by the Civil Appeal has re-affirmed the law laid down by APTEL that charges cannot be levied by Distribution Companies on its consumers without any statutory basis under the Electricity Act. Bulk / Industrial consumers are already subjected to higher tariffs which negate the need for the imposition of an additional reliability charge for implementing ‘Zero Load Shedding’.

This Prism has been prepared by:

Anupam Varma
Partner

Aditya Ajay
Senior Associate

Akshata Sharma
Associate

For more details, please contact [email protected]

[1] Civil Appeal No. 8413 of 2009, dated May 17, 2024.

Tags APTEL, Energy, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Supreme Court

ESG-focussed Reform for International Investment Agreements: A Potential Solution

Late last year, the UN Special Rapporteur on Human Rights and the Environment presented a scathing report to the UN General Assembly on investor-state dispute resolution (‘ISDS’) and its consequences for climate change and human rights. The report termed ISDS an ‘unjust, undemocratic and dysfunctional process’, which ‘perpetuates colonial extractivism and exacerbates inequality’.

While the report has met with some criticism (see here), the prevalent skepticism about ISDS, or for that matter towards international investment agreements (‘IIAs’) in general, is well-documented. This hostility has been fuelled in major part by the increasing ESG obligations of States. As States introduce more regulations to address key ESG issues, particularly climate change, labour and the environment, the conflict between such regulation and investor rights has become increasingly likely.

Please click here to read the full article by Anjali Anchayil, published in Oxford Business Blog.

Tags ESG, Human Rights, ISDS, JSA, Leading Law Firm, Leading Lawyers

US$ 450 million strategic investment in Hero Future Energies Group

JSA advised and assisted Hero Future Energies Global Limited (HFE Global) and Hero Future Energies Private Limited (HFE India) in relation to its private equity fund raise of US$ 450 Million (i.e. around INR 3600 crore) by global investment and private equity firm KKR (Kohlberg Kravis Roberts) in HFE Global. The transaction involved complex structuring and issues across UK and India jurisdictions.

Based in New York, KKR is one of the world’s largest global investment funds with more than US$ 500 billion of assets under its management, including investments in renewable energy sector in India.

HFE Group is focused on futuristic and clean energy and has presence in select international geographies around the world. IFC (World Bank) and Masdar are existing investor in HFE Group. Hero Future Energies is a leading independent power producer in India.

This investment will help HFE grow and expand its renewable energy capacity and capabilities in areas like solar, wind, battery storage, and green hydrogen, as well as into new markets over time. Further, this investment leverages KKR’s expertise in India and renewable energy. HFE’s clean energy solutions are crucial in assisting companies in decarbonizing as energy needs rise.

The transaction also required the filing of a merger notification with the Competition Commission of India and seeking necessary clarifications / permissions from the Reserve Bank of India.

Our Transaction Team Comprised Lead Partner – Manvinder Singh, Partner – Anant Mishra, Senior Associate – Parnik Saxena, and Associate – Pragya Pandey

Our Projects Advice Team Comprised Partner – Vishnu Sudarsan, Shashank Singh, andSiddhant Thakar.

Our Competition Team Comprised Partner – Vaibhav Choukse, Senior Associate – Nripi Jolly.

Tags Energy, Investment, JSA, Leading Law Firm, Leading Lawyers

Courts worldwide increasingly recognise climate action as a human right

Courts globally, including India’s Supreme Court and the European Court of Human Rights, are recognizing climate action as a fundamental human right. Activists are turning to courts to push governments to enact laws protecting citizens from climate change. Courts are imposing penalties and issuing directives to compel climate action, highlighting the need for stronger legal frameworks. Recent landmark verdicts emphasize balancing conservation efforts with climate change mitigation. Young people are also joining climate activism, emphasizing the urgency for action to tackle the climate crisis.

Please click here or refer to the below document to read the full article by Amit Kapur and Kartikeya Gajjala, published in The Economic Times.

