Withdrawing ISTS charges will check regional imbalance in setting up RE capacities: Power Ministry to Parliamentary panel

Technicians work to install a high voltage electric transmission line at the substation of Gujarat Solar Park
| Photo Credit:
REUTERS/AMIT DAVE

The Power Ministry has informed a parliamentary standing committee that withdrawing the waiver on inter state transmission charges (ISTS) will encourage a more geographically balanced renewable energy (RE) development in India and will reduce pressure on the power evacuation infrastructure.

The findings form part of a report on performance of solar power in India by the Parliamentary Standing Committee on Energy, which was placed before the Lok Sabha Speaker last month.

Representatives from the Ministries of Power, New & Renewable Energy (MNRE) and the Solar Energy Corporation of India (SECI) appeared before the panel between April and August 2025.

The committee is of the view that transmitting RE from high producing Western and Southern areas to the rest of the country, is both costly and has reduced efficiency due to energy losses on the way. 

The Ministry explained that gradual withdrawal of ISTS waivers will encourage more geographically balanced RE development, as earlier due to ISTS waivers, the transmission charges were cross-subsidised and majorly borne by the hydro rich States of North-East and hilly areas.

The current average ISTS charges are around 65 paise per unit (kWh). As per government policy, ISTS waivers will decrease by 25 per cent annually from July 2025 till it becomes zero by June 2028, barring offshore wind, Pumped Storage and green hydrogen production.

ISTS charges waiver

On problems due to the waiver on ISTS charges, Power Ministry told the panel that continuing the waiver has resulted in excess concentration of RE in a few regions such as Rajasthan and Gujarat, leading to grid instability potentially threatening the grid and extremely high cost of ISTS expansion required for evacuating RE to distant load centres.

“The gradual withdrawal of ISTS waivers will encourage more geographically balanced RE development across states, simultaneously reducing overall transmission costs for the citizens of the country,” the Ministry emphasised.

The Ministry explained that due to the waiver transmission costs of states buying RE from outside their boundaries like from Maharashtra, Delhi, Telangana, etc is majorly borne by other states, particularly hydro rich states in the North-East and hilly states.

Even states with substantial RE potential have been sourcing power from outside their boundary to shift the burden of transmission costs onto other states. The affected states have been raising objections to this unfair cost-sharing structure which is increasing their consumer tariffs, the Ministry informed the panel.

JMK Research & Analytics in a March 2025 report said that market stakeholders noted that ISTS waivers are contributing to an uneven concentration of RE across different states, favouring development in certain regions.

Even though the differential cost of RE power generation across Indian states is minimal (ranging from Rs 0.02-0.40 per unit), approximately 88 per cent of solar and wind capacity installations are concentrated in just seven states, it added.

“As a result, most projects are seeking connectivity primarily in states with the highest solar irradiation. This concentration pressures the government to invest significantly in building transmission infrastructure between the states where power is generated and where it is consumed.

Waiving ISTS transmission charges for even 1 GW of RE capacity results in over Rs 9,500 crore (around $1.1 billion) in foregone government revenue over the 25-year waiver period.

The Parliamentary Standing Committee said that the MNRE also noted that due to waivers, developers increasingly sought ISTS connectivity. However, since the gradual removal of waiver has been announced, the states have started focusing on strengthening their intra-State transmission infrastructure. 

“The committee expects the Ministry and other central agencies to promote the development of solar energy in areas having low solar capacity vis-à-vis potential, by hand holding such States/UTs through supportive policies, timely central financial assistance (CFA) release, regular monitoring of projects and constant engagement for early detection and timely resolution of the various issues being faced by such States/UTs,” it has recommended.

Published on November 12, 2025