India's legal system

India has a bicameral parliamentary system akin to the Westminster model in which the supreme
lawmaking powers reside with the two Houses of Parliament – the Lok Sabha (Council of the
People) and the Rajya Sabha (Council of States). This bicameral legislative structure is replicated
at the level of every State and incorporated into a federal system of government. The division of
powers between the Central or Union Government (as the federal Government is generally
referred to in India) and the States is in accordance with the schema enshrined in the Constitution
of India. These powers are explicitly categorized into three lists:

• The Union list contains subjects which lie within the exclusive purview of the Union
Government, with jurisdiction over all of India.

• The States list contains subjects which lie within the exclusive purview of each State within its
area of jurisdiction.

• The Concurrent list which contains subjects under the shared purview of the Union and State
governments. Electricity is a concurrent subject (Entry 38 in concurrent list).

The third level of governance/administration is the sub-State level, i.e. Municipal Corporations,
Municipalities or Panchayats. These have no inherent law-making powers. However, they may
require compliance with certain State laws. An example may be the levy of a local tax on the
movement of goods into municipal areas, although this power is being phased out as Value
Added Tax (VAT) is being rapidly implemented. The important point to note is that while
Central legislation is uniformly applicable all over India, the relevant State legislations vary
between States. Hence, for the implementation of specific projects, the laws of the State where
the project is to be implemented would apply. There is a small but distinct class of territories,
referred to as Union Territories, which are directly administered by the Central Government. The
legal provisions applicable to renewable energy in these territories may vary locally.

Electricity is a concurrent subject under Entry 38 in List III, therefore, both Centre and states can
legislate on this matter. Matters relating to interstate transactions are in the Centre’s domain
while states are responsible for the intra-state sale, purchase, distribution and supply of
electricity. However, in practice, the demarcation of power between the state and Centre is not as
simplistic. Concurrent jurisdiction prevents the Centre from directing the states to take specific
action.

This can be observed in the manner that the Central Electricity Regulatory Commission (CERC)
and the State Electricity Regulatory Commissions (SERCs) function. In the context of renewable
energy, the CERC issued regulations in 2010 (CERC REC Regulations) to boost Renewable
Purchase Obligation compliance by states through the introduction of the Renewable Energy
Certificate (REC) mechanism. However, the onus of framing RPO regulations, setting RPO
targets and its implementation is on the respective SERCs, with the CERC acting as a facilitator.
The Central Government’s thrust on development of renewable energy is apparent but the
constitutional framework prevents the Centre from realising its vision without the support of the
states.While the Centre can facilitate and incentivise the states to achieve renewable energy
targets, it cannot overstep the bounds of concurrent jurisdiction to implement or penalise non-
compliance by the states. States have often used this constitutional authority to push back on
reforms spearheaded by the Centre, which do not further their political agenda.

Apart from the issue of concurrent jurisdiction which covers the entire electricity sector, there
are also specific enabling provisions within the Constitution which support the generation and
consumption of clean energy. The Supreme Court5 , in a matter relating to RPO compliance,
recognised the constitutional mandate to promote renewable energy by relying on Article 21
which guarantees the right to life read with Article 51A (g) which imposes the fundamental duty
on citizens to protect and improve the natural environment. Further, Article 48A directs the state
to protect and improve the natural environment.

National Energy Laws and Regulating Bodies

The process of reform of the electricity sector was initiated in 1991 when the earlier Ministry of
Energy (with Department of Power, Coal and Non-Conventional Sources of Energy) was
trifurcated into separate ministries of the Government of India. With the passage of the
Electricity Laws (Amendment) Act 1991, private sector participation in generation was
permitted. The Electricity Regulatory Commissions Act 1998 saw the establishment of
Regulatory Commissions at both Central and State levels and these were entrusted with the
responsibility of tariff fixation as a principal function along with regulatory oversight in their
areas of jurisdiction. The Electricity Act 2003 regulatory Commissions are also covered under
the EA 2003.

Currently, there is no law providing separate coverage of the renewable energy sector in India.
This is an anomalous situation since the administrative machinery for dealing with the activities
of the renewable energy sector has been in place for a fairly long period of time. This consists of
the nodal MNRE at the Central level and State Renewable Energy Development Agencies (also
known as State Nodal Agencies) at the level of States. The State Nodal Agencies have been
named the "designated agencies" for implementation of the Energy Conservation Act 2001.
Moreover, there is a specialized financial agency, the Indian Renewable Energy Development
Agency (IREDA) to cater to the financial requirements of the renewable energy sector in India.
As there is a split between the electric power sector and other parts of the energy sector (coal,
petroleum fuels, natural gas), the conventional power generation sector is subject to an array of
rules and regulations emanating from various Central ministries. These do not necessarily apply
to the renewable energy sector; nevertheless they underline the need to have a central renewable
energy law for India in order to have a clear demarcation of the subject matter, activities, policies
and regulations, particularly in the context of portfolio standards and obligations.

Another set of Central laws that indirectly apply to the renewable energy sector in India include:
• Forest Conservation Act 1978. • Water (Prevention and Control of Pollution) Act 1972. • Air
(Prevention and Control of Pollution) Act 1980. • Environment Protection Act 1986 which
incorporates the Solid Waste Management Rules, 2000.

The National Tariff Policy (TP) of 2006 (MoP, 2006) following the National Electricity Policy
2005 has also been a significant legislation for REP development. While reiterating the mandate
of the EA 2003, it sets a deadline to the SERCs for implementing support measures for REP.
Moreover, in the same year, an Expert Committee from the Planning Commission submitted its
report on an Integrated Energy Policy for India. Among others, the report sets out a strategy for
renewable energy development and serves as a guiding framework for the shaping of the 11th
Five Year Plan. One of its important features is that it states that incentives for renewable energy
development should be linked to the energy generated and not just to the installed capacity
(Planning Commission, 2006).