Recently, the Cabinet Committee on Economic Affairs extended the deadline for furnishing final mega certificates to tax authorities from 10 years to 13 years from the date of import, for ten provisional power projects as indicated in the Policy.[1] The office memorandum bearing no. A-3/2015-IPC (Vol-III) dated April 7, 2022, was introduced by the Ministry of Power (“the Ministry”) to this effect.

The Government stipulated that during the extended period, bids for mega power plants (combination of intermittent renewable energy, storage and conventional power) will be invited in co-ordination with the Ministry of New & Renewable Energy (“MNRE”) and Solar Energy Corporation of India Limited (“SECI”) who would further participate in such bids to secure Power Purchase Agreements (“PPAs”).

Before we understand the amendment, let's first discuss the evolution of this Policy and its importance.

Market Position and Consumer Demand

The Indian public sector lacked adequate resources to match the incremental generational requirement of additional coal mining. To plug this gap, the Ministry is exploring the possibility of setting up mega power projects with the help of private sector players thereby attracting domestic and foreign private investment from eager investors.

Another pertinent issue faced by the Indian Government in the power sector relates to its geography. While the authorities identified locations in eastern, central and coastal India endowed with naturally occurring coal and hydel power capacity, the highest demand for power in southern India. The geographical demand-supply conundrum faced by authorities demands the establishment of mega power projects to tackle the increasing demand for power on the most viable route.    

When the private power policy was initiated during 1991-92, the Ministry envisaged that to improve the power supply, it would require setting up more than 10,000 MW of capacity every year in the next few years. Moreover, the fuel for such thermal power plants i.e., coal is located mainly in eastern and central India, whereas the hydel power potential is concentrated in the northeast and north but a higher demand for power is in the south and the west. It is, therefore, obvious that unless mega power projects are set up in the region having coal and hydel potential, it would be difficult to tackle the increasing demand for power on the most viable route. Establishing mega projects in the coastal regions based on imported coal also poses a feasible option.

Regulatory Changes in the Energy Sector

Pertinently, during the launch of the private power policy in 1992, the Ministry found that India requires to set up more than 10,000 megawatts of capacity each year to improve power supply in the coming years.

The public sector front lacked resources for putting up the required additional coal mining capacity to match the incremental generation requirement. Therefore, the Ministry has been exploring the possibility of setting up mega power projects through the private sector route to attract domestic and foreign private investment and the response so far has been positive.

At this juncture, it is important to note that the government amended the Mega Power Policy in 2009 to smoothen the application process to attain final mega certificates.[2]

The said modifications endow benefit of the Policy to the power projects of the following capacity:

Thermal Power Plantswith a capacity of 1000 MW or moreor 700 MW if the plant is located in Jammu & Kashmir, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura.
Hydel Power Plantswith a capacity of 500 MW or moreor 350 MW if the plant is in the states of J&K, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura

B. Widening the scope of the Policy

i. The benefits enjoyed by stakeholders under the said Policy are extended to brownfield expansion projects.

ii. The benefits are to be extended to brownfield expansion projects too.

C. Interstate sale of power for achieving mega power project status has been removed.

D. The mega power projects would have to tie up power supply with power distribution companies/utilities through long-term PPA in accordance with the National Electricity Policy 2005 & Tariff Policy 2006.

E. ICB for procurement of equipment for mega projects are not required if the requisite quantum of power has been tied up or the project has been awarded through tariff-based competitive bidding. 

F. The present exemption of 15% price preference available to domestic bidders in cost-plus projects of PSU would continue. However, the price preference would not apply to tariff-based competitively bid projects of PSU.

Extension of Deadline to Apply for Mega Power Project Certification    

Prior to the recent amendment, the Policy only allowed a period of 120 months or 10 years from the date of import for businesses to apply for and furnish final mega certificates to the tax authorities as against the provisional mega projects. Now, the Cabinet has officially extended the said deadline by 3 years for ten partly / wholly commissioned provisional mega power plants.                                                             

Reproduced hereinbelow is the list of 10 (ten) provisional mega power projects to which the aforesaid amendment is applicable and which have been commissioned/partly commissioned so far:    

Sr. No.Name of the ProjectProject Capacity (MW)
1.Baradhara Thermal Power Plant (“TPP”) (2X600 MW), Janjgir-Champa, Chhattisgarh1200
2.Anuppur TPP (2X600 MW), M.P.1200
3.Uchpinde TPP (4x360 MW), Janjgir-Champa, Chhattisgarh1440
4.Cuddalore TPP (2x600 MW), Tamil Nadu1200
5.Lalitpur TPP (3x660 MW), Uttar Pradesh1980
6.Vishakhapatnam TPP (2x520 MW) Andhra Pradesh1040
7.Nellore TPP (2x660 MW), Andhra Pradesh1320
8.Raikheda TPP (2x685MW), Raipur, Chhattisgarh1370
9.Binj Kote TPP (4x300 MW), Raigarh, Chhattisgarh1200
10.Janjgir-Champa, Akaltara TPP: U-2&5 (2x600MW), Chhattisgarh1200

Key Takeaways

The extension of time granted to businesses for furnishing final mega certificate is a thoughtful action welcomed by the concerned industry players. The extension thus granted will enable developers to competitively bid for further Power Purchase Agreements and enjoy the applicable tax exemptions under the Policy. The increased liquidity at the behest of the developers will boost the power sector’s growth in India and revive the stressed power assets.

