GNA Regulations | CERC Relaxes Reg 11A, Allows Subsidiary to Fulfil Land & Financial Closure Norms for Parent Company's Connectivity - 2025-07-16

CERC Relaxes GNA Regulations, Permits Subsidiaries to Fulfil Land and Financial Norms for Parent Companies

New Delhi: In a significant move providing relief to renewable energy developers, the Central Electricity Regulatory Commission (CERC) has exercised its 'Power to Relax' under the GNA Regulations, 2022. The Commission, in a common order, permitted parent companies that are connectivity grantees to use land and financial closure documents submitted in the name of their wholly-owned subsidiaries to meet regulatory requirements.

The decision came in response to petitions filed by M/s. Oyster Renewable Energy Private Limited and M/s. Avaada Energy Private Limited against the Central Transmission Utility of India Limited (CTUIL). The order, delivered by a bench comprising Chairperson Jishnu Barua and Members Ramesh Babu V., Harish Dudani, and Ravinder Singh Dhillon, resolves a critical issue faced by developers who execute projects through Special Purpose Vehicles (SPVs).

---

Background of the Case

The petitions, filed under Section 79(1)(c) of the Electricity Act, 2003, and Regulations 41 and 42 of the GNA Regulations, challenged CTUIL's refusal to accept compliance documents.

Petitioners: Oyster Renewable Energy Pvt. Ltd. (OREPL) and Avaada Energy Pvt. Ltd. (AEPL), along with their respective 100% subsidiaries (SPVs), Oyster Green Hybrid One Pvt. Ltd. (OGHOPL) and Avaada MPSustainable2 Pvt. Ltd. (AMSPL).

Core Issue: The parent companies (OREPL and AEPL) had secured connectivity to the inter-State transmission system (ISTS). However, as is standard industry practice, the projects were being implemented by their subsidiary SPVs. Consequently, land acquisition and other project-related milestones were completed in the names of the subsidiaries. CTUIL insisted that under Regulation 11A of the GNA Regulations, these documents must be in the name of the original connectivity grantee (the parent company), threatening coercive action, including the revocation of connectivity.

---

Arguments from Both Sides

Petitioners' Stance:

The petitioners argued that executing projects through SPVs is a standard industry practice, recognised even within the GNA framework under Regulation 15.1, which allows for the transfer of connectivity between parent and subsidiary companies. They contended that a rigid interpretation by CTUIL created an unintended procedural hurdle, especially since the projects were making substantial progress and investments had been made.

They cited previous CERC orders (e.g., Petition No. 192/MP/2024 and 503/MP/2024) where similar relaxations were granted. They also highlighted that the Draft Third Amendment to the GNA Regulations proposes to formally incorporate this provision, indicating the Commission's intent to remove this difficulty.

Respondent's (CTUIL) Position:

CTUIL argued that its hands were tied by the existing regulations. It stated that there was no explicit provision allowing it to accept documents from a subsidiary for a connectivity grant awarded to its parent. While acknowledging the CERC's past orders, CTUIL maintained that those were case-specific relaxations and could not be applied generically without a formal amendment to the regulations or a specific directive from the Commission.

---

CERC's Analysis and Decision

The Commission noted that this issue was not new and had been addressed in previous rulings. It referenced an interim generic direction issued on May 13, 2025, during the hearing of these very petitions:

"The Commission directed CTUIL to process the land documents in the name of subsidiary where Connectivity have been granted to the Parent company or vice versa, to comply with Regulation 11A (1) of the GNA Regulations, for all such cases, till the issuance of the third amendment to the GNA Regulations..."

In its final order, the CERC formalised this stance, invoking its powers under Regulations 41 (Power to Relax) and 42 (Power to Remove Difficulty) of the GNA Regulations. The Commission ruled:

"We hereby relax the provision of Regulation 11A(1) of the GNA Regulations and allow the Petitioner in each Petition, which is the Connectivity grantee, to submit the Land documents in the name of its subsidiary... to meet the requirement under Regulation 11A(1) of the GNA Regulations, subject to necessary verification whether the entity with land documents is a subsidiary company under the Company's Act."

The CERC also clarified that this relaxation extends to the submission of financial closure documents under Regulation 11A(2), aligning with its previous orders and generic directions. It sternly directed CTUIL to ensure a consistent approach, stating:

"We direct CTUIL that it shall ensure that documents of Financial Closure and land are in the name of the company that is implementing the project... it cannot be the case that the Parent company is a Connectivity Grantee, but the project is being implemented by the Parent company itself, and the Financial closure documents are being furnished in the name of some of its subsidiaries."

However, the Commission rejected the petitioners' prayer for the immediate return of all Connectivity Bank Guarantees, clarifying that only the specific Bank Guarantee submitted for the land route (under Regulation 5.8) is returnable upon submission of land documents. Other BGs are to be returned only after the project achieves Commercial Operation Date (COD) as per Regulation 16.

With these directions, the petitions were disposed of, providing a crucial operational clarification for the renewable energy sector until the GNA Regulations are formally amended.