Tags Climate Change, Court of Human Rights, JSA, Leading Law Firm, Leading Lawyers

APTEL adds a new’element’ to restitutionary relief for Change in Law claims

JSA successfully represented Adani Power Ltd. (“Adani”) before Appellate Tribunal for Electricity (“APTEL”). By Judgment dated 18.04.2024, APTEL held that Adani is entitled to (a) Change in Law compensation on account of levy of Evacuation Facility Charges by Coal India, and (b) Carrying Cost at the rate of Late Payment Surcharge (on compounding basis) in terms of the Power Purchase Agreement (“PPA”). This is first time that APTEL has allowed Carrying Cost at the rate of Late Payment Surcharge, on compounding basis.

Following are some key findings of APTEL:

The restitutionary principles engrained in relevant Article of the PPA that a party should be compensated for the time value of money, by virtue of a legal fiction, would be required to be invoked for grant of compound interest on Carrying Cost on account of a Change in Law event, from the date on which the Change in Law event occurred (@pgs. 24-26)
Rejected Discoms’ contention that Adani should be entitled to Carrying Cost only after the Supplementary Bill is raised, as accepting it would result in Adani being deprived of the benefit, of Carrying Cost, for a period of more than six years between the date on which the Change in Law and date of this Judgment, thereby defeating the very object sought to be served by application of the restitutionary principle (@pg. 27).
Adani is entitled to Carrying Cost at rate of Late Payment Surcharge (@pg. 28).
Levy of Evacuation Facility Charges (on despatch of coal) through Coal India Limited’s notification dated 19.12.2017 is a Change in Law event (@pg. 26).
Decision rendered by a larger Bench of Supreme Court as understood by subsequent smaller Bench of the Supreme Court would require lower Courts/Tribunals in the hierarchy to follow the later decision (@pg. 30).
For the period of delay in filing of Appeal, if any, no Carrying Cost is payable to the Appellant (@pg. 34).

This judgement has finally settled the law regarding a highly contentious issue viz. grant of Carrying Cost at the rate of Late Payment Surcharge (on compounding basis) in terms of PPA. This should put to rest several long-standing litigations initiated by Discoms and will help several other generators in the sector where similar issues are pending. We expect this Judgment to also foster investor confidence in the power sector as it attempts to balance public and private interests in lines with the principles envisaged in Section 61 of the Electricity Act, 2003.

Our Disputes Team Comprised Joint Managing Partner – Amit Kapur, Partner – Poonam Verma Sengupta, Senior Associate – Saunak Kumar Rajguru and Associate – Subham Bhut.

Tags Adani Power, APTEL, JSA, Leading Law Firm, Leading Lawyers

JSA Prism | Climate Change | April 2024

Please click here to download the Prism as PDF.

Scheme Guidelines for implementation of ‘Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme – Component I: Incentive Scheme for Electrolyser Manufacturing Tranche – II’

In January 2023, the Union Cabinet approved the National Green Hydrogen Mission with an initial outlay of INR 19,744 crore (Indian Rupees nineteen thousand seven hundred and forty-four crore), allocating funds for various components including the Strategic Interventions for Green Hydrogen Transition (“SIGHT”) Programme (“SIGHT Programme”), pilot projects, research and development, and other mission components. The SIGHT Programme proposes 2 (two) distinct financial incentive mechanisms to support domestic manufacturing of electrolysers and production of Green Hydrogen. Tranche I of the SIGHT Programme awarded tenders to 10 (ten) companies on January 9, 2024, for establishing green hydrogen production facilities in India with a total capacity of 4,12,000 (four lakh twelve thousand) tons per annum.

Building on this, the Ministry of New and Renewable Energy (“MNRE”), on March 16, 2024, issued the ‘Scheme Guidelines for implementation of Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme – Component I: Incentive Scheme for Electrolyser Manufacturing Tranche – II’ (“Scheme”). The objectives of the Scheme include maximizing indigenous electrolyser manufacturing capacity, achieving a lower levelized cost of hydrogen production, ensuring globally competitive performance and quality of products, progressively enhancing domestic value addition, and supporting established and promising technologies.