The government will also invite bids for firm power (a combination of intermittent renewable energy, storage, and conventional power) during this extended period in coordination with the MNRE and Solar Energy Corporation of India Limited. Moreover, the ten notified mega projects will be expected to participate in firm power bids to secure PPAs.


[1] Clause- I of Para- I of Amendment to Mega Power Policy, 2009 (“the Policy”) for Provisional Mega Power Projects dated April 12, 2017.

[2] Ministry of Power vide notification dated 14th December 2009

Recently, as a massive move, the Inter-Ministerial Committee (“IMC”) of the Ministry of Road Transport and Highways (Highways Section) of the Government of India (“the Ministry”) in its meeting held on April 1, 2022, concurred with the proposal permitting a change of ownership from 2 (two) years to 1 (one) year after the commercial operation date (“COD”).

Subsequently, a circular bearing no. NH- 24028/14/2014-H (Vol Il) (E-134863) (“the Circular”) dated May 23, 2022, regarding the change in ownership clauses in the Model Concession Agreement (“the Agreement or MCA”) of BOT (Toll) projects was introduced.

Before getting into the peculiarities of the circular, let us get a brief idea of what is BOT (Toll) Project.


The National Highway Authority of India (“NHAI”) has adopted primarily 4 (four) types of national highway projects in the public-private partnership model, as follows:

Sr. No.Type of highway modelsBrief Explanation
1.BOT (Toll)This model is a public-private partnership in which the private developers/operators, invest in toll-able highway projects and are entitled to collect and retain toll revenue for the tenure of the project concession period. The private developer/operator, who eventually becomes a concessionaire, is responsible for the design, development, operation, and maintenance (O&M) of the project for the entire concession period after it is developed and put to commercial use. On the expiry of the concession period, the facility is transferred to the authority (NHAI).
2.BOT (Annuity)In this model, responsibility for the design, development, and O&M of the road project for the entire concession period is vested with the concessionaire for the Project. But, unlike the BOT (Toll) projects, the revenue of the Concessionaire is generated through annuity payments by NHAI during the concession period.
3.Hybrid Annuity Model (HAM)In this model, 40% of the project cost is paid by the government or as construction support or grant to the private developer. The rest is funded by the successful bidder during the construction period. Even for these projects, the revenue of the Concessionaire is generated through annuity payments by NHAI during the concession period.
4.Toll Operate Transfer (TOT)In this model, the right of collection and appropriation of toll for selected operational national highway projects constructed through public funding are mandatorily assigned to concessionaires for a pre-determined concession period against upfront payment for a lumpsum amount to NHAI.


The key stakeholders and typical contractual structure for a toll road project can be diagrammatically represented as below:


Circular and the Relevant Clauses of a BOT (Toll) Agreement

Definition of “Change in Ownership”

Original- Clause 1.1 read with Article 48 of the Agreement which defines the term “Change in Ownership” states that “a transfer of the direct and/or indirect legal or beneficial ownership of any shares, or securities convertible holding of the {Selected bidder / Consortium Members}, together with {it’s/their} Associates, in the total Equity to decline below 51% (fifty-one per cent) thereof During Construction Period and two years thereafter; provided that any material variation (as compared) to the representation made by the Concessionaire during the bidding process for the purposes of meeting the minimum conditions of eligibility or for evaluation of its application or Bid, as the case may be) in the proportion of the equity holding of {the selected bidder/any Consortium Member} to the total Equity, if it occurs prior to completion of a period two years after COD, shall constitute Change in Ownership”;

Amendment-The said Circular reduces the period of the constitution of change in ownership from 2 (two) years (as stated in the definition above) to 1 (one) year after COD.

Sub-clause 5.3.1 of Clause 5.3 (Obligations relating to Change in Ownership) of Article 5[1] of the MCA

Original- The aforesaid sub-clause states that the concessionaire shall not undertake or permit any Change in Ownership, except with the prior approval of the authority.

