Ending ISTS Waiver May Raise Transmission Costs by 16 Percent, Says Ostara CEO
Withdrawal of the 100 percent waiver on inter-state transmission (ISTS) charges for solar and wind projects could drive up renewable power tariffs and reduce the financial viability of new projects.
July 03, 2025. By Dineshwori
The move, aimed at accelerating project execution timelines, introduces a phased reduction in waivers over the next few years.
ISTS charges are levied for transferring electricity across state lines and are paid to transmission utilities to cover the costs of building, maintaining, and operating high-voltage transmission infrastructure.
These charges are typically borne by the beneficiaries of the transmission system, such as distribution companies (DISCOMs) or other entities drawing power from the ISTS network.
Under the revised policy, renewable energy projects commissioned on or before June 30, 2026, will be eligible for a 75 percent waiver on ISTS charges for 25 years. Projects completed by June 30, 2028, will receive a reduced waiver of 25 percent for the same duration. However, any project commissioned after this date will not receive any waiver on ISTS charges.
Originally introduced in 2016, the 100 percent ISTS waiver has been a critical enabler of India's clean energy growth, significantly reducing transmission costs for developers.
This provision remains unchanged for projects completed by June 30, 2025, which will continue to enjoy a full waiver for 25 years.
Officials from the Ministry of New and Renewable Energy (MNRE) stated that the new timeline is intended to discourage delays in project commissioning and promote timely execution.
However, the industry has expressed concern that the withdrawal of the full waiver could drive up renewable power tariffs and reduce the financial viability of new projects.
“The decision to withdraw the inter-state transmission subsidy for renewable energy projects commissioned after June 2025 will likely increase transmission costs by approximately 16 percent, impacting tariffs and the financial viability of upcoming projects,” said Vasudha Madhavan, Founder & CEO at Ostara Advisors, an investment banking platform focused on the energy transition.
Madhavan added that while this presents a near-term challenge for developers, it could also catalyse a “shift toward more decentralised, intra-state renewable energy generation and drive greater investment in battery storage solutions.”
Meanwhile, the government is shifting its focus toward strengthening other aspects of the energy transition—particularly Hydro Pumped Storage Projects (PSPs) and Battery Energy Storage Systems (BESS)—by offering a 100 percent ISTS charges waiver for 25 years for eligible projects.
On June 10, the Ministry of Power issued an order amending the ISTS charges waiver framework for energy storage systems.
Under the new provisions:
• Hydro PSPs for which construction is awarded on or before June 30, 2028, will be eligible for a 100 percent ISTS charges waiver for 25 years.
• Co-located BESS projects commissioned on or before June 30, 2028, will also receive a 100 percent ISTS waiver, provided the power is consumed outside the state where the BESS project is located.
However, no ISTS waiver will be granted for Hydro PSPs with construction awarded after June 30, 2028, or for co-located BESS projects commissioned after that date.
please contact: contact@energetica-india.net.
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