Salient Features

Budget allocation: The Scheme, allocated a total outlay of INR 4,440 crore (Indian Rupees four thousand four hundred and forty crore), will span from FY 2025-26 to FY 2029-30.
Implementing agency: MNRE will oversee the Scheme’s execution through the Solar Energy Corporation of India Limited (“SECI”). SECI’s responsibilities encompass administrative, managerial, and implementation support, including application evaluation, issuance of acknowledgments and letters of award, verification of incentive claims, and quarterly progress reporting to MNRE. SECI is entitled to 0.5% of the disbursed incentive amount as administrative charges and holds authority to conduct physical inspections and enlist third-party agencies for technical verification.
Guiding principles: The Scheme adheres to specific guiding principles:
1. Support for electrolyser manufacturing will be provided in terms of INR/kW corresponding to the manufacturing capacity.
2. The base incentive will commence at INR 4440 (Indian Rupees four thousand four hundred and forty) perkW in the inaugural year and will gradually decrease annually.
3. Incentives will be disbursed for 5 (five) years from the onset of electrolyser manufacturing.
Penalties: Bidders participating in the Scheme are mandated to submit earnest money deposit (“EMD”) as specified in the tender document. Non-compliance with the tender terms may lead to forfeiture of the EMD. Successful bidders, upon acceptance of the award, must furnish performance bank guarantees (PBG) or analogous instruments, as stipulated in the tender document. Failure to adhere to project commissioning timelines or default in project execution may result in forfeiture of the commensurate bank guarantees or similar performance guarantee instruments by SECI. Detailed modalities regarding penalties, including encashment of EMD, bank guarantees, accrued interest, or other penalties collected by SECI, will be outlined in the tender documents.
Monitoring: Oversight will be conducted by a Scheme Monitoring Committee (“SMC”) chaired by the Secretary of MNRE. The SMC, comprising representatives from MNRE, SECI, and relevant experts, will periodically review the implementation status and performance of electrolyser manufacturing capacities awarded under the scheme, facilitating resolutions for any encountered difficulties.

Implementation methodology

The scheme is designed to promote the manufacturing of efficient and top-tier electrolysers within India. It outlines a detailed selection process for bidders, evaluating them based on the following specific parameters:
1. Performance quotient based on the Specific Energy Consumption
2. Local value addition for each year of production

Additionally, verification of local value addition will be conducted annually to ensure compliance with the Scheme requirements.

Eligibility: The Scheme imposes stringent eligibility criteria, requiring bidders to meet financial stability and manufacturing capability standards. Bidders, whether single companies or joint ventures/consortiums, must demonstrate a net worth equal to or exceeding INR 21,00,00,000 (Indian Rupees twenty-one crore) per MW for bucket 1 or 2A, and INR 30,00,000 (Indian Rupees thirty lakh) per MW for bucket 2B, with the option to showcase financial capability through affiliates. Additionally, electrolysers produced must adhere to technical specifications including specific energy consumption of 56 kWh per kg of Hydrogen production, a guaranteed life of at least 60,000 hours, and a minimum Local Value Addition of 40% for alkaline electrolyzers and 30% for other technologies in the first year of production, ensuring the production of high-quality equipment fostering efficient green hydrogen generation.
In order to promote indigenously developed electrolyser technologies, bids in the second tranche of 1500 MW will be called in three separate buckets.
Payment incentives for the selected bidders are also set in the Scheme guidelines.

Conclusion

In light of the burgeoning global interest in green hydrogen initiatives, the Mission, has set forth a promising trajectory towards sustainable energy production. The issuance of the Scheme guidelines for the SIGHT Programme’s Electrolyser Manufacturing Component marks a pivotal step in bolstering domestic manufacturing capabilities and fostering a competitive market landscape. By incentivizing electrolyser production and green hydrogen generation, the Scheme aims to elevate India’s position in the renewable energy sector while aligning with global sustainability objectives.

The guidelines present an opportunity for stakeholders to strategically position themselves in the growing green hydrogen market. The Scheme outlines stringent eligibility criteria and incentive structures, ensuring the participation of qualified entities and the delivery of high-quality electrolysis technology. Moreover, the emphasis on indigenous manufacturing and technical standards underscores a commitment to innovation and competitiveness, offering clients a pathway to contribute to India’s energy transition while capitalizing on emerging market trends. As the green hydrogen landscape evolves, stakeholders must navigate these guidelines adeptly to leverage the Scheme’s potential for growth and innovation, fostering a sustainable energy future for India and beyond.

