Around 26 gigawatts (GW) of under-construction utility-scale renewable energy projects in India, which already have signed power purchase agreements (PPAs), may face reduced cash flows following the expiry of the 100% inter-state transmission system (ISTS) charge exemption on June 30, 2025. Many of these projects have been delayed due to procedural, regulatory, and infrastructure-related issues and will now be subject to a phased reduction in transmission charge benefits.

The ISTS charge waiver, first introduced by the Ministry of Power in 2016 and later extended, played a significant role in promoting renewable energy development by exempting eligible projects from transmission costs. This allowed solar- and wind-rich states such as Rajasthan and Gujarat to supply electricity to high-demand regions across India at competitive rates.

However, the exemption was always intended to be time-bound. Under the planned phase-down, projects commissioned by June 30, 2025, will retain the full 100% waiver for 25 years. Projects completed after this date but by June 2026 will receive a 75% waiver, those commissioned by June 2027 will get a 50% waiver, and those completed by June 2028 will get a 25% waiver. After June 2028, the benefit will be discontinued entirely. Although ISTS charges are usually borne by the offtaker, developers could be liable for these costs if delays are determined to be solely their responsibility.

Ankit Hakhu, Director, Crisil Ratings, said in a statement, “Considering, around three-fourths of the affected capacity is expected to be commissioned by June 20266 and will still qualify for a 75% waiver, large scale sectoral impact and material downside in returns from the phase-down is expected to be limited. Additionally, most of these under-construction projects are backed by established developers, which provide financial flexibility. That said, if any project is impacted, they may see their project returns moderate by 80 to 370 basis points, depending on project type, bid competitiveness, and date of commissioning.”

Mohini Chatterjee, Team Leader, Crisil Ratings, mentioned, “The circular allows for extension of waiver for any force majeure event, including the non-availability of transmission infrastructure, or for any other delay not attributable to the developer. However, approvals will be contingent on the decision of the concerned regulator. Considering these will be evaluated on a case-by-case basis, timely and satisfactory resolution of waiver-related disputes will be critical for the standalone credit profiles of these projects.”

Transmission charges vary depending on project type, location, and usage, typically ranging from ₹0.50 to ₹1.50 per kilowatt-hour (kWh). The gradual withdrawal of the waiver could reduce long-term project cash flows and impact financial metrics such as the debt service coverage ratio (DSCR). For example, if a developer has to bear 25% of an assumed ₹0.65/kWh transmission charge due to the reduced waiver, the DSCR could fall from 1.4 times to 1.3 times.

Some delayed projects may still qualify for the full exemption if the delays are caused by specific allowable circumstances. Meanwhile, the government remains committed to supporting the renewable energy sector, with a growing emphasis on grid stability. As part of this effort, the full ISTS charge exemption has been extended for battery energy storage systems and pumped hydro projects until June 2028.

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