ISTS Charges

What Are ISTS Charges?

These charges serve a specific economic purpose: they recover the capital cost of transmission infrastructure, ongoing operations and maintenance expenses, and a regulated return on the transmission licensees’ investment. Technical losses in the network are accounted for separately. 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 low PPA tariff that delivers power to a consumer in Maharashtra would, without a waiver, carry the ISTS charges payable at the drawal end on top of that tariff, which can materially change project economics.

The Ministry of Power’s ISTS waiver, first ordered in 2016 and extended several times, removed this cost layer for solar and wind projects commissioned up to 30 June 2025. Projects commissioned after that date pay a rising share of ISTS charges: 25% for commissioning between 1 July 2025 and 30 June 2026, 50% for 2026-27, 75% for 2027-28, and 100% from 1 July 2028. 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:

The figures below are illustrative, not regulated rates.

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 helped ISTS-connected solar parks, such as Bhadla in Rajasthan, sell power across state boundaries to buyers who would have found inter-state procurement at full ISTS cost harder to justify.

How ISTS Charges Work

The framework for ISTS charges is established by CERC’s Sharing of Inter-State Transmission Charges and Losses Regulations, 2020, which replaced the 2010 point-of-connection regulations. The methodology involves several components.

Revenue Requirement

Each inter-state transmission licensee, Power Grid being the largest, recovers yearly transmission charges 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: A regulated return set under CERC tariff regulations.
• Interest on loan: Actual interest cost on debt-funded infrastructure.
• Depreciation: Straight-line depreciation over the asset life. CERC reviews and approves these charges through a public tariff petition process. Transmission losses are handled separately, as described below.

Cost Allocation

Under the 2020 regulations, the approved yearly transmission charges are split into four components and shared mainly among drawee entities (DISCOMs and other buyers drawing power from the ISTS), plus injecting entities in some cases:

National Component: Covers renewable-linked transmission and HVDC assets of national importance, shared by drawee entities across India.

Regional Component: Covers the regional grid of each region, shared by drawee entities in that region.

Transformer Component and AC System Component: Cover inter-connecting transformers in each state and the remaining AC system, shared on the basis of usage.

Losses

In addition to charges, ISTS technical losses apply. They are calculated on an all-India average basis, so a buyer needs slightly more energy injected at the generator end than it receives. The Ministry of Power’s 2021 order waives transmission charges only, not losses; the loss waiver applies only to projects whose bidding was completed by 15 January 2021.

Billing and Settlement

The implementing agency (NLDC, run by Grid-India) computes and publishes the transmission charges payable by each user. The Central Transmission Utility then raises monthly bills to the designated ISTS customers and posts them on its website.

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 hypothetical scenario illustrates why the waiver has mattered to corporate India’s renewable procurement. Note that a project commissioned after 30 June 2025 would carry part of the ISTS charge rather than zero.

Technical Specifications and Benchmarks

Benefits and Advantages

• Dramatic cost reduction: The waiver removes the ISTS charge layer, fully for projects commissioned up to 30 June 2025 and partly for those commissioned up to 30 June 2028, from inter-state solar transactions.

• 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 and tapering: The full waiver ended for projects commissioned after 30 June 2025. Later projects pay a rising share of ISTS charges, and those commissioned from 1 July 2028 pay full charges, so commissioning delays now carry a direct cost.

• 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.

• Phase-out under way: The waiver is being withdrawn in annual steps for solar and wind projects commissioned after 30 June 2025, reaching full charges from 1 July 2028.

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: Plants and solarised pumps under PM-KUSUM Components A and C connect to the state distribution network and sell to the local DISCOM, so ISTS charges and the waiver do not normally apply to them.

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, 2020 establish the methodology for calculating and allocating ISTS charges. They replaced the 2010 regulations and have since been amended.

• Ministry of Power orders set the ISTS waiver policy, eligibility criteria, commissioning deadlines and the phase-out trajectory, issued under para 6.4(6) of the Tariff Policy, 2016. The current base order is dated 23 November 2021, with later amendments including a 10 June 2025 order on energy storage.

• Transmission tariff orders are issued by CERC for Power Grid and other ISTS licensees, approving the yearly transmission charges that feed into 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), run by Grid-India, is the implementing agency that computes the ISTS charges payable by each user; the Central Transmission Utility raises the bills.

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, India’s broader solar build-out under the National Solar Mission and the 500 GW non-fossil capacity goal for 2030 depends partly on inter-state utility-scale deployment that the waiver supported.

Future Trends

The gradual phase-out is already the current policy. Under the Ministry of Power’s 23 November 2021 order, projects commissioned up to 30 June 2025 keep a full waiver for 25 years, while new solar and wind projects pay a rising share of ISTS charges until full charges apply from 1 July 2028. Beyond that, a few developments are worth watching.

Grandfathered projects: Existing projects keep their waiver for its full term, so the cost difference between older and newer projects will widen over time.

Technology-specific support: Storage is already treated differently. A 10 June 2025 Ministry of Power order gives a full waiver to co-located BESS commissioned by 30 June 2028 (where the power is consumed outside the state) and to pumped storage projects whose construction is awarded by that date.

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. The full waiver applies only to projects commissioned up to 30 June 2025. Later projects pay 25%, 50% or 75% of ISTS charges depending on their commissioning year, and full charges from 1 July 2028.

• “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. The orders apply prospectively, and the share of the waiver depends on the project’s commissioning date.

• “ISTS charges are negotiable.” False. ISTS charges are determined under CERC regulations and published by the implementing agency. 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.

• The Ministry of Power fully waived ISTS charges for solar and wind projects commissioned up to 30 June 2025, for 25 years. Projects commissioned later pay 25%, 50% and 75% of the charges in successive years, and 100% from 1 July 2028.

• 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 mainly on commissioning date and technology; verify against current Ministry of Power orders.

• The phase-out is already under way; project developers should model the charge share that applies to their commissioning date.

• CERC regulates ISTS charges through the Sharing of Inter-State Transmission Charges and Losses Regulations, 2020.

• 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, 2020 (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
• Ministry of Power, Order No. 23/12/2016-R&R dated 23 November 2021 on waiver of ISTS charges for solar and wind
• Ministry of Power, Order dated 10 June 2025 on waiver of ISTS charges for energy storage systems