Amendment- The Circular amends Clause 5.3.1 to include a few conditions for the approval from the authority for undertaking Change in Ownership. The conditions are as follows:

Point (k) of sub-clause 7.1 (Representations and Warranties of the Concessionaire) of Article 7[3]

Original- The aforesaid clause states that “the Concessionaire shall at no time undertake or permit any Change in Ownership except in accordance with the provisions of Clause 5.3 and that the {selected bidder/Consortium Members), together with {its/their} Associates, hold not less than 51% (fifty-one per cent) of its issued and paid-up Equity as on the date of this Agreement, and that no member of the Consortium whose technical and financial capacity was evaluated for the purposes of pre-qualification and short-listing in response to the Request for Qualification shall hold less than 26% (twenty-six per cent) of Equity during the Construction Period and two years thereafter; Provided further that any such request made under Clause 5.3, shall at the option of the Authority, be required to be accompanied by a suitable no objection letter from the Senior Lenders.”

Amendment- The Circular reduces the said period of 2 (two) years to 1 (one) year for holding 51% and 26% equity, respectively, during the construction period and thereafter, in the case of consortium members.

Key Takeaways

Over the last decade, the Government continued making efforts to revive the BOT model. In fact, in the current Financial Year, multiple projects under the said model would be opened for bidding.

Considering the above-discussed amendment of transferring ownership on the expiry of one year after the commercial operation date, monetization of such projects by the promoters by disposing of their stake is likely to have a positive impact on their ability to undertake more projects.  

Whilst this appears to be the main objective behind the amendment, neither NHAI nor the lenders would allow any change in ownership during the construction period, since that is the most important aspect of the project, that is, the SPV, which is the successful bidder, is owned and controlled by the promoters, whose experience in the road construction and their financial status, form the basis of being qualified to take up the project. The extension beyond one year after the construction period is intended to achieve consistency and stability in the operation of the project, after the expiry of which dilution of the promoters’ stake in the SPV would not affect the project highway, its operation and maintenance and generation of revenue from the project, and thus, such dilution is not likely to hamper the interests of NHAI or the lenders.

Disclaimer: The information contained in this newsletter does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available herein are for general information purposes only.

[1] Article 5 deals with Obligations of the Concessionaire.

[2] Punch List shall mean document prepared by the contractor that lists any work that is not complete, or not completed correctly. 

[3] Article 7 deals with Representations and Warranties.

An association of non-banking financial companies (NBFCs) has sought a “harmonised” regulatory framework with that of banks in response to the discussion paper issued by the Reserve Bank of India (RBI) on January 22. Among the requests made by the Finance Industry Development Council (FIDC) is that of a refinancing arrangement to reduce the dependence of small and medium NBFCs on the banking system and differential risk weights for different loan categories.

“An alternative mechanism for rating these entities may also be considered to ensure that all NBFCs do not get rated on the same parameters irrespective of size, complexity of business and the niches in which they operate. The NBFCs in the proposed BL (base layer) and ML (middle layer) suffer at present due to this rigidity of credit rating templates followed by the rating agencies,” the FIDC conveyed to the RBI in a letter dated February 12, a copy of which FE has seen.

The industry has requested the RBI to articulate a road map for NBFCs in the upper layer (NBFC-UL) to convert themselves into banks. It has sought greater flexibility on matters such as deposit acceptance, raising of funds through external commercial borrowings (ECBs) and setting up of subsidiaries overseas.

For NBFCs in the middle layer, FIDC has sought “a special focus on availability of funding”. These companies would fall primarily in the BBB to AA- category in terms of their external credit rating and they continue to face fundraising challenges, the letter said.

Umesh Revankar, MD & CEO, Shriram Transport Finance Company, told FE that among the representations made by the industry (not by the FIDC) is also a request to reduce the frequency of rotation of statutory auditors. “One of the points is that of the frequent changes required in statutory auditors every three years. We have suggested that it can be every five years,” he said.

Girish Rawat, partner, L&L Partners, explained that currently, the Companies Act, 2013, lays down that prescribed companies are required to mandatorily rotate their auditor. An individual auditor cannot serve for more than one term of five years and an audit firm cannot serve for more than two terms of five consecutive years, with a cooling off period of five years. The RBI has proposed a uniform tenure of three consecutive years for auditors of NBFCs in the middle layer and above, with a cooling off period of six years.

Some experts are of the view that the frequent change in auditors could leave gaps in the audit process. Prateek Bansal, associate partner, White & Brief Advocates and Solicitors, said that the mandatory rotation of auditors leads to increased compliances and processes within the NBFCs. “Now, the proposed time frame of rotation after every three years is further alarming as the likelihood of faulty audits increases due to the short time period allowed to an auditor to become fully acquainted with the system and operations of a company,” he said. “The proposed time limit must be increased to at least five years, which will also be in line with the provisions of Section 139 of the Companies Act, 2013.”

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