This Prism has been prepared by:

Vishnu Sudarsan
Partner

Sugandha Somani Gopal
Partner

Asmita Maan
Associate

For more details, please contact [email protected]

Tags Climate Change, Green Hydrogen, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates

JSA Prism | Climate Change | April 2024

Please click here to download the Prism as PDF.

Scheme Guidelines for implementation of R&D Scheme under the National Green Hydrogen Mission

The Ministry of New and Renewable Energy (“MNRE”), vide notification dated March 15, 2024, issued the ‘Scheme Guidelines for the implementation of R&D Scheme under the National Green Hydrogen Mission’ (“Scheme”).

The National Green Hydrogen Mission (“Mission”), which was launched in January 2023, is focused on a holistic development of a thriving, self-sufficient, indigenous green hydrogen sector in India. This would mean not only focusing on development of India’s green hydrogen manufacturing capabilities or increasing affordable supply of renewable energy, but also emphasizing on building a knowledge base through robust research and development (“R&D”) initiatives in the field of green hydrogen as well as upskilling India’s workforce proposed to be engaged in the green hydrogen sector. This Scheme, being aligned with the broader aim of the Mission, looks towards building a robust R&D ecosystem with emphasis on collaboration amongst industry-academia-government to establish an innovation ecosystem for green hydrogen technologies as well as facilitate scaling up and commercialization of the technological advancements by providing requisite policy and regulatory support to R&D activities.

Budgetary Outlay

As per the Scheme document, the budgetary outlay for the R&D initiative will be INR 400,00,00,000 (Indian Rupees four hundred crore) until the financial year 2025-26.

Key Components

As per the Scheme, the following types of R&D projects will be provided with fiscal assistance by the Government of India:

Mission mode projects (0 (zero) – 5 (five) years horizon): These projects will focus on development of an end-product in partnership between government and industry. These projects will leverage existing knowledge and infrastructure and projects under Mission mode are likely to include development of indigenous modular electrolysers, polymer electrolyte membrane (PEM) based fuel cells.
Grand challenge projects (0 (zero) – 8 (eight) years horizon): These projects will focus on overcoming challenges related to licensing and supply constraints and will be taken up on consortium basis. The projects will include component-specific research with an aim to upscale existing domestic manufacturing capabilities which lead to a lowering of cost of critical technologies. It is expected that Grand Challenge Projects will be built around manufacture of critical electrolyser and fuel cell components like membrane electrode assemblies, electrocatalysts, catalyst coated membranes, gas diffusion layers, bipolar plates etc.
Blue sky projects (0 (zero) – 15 (fifteen) years horizon): These projects will focus on establishing competitive advantage for the Indian industry including greenfield and indigenous R&D projects. Blue sky projects will develop capabilities of the Indian R&D sector such as development of third generation electrocatalysts, reversible solid oxide electrolysers (SOECs) and solid oxide fuel cells (SOFCs ), seawater electrolysis, thermo-catalytic pyrolysis, plasma pyrolysis, salt cavern surveys, etc.
Centers of Excellence: The Scheme will also focus on identifying, developing and supporting centers of excellence, by building subject expertise and research infrastructure in these centers. The approach proposed will be based on involving the academia, industry as well as the government to ensure coordinated transfer and commercialization of new green hydrogen technology developed as a result of R&D activities.

In addition to the above, the Scheme proposes support for innovative medium and small enterprises (MSMEs) and start-ups working on developing indigenous technology.

Implementation of Scheme

The Scheme is proposed to be implemented in a diverse manner with the government looking to follow several routes. Some of these are mentioned below:

MNRE may, from time to time, issue ‘Call for Proposals’ for R&D projects through advertisement in scientific / technological journals and the MNRE website. Proposals will be invited against identified challenges, research problems in fostering green hydrogen ecosystem for R&D areas.
Interested institutions/ individuals will be permitted to submit proposals in relevant areas of research at any time to the MNRE. Such proposals will be evaluated for financial support according to their relevance to the Ministry’s research priorities.
MNRE will also look towards suo moto soliciting proposals from identified experts, institutions and industry capable of implementing technology development activities in relevant areas.

