India: Infrastructure And Energy Digest: Overview Of Legal And Regulatory Developments - October 2021

INFRASTRUCTURE

Background:

On October 21, 2021, the Cabinet Committee on Economic Affairs (CCEA) approved the "PM Gati Shakti National Master Plan" (Gati Shakti NMP). This will lay down the institutional framework for rolling out, implementation, monitoring and providing a support mechanism for multi-modal connectivity. The Gati Shakti NMP would essentially be a digital platform to bring several ministries including Railways and Roadways together for integrated planning and coordinated implementation of infrastructure connectivity projects. It aims to facilitate the last mile connectivity of infrastructure and also reduce travel time for people.

Salient Features:

• The Gati Shakti NMP will be monitored by a three-tier system. The implementation framework would include Empowered Group of Secretaries (EGOS), Network Planning Group (NPG) and Technical Support Unit (TSU) with required technical competencies.
• The EGOS would be headed by the Cabinet Secretary and will consist of secretaries of 18 ministries as members and Head of Logistics Division as member convenor. The EGOS has been mandated to review and monitor implementation of the Gati Shakti NMP to ensure logistics efficiency. It is empowered to prescribe the framework and norms for undertaking any subsequent amendments to the Gati Shakti NMP. The EGOS is required to set out the procedure and definitive framework for synchronization of various activities and ensure that various initiatives of infrastructure development are part of the common integrated digital platform. The EGOS will examine the interventions required to meet the demand side, in efficiently transporting bulk goods on the requirement of various ministries such as steel, coal and fertilizers.
• The CCEA has also approved the formation, composition and terms of reference for the NPG. The NPG will consist of heads of the network planning wing of respective infrastructure ministries and will assist the EGOS.
• The formation of the TSU will ensure that there is no duplication of works for holistic development of any region as well as reduce logistics costs through micro-plan detailing by providing the required competencies. The TSU will comprise domain experts from various infrastructure sectors such as Aviation, Maritime, Public Transport, Rail, Roads and Highways and Ports and subject matter experts such as Urban & Transport Planning, Structures (roads, bridges & buildings), Power, Pipeline, GIS, ICT, Finance/Market PPP, logistics and Data Analytics.
• The Gati Shakti NMP is intended to break departmental silos and bring in more holistic and integrated planning and execution of projects with a view to address the issues of multi modal connectivity and last mile connectivity. This will help in bringing down the logistics cost and also translate into enormous economic gains to consumers, farmers, youth as well as those engaged in businesses.
• The Gati Shakti NMP is to be based on 6 pillars:
• • Comprehensiveness: It will include all the existing and planned initiatives of various Ministries and Departments with one centralized portal.
  • Prioritization: Different departments of the Government will be able to prioritize their projects through cross-sectoral interactions.
  • Optimization: It will assist different ministries in planning for projects after identification of critical gaps. For the transportation of the goods from one place to another, the plan will help in selecting the most optimum route in terms of time and cost.
  • Synchronization: It will help in synchronizing the activities of each department, as well as of different layers of governance, in a holistic manner by ensuring coordination of work between them.
  • Analytical: The plan will provide the entire data at one place with GIS based spatial planning and analytical tools having 200+ layers, enabling better visibility to the executing agency.
  • Dynamic: All Ministries and Departments will now be able to visualize, review and monitor the progress of cross-sectoral projects, through the GIS platform, as the satellite imagery will give on-ground progress periodically and progress of the projects will be updated on a regular basis on the portal.

Our view: The Gati Shakti NMP signals a paradigm shift in the Government approach to development planning. If implemented effectively, the Gati Shakti NMP would be a game-changer in inter-ministerial and inter-departmental cooperation in infrastructure planning and ensure maximum utilization of resources and capacities. This effort by the GOI will indeed enhance efficiency and reduce wastage. One hopes that this will be a win-win for all the stakeholders and assist in the overall economic growth of India.

ENERGY

Resolution of CERC-SEBI jurisdiction dispute gets Supreme Court approval

Background:

The Supreme Court in an order passed on October 6, 2021, in the case of Power Exchange of India v. Securities and Exchange Board of India¹, permitted the Central Electricity Regulatory Commission (CERC) and the Securities and Exchange Board of India (SEBI) to proceed in accordance with law to resolve a decade long jurisdiction dispute. The dispute was on which regulatory body should regulate trading in electricity forward contracts², electricity future contracts³ and electricity derivative contracts.

Factual Matrix:

• The CERC and the SEBI had filed a Special Leave Petition against a decision of the High Court of Bombay in the case of Multi Commodity Exchange of India and Others vs. CERC and Others⁴. In this case, the High Court of Bombay had rendered inoperative certain provisions of the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 which had given the power to the CERC to regulate electricity forward, futures and derivative contracts. The High Court held these provisions to be inoperative on account of an overlap of regulatory jurisdiction with the Forward Markets Commission (FMC).
• With the merger of the FMC with SEBI in 2015, the question of regulatory overlap arose between the CERC and the SEBI. During the pendency of the appeal from the High Court of Bombay's decision, the Ministry of Power (MoP) set up a Committee on Efficient Regulation of Electricity Derivatives (Committee). The Committee had representatives from the Department of Economic Affairs, Central Electricity Authority, CERC, Power System Operation Corporation Limited (POSOCO), SEBI, Indian Energy Exchange, Power Exchange of India Limited and the Multi Commodity Exchange.
• The Committee submitted its report in October 2019. The Committee recommended that electricity contracts which require the physical delivery of electricity should be regulated by the CERC and electricity derivatives should be regulated by the SEBI. The Supreme Court asked the parties to abide by the settlement reached between the CERC and SEBI in accordance with the recommendations of the Committee.

Our view: The Central Electricity Regulatory Commission (Power Market) Regulations, 2021 (which came into effect from August 15, 2021) regulate ready delivery term ahead contracts. Electricity derivatives will no doubt lower electricity prices, the flip side however is that it will increase volatility. As derivative trading is bound to affect the trading of electricity spot prices, the extent of regulatory co-ordination required between the CERC and SEBI remains to be seen. For RE generators, where there is a challenge of variability of supply market-based mechanisms such as forward physical - future physical and future contracts can help market participants hedge the price risk. Further, electricity derivatives can be used by distribution companies (DISCOMs), large commercial and industrial consumers and generators for effective price risk management. This can be combined for several months to form a close match with the long-term load or generation profile. DISCOMS and other large consumers would also be able to plan their short-term power procurement more efficiently.

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Footnotes

1. Civil Appeal Numbers 5290-5291 of 2011.

2. A contract where electricity is delivered at a future date at a price agreed to in the present. They are also referred to as term ahead contracts.

3. Futures contracts are traded on a commodity exchange where the delivery date, location, quality, and quantity are standardized.

4. Writ Petition Number 1197 OF 2010 with Notice of Motion Number 100 of 2010 (decided on February 2, 2011).

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