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Power Ministry Directs Regulators to Formulate Tariff Framework for Transmission Asset Monetisation

The Ministry of Power has instructed the Forum of Regulators (FoR)—a collective body representing both central and state electricity regulatory commissions—to devise a uniform tariff determination framework for power transmission projects identified under the government’s asset monetisation programme.

The framework, once developed, will be adopted by all state electricity regulators to streamline and promote the monetisation of transmission assets across India. The move is aimed at enabling transparent tariff calculation, ensuring predictable revenue flows, and providing investors with greater commercial visibility during the bidding process.

In October 2022, the power ministry had issued guiding principles for the monetisation of public sector transmission assets through the Acquire, Operate, Maintain and Transfer (AOMT) model under the public-private partnership (PPP) structure. The process involves a series of steps, including asset identification, demerger into a special purpose vehicle (SPV), regulatory licensing, and the appointment of consultants for technical and financial assessments before inviting bids.

During consultations, several state governments raised concerns related to revenue certainty, tax implications, and payment security mechanisms for intra-state transmission projects. These issues, officials noted, have created uncertainty for both utilities and investors regarding cash flow predictability.

In a recent communication to the Forum of Regulators, the ministry highlighted that one of the major challenges for state transmission utilities and potential investors is the lack of stable cash flow projections for monetised assets. Since intra-state transmission projects primarily cover real-time market (RTM) operations, tariffs are periodically revised by regulators based on control block norms—causing fluctuations in expected returns.

“As these norms vary across control blocks, prospective investors face significant difficulties in forecasting cash flows over the concession period,” the ministry noted in its letter. “Without greater predictability, bidders may undervalue the assets during the monetisation process.”

To address these challenges, the ministry has proposed that the Forum of Regulators develop a standardised asset transfer and tariff-setting mechanism. The new approach will help ensure consistent valuation and tariff determination for intra-state transmission projects, thereby enhancing investor confidence and supporting India’s broader transmission infrastructure monetisation drive.