Evaluation of Proposals Submitted

The MNRE will accept proposals for R&D projects submitted by academic institutions, universities, government/non-profit research organizations as well as private institutes/research organizations and industries. The proposals submitted will be evaluated on the following parameters by Sectoral Sub-Committees (“SSC”) constituted under the Advisory Group chaired by the Principal Scientific Advisor, Government of India:

Relevance and quality of the proposal.
Availability of clear statement of quantified objectives and deliverables.
Technical feasibility of the proposal.
Technology Readiness Level of the proposed proposal/project.

Disbursement of Financial Support

Under the Scheme the proposals which are approved by the SSCs will be entitled to financial support from the Government of India under the Mission. Academic institutions, universities, government/non-profit research organizations would be eligible for financial support up to 100% of the total project cost, subject to a cap as decided by the concerned SSC. Private institutes/research organizations and industries would receive financial support up to 80% of the total project cost subject to a cap as decided by the concerned SSC.

The manner of release of the financial support will be as follows:

Up to 30% of the total assistance (excluding the institutional overheads) will be released along with the sanction of the project, depending on the requirement of equipment in the project.
Remaining financial assistance (excluding the institutional overheads) will be sanctioned as per the annual allocation based on the progress/milestone achieved in the project.
Overhead charges will be restricted up to 8% of the total project cost for the projects costing up to INR 1,00,00,000 (Indian Rupees one crore). For project costs between INR 1,00,00,000 (Indian Rupees one crore) and INR 5,00,00,000 (Indian Rupees five crore), the overhead charges will be 8% of the project cost or INR 15,00,000 (Indian Rupees fifteen lakh) whichever is less. For projects cost of more than INR 5,00,00,000 (Indian Rupees five crore), the quantum and overhead charges will be decided by the MNRE on a case-to-case basis. These institutional overhead costs will be released to the project proponent only after successful completion of the project, review by the concerned SSC and on receipt of the project completion report and conclusion of the financial due diligence.

Other Key Terms

The Scheme contemplates certain other key conditions which will govern any financial assistance to be provided to the project proponents. These include:

The grantee/ project proponent will be responsible for protecting the intellectual property rights being generated through the research projects under the Scheme.
The funds will be released exclusively for the specific project sanctioned and has to be spent on the project within the approved time duration. The grantee organization is not permitted to seek or utilize funds from any other organization (government. semi-government, autonomous and private bodies) for this project unless specifically approved for joint funding by the SSC. Any un-spent balance out of the amount sanctioned must be surrendered to the Government of India.
For permanent, semi-permanent assets acquired solely or mainly out of the project grants, an audited record in the form of a register must be maintained by the project proponent. For the purpose of the Scheme “Assets” include (a) the immovable property acquired out of the grant; and (b) movable property of capital nature where the value exceeds INR 50,000 (Indian Rupees fifty thousand). The project proponent will be required to send to MNRE a list of assets acquired from the grant. The grant must not be utilized for construction of any building unless specific provision is made for that purpose.
Assets acquired in the project is required to be shared proportionately between Government of India and project proponents in accordance with the cost sharing pattern of the project. The assets will not be disposed of or encumbered or utilized for any purpose other than those for which the grant had been sanctioned, without the prior permission of this MNRE.
On conclusion of a project, Government of India will have the discretion to sell or otherwise dispose of its share of the assets, which are the property of the Government of India. The project proponent will provide the Government of India necessary assistance and facilities for arranging the sale of these assets. The Government of India may exercise discretion to gift its share of assets to the grantee organization or transfer them to any other organization if it is considered appropriate.

