ISTS Charges

What Are ISTS Charges?

ISTS (Inter-State Transmission System) charges are fees levied for the use of India’s national high-voltage electricity transmission network that connects state-level power systems across the country. The network, operated primarily by Power Grid Corporation of India Limited (PGCIL), consists of 765 kV, 400 kV, and 220 kV transmission lines, substations, and switchyards that enable bulk power transfer from generating stations in one state to consumers in another.

These charges serve a specific economic purpose: they recover the capital cost of transmission infrastructure, ongoing operations and maintenance expenses, a regulated return on Power Grid’s investment, and compensation for technical losses incurred during long-distance power transmission. Without ISTS charges, there would be no mechanism to fund the national grid that makes inter-state electricity trade possible.

For solar generators, ISTS charges represent a significant cost layer. A solar plant in Rajasthan with a PPA tariff of Rs 2.50 per kWh might face ISTS charges of Rs 0.80 to Rs 1.20 per kWh to deliver power to a consumer in Maharashtra. This increases the effective cost by 32% to 48%, fundamentally altering project economics.

The Government of India’s ISTS waiver policy, introduced in 2021 and extended multiple times, eliminates this cost layer for eligible solar and wind projects. The waiver has been transformative for India’s renewable sector, enabling corporate open-access deals, utility-scale solar parks, and inter-state green energy transactions that would otherwise be economically marginal.

Why ISTS Charges Matter

ISTS charges matter because they determine whether inter-state solar power is economically viable. India’s best solar resources, highest irradiance, lowest land costs, and largest contiguous parcels, are concentrated in Rajasthan, Gujarat, and parts of Madhya Pradesh. India’s largest electricity consumers, Maharashtra, Karnataka, Tamil Nadu, and Delhi, are often hundreds of kilometres away.

Without the ISTS waiver, this geographic mismatch creates a cost barrier:

Example without waiver:

• Solar PPA in Rajasthan: Rs 2.50 per kWh
• ISTS charges to Maharashtra: Rs 1.00 per kWh
• State transmission and wheeling: Rs 0.80 per kWh
• Cross-subsidy surcharge: Rs 1.50 per kWh
• Total delivered cost: Rs 5.80 per kWh

Compared to Maharashtra’s commercial tariff of Rs 10 to 12 per kWh, solar still saves money. But the margin is narrow, and the payback period extends beyond what many corporate boards will approve.

Example with waiver:

• Solar PPA in Rajasthan: Rs 2.50 per kWh
• ISTS charges: Rs 0 (waived)
• State transmission and wheeling: Rs 0.80 per kWh
• Cross-subsidy surcharge: Rs 1.50 per kWh
• Total delivered cost: Rs 4.80 per kWh

The Rs 1.00 per kWh saving improves project IRR by 2 to 3 percentage points and shortens payback by 1 to 2 years. This difference has driven gigawatts of corporate open-access solar contracts.

The waiver has also enabled solar park developers in Rajasthan’s Bhadla, Pavagada in Karnataka, and Gujarat’s Charanka to sell power across state boundaries to consumers who would never have considered inter-state procurement at full ISTS cost.

How ISTS Charges Work

The framework for ISTS charges is established by CERC’s Sharing of Inter-State Transmission Charges and Losses Regulations. The methodology involves several components.

Revenue Requirement

Power Grid calculates its annual revenue requirement based on:

• Capital costs: Historical and current investment in transmission lines, substations, and associated equipment.
• Operations and maintenance: Annual O&M expenditure including staffing, maintenance, and vegetation management.
• Return on equity: Regulated at 15.5% post-tax under CERC norms.
• Interest on loan: Actual interest cost on debt-funded infrastructure.
• Depreciation: Straight-line depreciation over the asset life.
• Transmission losses: Technical losses in the ISTS network, typically 3% to 5%.

CERC reviews and approves this revenue requirement through a public tariff petition process.

Cost Allocation

The approved revenue requirement is allocated across all users of the ISTS network:

Point-of-Injection (POI) charges: Levied at the generator’s interconnection substation. Reflects the cost of transmitting power from the generator to the regional grid backbone.

Point-of-Drawal (POD) charges: Levied at the consumer’s receiving substation. Reflects the cost of delivering power from the regional backbone to the consumer.

Zonal/regional allocation: Costs are segregated by region, Northern, Western, Southern, Eastern, North-Eastern, and inter-regional links, with users paying for the infrastructure they actually use.

Losses

In addition to charges, ISTS technical losses apply. A consumer receiving 100 MWh at the delivery point pays for 103 to 105 MWh at the generator end, reflecting 3% to 5% loss in transmission. The ISTS waiver typically includes these losses, meaning the consumer pays only for delivered energy.

Billing and Settlement

ISTS charges are administered through the National Load Despatch Centre (NLDC) and Regional Load Despatch Centres (RLDCs). Generators and consumers register their inter-state transactions, and charges are calculated monthly based on metered energy flows. Settlement occurs through the Power Exchange or bilateral mechanisms.

Visual Explanation

Real-World Example

A large IT services company with data centres in Mumbai and Pune wants to procure 100 MW of solar power to meet its renewable energy targets and reduce electricity costs. The company issues an RFP for open-access solar procurement.

Two developers submit bids:

Developer A: 100 MW solar plant in Rajasthan’s Jaisalmer district, PPA tariff Rs 2.45 per kWh, 25-year term.

Developer B: 100 MW solar plant in Maharashtra’s Solapur district, PPA tariff Rs 2.80 per kWh, 25-year term.

At face value, Developer A’s tariff is 12.5% lower. But the delivered cost calculation reveals the full picture:

With the ISTS waiver, the Rajasthan project matches the Maharashtra project’s delivered cost despite the inter-state distance. Without the waiver, the Rajasthan project’s cost would rise to Rs 6.05/kWh, making it uncompetitive.

The IT company selects Developer A, securing a 25-year supply of renewable power at a cost 45% below Maharashtra’s commercial tariff of Rs 11 to 12 per kWh. The ISTS waiver made this transaction possible.

This scenario illustrates why the waiver has been instrumental in corporate India’s renewable procurement surge. Companies like Reliance, Tata, Mahindra, ITC, Wipro, Infosys, and Aditya Birla have executed multi-state solar deals enabled by ISTS charge elimination.

Technical Specifications and Benchmarks

Benefits and Advantages

• Dramatic cost reduction: The waiver eliminates Rs 0.50 to Rs 1.50 per kWh from inter-state solar transactions, improving project economics by 20% to 60% on the transmission component.

• Geographic flexibility: Generators can site plants in optimal solar locations, Rajasthan, Gujarat, Karnataka, regardless of consumer location. Consumers can access the cheapest solar in India.

• Corporate renewable procurement: The waiver has enabled gigawatts of corporate open-access PPAs, helping India Inc. meet RE100 commitments and SEBI BRSR disclosure requirements.

• Solar park development: Large solar parks in high-irradiance zones can sell power across India, not just within their host state, expanding their addressable market.

• Grid utilisation: The waiver incentivises use of existing ISTS capacity, improving asset utilisation and deferring new transmission investment.

• Competitive tariff discovery: By removing a fixed cost layer, the waiver ensures that solar tariff competition focuses on generation efficiency and CAPEX optimisation rather than transmission arbitrage.

• Energy security: Inter-state renewable trade reduces reliance on imported fossil fuels and diversifies supply sources across India’s geography.

• Manufacturing stimulus: Lower delivered costs increase overall solar demand, indirectly supporting India’s expanding domestic module manufacturing under the PLI scheme.

Limitations and Drawbacks

• Time-bound uncertainty: The waiver has been extended multiple times but is not permanent. Projects commissioning after the deadline lose the benefit, creating planning uncertainty.

• State-level charges remain: The waiver eliminates only the inter-state component. Intra-state transmission, wheeling, and cross-subsidy surcharge, which can total Rs 1.70 to Rs 4.60 per kWh, still apply.

• Cross-subsidy surcharge barrier: In states like Maharashtra and Tamil Nadu, the cross-subsidy surcharge is the largest cost component. The ISTS waiver does not address this state-level policy barrier.

• Grid congestion risk: As inter-state renewable transactions grow, certain transmission corridors may face congestion, potentially triggering curtailment of scheduled renewable generation during peak flow periods. Physical delivery constraints could limit the practical benefit of the waiver even when legally available.

• Eligibility complexity: Determining whether a specific project qualifies requires careful review of commissioning dates, technology, capacity, and PPA structure. Misinterpretation can lead to unexpected charges.

• Not applicable to rooftop: Residential and commercial rooftop systems connected to the local distribution network cannot benefit from the ISTS waiver. The policy applies only to inter-state generation and open-access transactions.

• Potential for phase-out: As India’s renewable capacity approaches the 500 GW target, the policy rationale for the waiver diminishes. Future governments may allow it to expire.

Comparison: ISTS vs Intra-State vs Wheeling Charges

Applications

Corporate open-access solar: Large consumers with multi-state operations use the ISTS waiver to procure solar from optimal locations. A manufacturing company with plants in Maharashtra, Gujarat, and Tamil Nadu can contract a single solar park in Rajasthan and allocate power across locations through banking and wheeling arrangements, or structure a group captive arrangement to secure similar open-access benefits with an equity stake in the generating company.

Utility-scale solar parks: Developers of ground-mount solar parks in Rajasthan, Gujarat, and Karnataka rely on the ISTS waiver to sell power to discoms and open-access consumers in other states. Without the waiver, park economics would not support the low tariffs required for viability. Coordinating land acquisition, grid-connectivity studies, and construction across hundreds of megawatts of interconnected capacity typically requires dedicated MW-scale project management consultancy.

Solar-wind hybrid projects: Hybrid plants combining solar and wind benefit from the waiver on the same terms as standalone projects, improving capacity utilisation and reducing grid integration challenges.

PM-KUSUM Component C: Grid-connected agricultural solar pumps under PM-KUSUM can benefit from ISTS waiver when power is exported to the grid across state boundaries, though most Component C projects are intra-state.

Green hydrogen and ammonia: Emerging green hydrogen projects that require large-scale renewable power may leverage the ISTS waiver to source cheap solar from Rajasthan and Gujarat for electrolyser plants in industrial zones.

Not applicable: Residential solar systems under PM Surya Ghar, small commercial rooftop installations, and captive systems using only local distribution networks do not use ISTS and cannot benefit from the waiver. These installations instead settle their export and import through net metering arrangements with their local DISCOM, not inter-state transmission.

Industry Standards and Regulations

• CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2010 establish the methodology for calculating and allocating ISTS charges. The regulations have been amended multiple times to refine cost allocation and incorporate new transmission assets.

• Ministry of Power notifications announce the ISTS waiver policy, eligibility criteria, commissioning deadlines, and extensions. These notifications are published in the Gazette of India and carry statutory force.

• Power Grid Corporation tariff orders are issued annually by CERC, approving the revenue requirement and specific charge rates for each tariff period. The orders provide the detailed rates used in ISTS billing.

• CEA Technical Standards for Connectivity specify the technical requirements for connecting generators to the ISTS network, including metering, protection, and communication requirements.

• National Load Despatch Centre (NLDC) administers the ISTS charge settlement process, maintaining registers of eligible generators and calculating monthly charges based on metered energy flows.

India-Specific Context

India’s federal power structure creates a unique environment for ISTS policy. Electricity is a concurrent list subject, meaning both the central government and state governments legislate. The central government, through CERC, regulates inter-state transmission. State governments, through SERCs, regulate intra-state transmission and distribution.

This division means that the central government’s ISTS waiver authority extends only to the inter-state component. State-level charges, wheeling, cross-subsidy surcharge, and banking fees remain under state control. Some states, notably Gujarat and Rajasthan, have relatively open-access-friendly regimes. Others, notably Maharashtra and Tamil Nadu, impose high cross-subsidy surcharges that limit open-access solar growth despite the ISTS waiver.

Gujarat’s solar market has benefited indirectly from the ISTS waiver. Gujarat-based solar developers can build plants in the state’s high-irradiance Kutch and Banaskantha districts and sell power to consumers in Maharashtra and Delhi through ISTS, expanding their market beyond Gujarat’s DISCOMs.

Heaven Green Energy, while focused primarily on Gujarat’s residential, commercial, and industrial rooftop market, monitors ISTS policy developments for clients considering open-access or utility-scale expansion. The waiver’s continuation or phase-out significantly affects the strategic options available to large energy consumers.

The PM Surya Ghar scheme, which targets 1 crore residential rooftop systems, is unaffected by ISTS policy because residential systems are distribution-connected and intra-state. However, the broader National Solar Mission target of 280 GW by 2030 depends partly on inter-state utility-scale deployment enabled by the waiver.

Future Trends

The future of ISTS charges and the waiver policy depends on India’s renewable deployment trajectory and fiscal constraints. Three scenarios are possible.

Scenario 1: Gradual phase-out: As India approaches 500 GW renewable capacity by 2030, the government allows the waiver to expire for new projects while grandfathering existing commitments. New projects pay full ISTS charges, but the market has matured enough to absorb the cost. This is the most likely medium-term outcome.

Scenario 2: Technology-specific extension: The waiver may be extended for emerging technologies, green hydrogen, energy storage, offshore wind, that require additional policy support, while expiring for conventional solar and wind that have achieved grid parity.

Scenario 3: Market-based transmission pricing: CERC may evolve toward more granular, market-based transmission pricing that reflects real-time congestion and locational marginal costs. Under such a regime, the blanket waiver would be replaced by targeted congestion relief mechanisms.

For project developers, the prudent approach is to model both with-waiver and without-waiver scenarios in financial projections. Lenders increasingly require sensitivity analysis showing project viability even if the waiver expires or is not extended for the specific project timeline.

For corporate buyers, long-term PPAs should include contractual protections, such as tariff adjustment clauses, that address ISTS waiver continuity risk. Buyers who assumed permanent waiver benefits may face cost surprises if policy changes. Lenders similarly stress-test the debt service coverage ratio of open-access projects under both with-waiver and without-waiver scenarios before financial close.

Common Mistakes and Misconceptions

• “ISTS waiver eliminates all transmission costs.” False. The waiver covers only the inter-state component. Intra-state transmission, wheeling, and cross-subsidy surcharge remain and often exceed the ISTS component.

• “The waiver is permanent.” False. It is a time-bound policy tool with specific commissioning deadlines. Extensions have been granted but are not guaranteed indefinitely.

• “Residential solar benefits from ISTS waiver.” False. Rooftop systems are connected to the local distribution network and do not use inter-state transmission.

• “All solar projects automatically qualify.” False. Eligibility depends on commissioning date, technology, capacity, and PPA structure. Specific projects must be verified against current notifications.

• “ISTS and intra-state charges are the same thing.” False. ISTS is inter-state, regulated by CERC, operated by PGCIL. Intra-state is within one state, regulated by SERC, operated by STU.

• “The waiver applies retroactively.” False. Only projects commissioned within the eligibility window receive the benefit. Existing plants commissioned before the policy do not qualify.

• “ISTS charges are negotiable.” False. ISTS rates are regulated by CERC and published in tariff orders. They are not subject to negotiation between generator and consumer.

• “Open access is free with ISTS waiver.” False. Open access involves multiple charges. The ISTS waiver removes one layer but state-level charges can still total Rs 1.70 to Rs 4.60 per kWh.

Key Takeaways

• ISTS charges are fees for using India’s inter-state high-voltage transmission network, typically Rs 0.50 to Rs 1.50 per kWh without waiver.

• The Government of India has waived ISTS charges for eligible solar and wind projects commissioned within specified deadlines, with multiple extensions granted.

• The waiver applies only to the inter-state component; intra-state transmission, wheeling, and cross-subsidy surcharge still apply.

• The waiver has enabled gigawatts of corporate open-access solar and utility-scale solar park development by improving inter-state project economics.

• Eligibility depends on commissioning date, technology, capacity, and PPA structure; verify against current Ministry of Power notifications.

• The waiver is time-bound and likely to phase out as India approaches renewable targets; project developers should model both scenarios.

• CERC regulates ISTS charges through the Sharing of Inter-State Transmission Charges and Losses Regulations, with rates approved annually.

• Residential rooftop solar under PM Surya Ghar does not use ISTS and cannot benefit from the waiver.

• State-level open-access charges, particularly cross-subsidy surcharge, remain the largest barrier to inter-state solar in many states.

• Corporate PPA negotiations should include contractual protections addressing ISTS waiver continuity risk.

Frequently Asked Questions

See frontmatter faqs: for the complete FAQ list covering what ISTS charges are, who pays, the waiver policy, cost impact, deadline extensions, eligibility, remaining charges, calculation methodology, regulatory authority, ISTS vs intra-state differences, hybrid project applicability, residential applicability, phase-out likelihood, corporate PPA impact, and eligibility documentation.

Related Glossary Terms

• Open Access Solar
• Wheeling Charges
• Cross-Subsidy Surcharge
• Intra-State vs Inter-State
• CTU vs STU
• CERC
• Power Purchase Agreement
• National Solar Mission
• Group Captive
• Solar Curtailment
• Solar EPC
• Commercial Solar
• Industrial Solar
• Ground Mount Solar Park
• PM KUSUM

Related Resources

• How Solar PPAs and RESCOs Work in India
• Solar EPC Services
• Commercial Solar Systems
• Industrial Solar Systems
• Ground Mount Solar Parks
• PM KUSUM Complete Guide
• Solar Payback Period Calculator

Sources and References

• CERC, Sharing of Inter-State Transmission Charges and Losses Regulations, 2010 (as amended)
• Ministry of Power, Gazette Notifications on Waiver of ISTS Charges for Solar and Wind Projects
• Power Grid Corporation of India Limited, Annual Transmission Tariff Orders
• Central Electricity Authority, National Electricity Plan and Grid Connectivity Standards
• MNRE, Scheme Guidelines for Solar Park Development and Open Access
• Ministry of Power, Extension Notifications for ISTS Waiver Deadlines
• CERC, Point of Connection Charges and Loss Allocation Methodology
• NLDC, ISTS Charge Settlement Procedures and Generator Registration Guidelines