Conclusion

As part of the Mission, the Government of India will be looking to build capacities to produce at least 5 (five) million metric tonne (“MMT”) of green hydrogen per annum by 2030, with potential to reach 10 (ten) MMT per annum with growth of export markets. To achieve this objective, the Mission contemplates a holistic approach which goes beyond demand and supply incentives but also involves evolving an ecosystem for R&D activities in the green hydrogen sector. The aim is to develop and build up India’s indigenous capabilities of producing green hydrogen in India and this will only be possible if India’s R&D sector is provided with ample support, financially and technically. This Scheme, which involves funding of R&D projects in the green hydrogen space will ensure mitigation against the risk technological disruptions and unforeseen developments. As per the Mission document, the call for proposals by the Government of India for implementing R&D projects was scheduled to take place in financial year 2024-25 and with the notification of this Scheme and the publication of the first set of call for proposal documents, the roadmap of the Mission seems to be on track.

This Prism has been prepared by:

Ashish Suman
Partner

Ayan Sinha
Senior Associate

For more details, please contact [email protected]

Tags Climate Change, Green Hydrogen Policy, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates

Guidelines for solid waste management in coastal aquaculture units or activities

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The Ministry of Fisheries, Animal Husbandry and Dairying issued the ‘Guidelines for solid waste management in coastal aquaculture units or activities’ (“Guidelines”) on March 15, 2024. The Guidelines aim to achieve sustainable development of environmentally friendly coastal aquaculture. The Guidelines mandate a systematic approach to waste management, requiring units to evaluate waste generation, segregate solid waste into biodegradable, non-biodegradable, and hazardous categories, and establish appropriate measures for waste transportation, reuse, and recycling. The salient features of the Guidelines are described below.

Salient Features

The wastes generated from coastal aquaculture units may be categorised into wastewater and solid waste.
The Coastal Aquaculture Authority (“Authority”) mandates that the wastewater or effluents from coastal aquaculture units should be treated in an effluent treatment system, following the protocol specified by the Authority. The protocol must conform to the prescribed standards for treatment of wastewater discharged from the aquaculture units as specified under the guidelines for regulating coastal aquaculture issued under the Coastal Aquaculture Authority Rules, 2024, or the Pollution Control Board, before it is discharged into open water.
The coastal aquaculture units must develop appropriate infrastructure for segregation, collection, storage, transportation processing and disposal of solid or plastic waste either on its own or by engaging agencies or producers in accordance with the rules prescribed under the Environment (Protection) Act, 1986.
Coastal aquaculture units are required to identify waste generation areas, area for the storage and treatment of different streams of waste, safe disposal methods and prepare a solid waste management plan for their facility.
Every unit is required to enter into an agreement with appropriate or authorised agencies for the collection and disposal of: (a) recyclable non-degradable waste; (b) sludge from effluent treatment system; (c) biodegradable non-recyclable waste; (d) non-degradable non-recyclable waste; and (e) domestic sewage.
The facility manager of such unit will be responsible for: (a) planning and ensuring the waste transportation; (b) implementing waste reuse or recycling; and (c) minimising the transportation of waste to the processing or disposal sites.
Units are required to segregate waste at source and collect them in bins and are required to ensure that each area has persons on duty to collect, segregate and dispose the waste based on its category, every 12 (twelve) hours. Records are required to be maintained for clearing the waste.
Every person, especially those who are assigned for handling, storing, or otherwise managing the waste, are required to be trained on the intended use of the bins which may include an introduction to: (a) basic procedures for waste management; (b) human and environmental risks; and (c) measures of precaution in waste management, etc.
Temporary storage of appropriate capacity must be maintained by every coastal aquaculture unit for handling different categories of such wastes.
The activities of the waste management system must be evaluated periodically by every coastal aquaculture unit and in case of any non-compliance, it must adopt appropriate methods to ensure compliance. Further, the Authority will evaluate the activities of the waste management system in all the coastal aquaculture units and in case of non-compliance, suitable action will be initiated to ensure compliance.
Every agency must maintain a separate record for clearing of waste. The records for the disposal of sludge, sewage and other recyclable and non-recyclable waste must be maintained at every coastal aquaculture unit.

Conclusion

The Guidelines are a step forward towards promoting sustainable development and responsible practices amongst coastal aquaculture units. Through responsible management of water and solid waste, aquaculture units will be able to protect coastal ecosystems, and ensure the long-term viability of aquaculture activities.

This Prism has been prepared by: