Extending The ISTS Waiver: India’s Smartest Climate Investment

India’s clean energy transition is not just a climate imperative—it is a foundational pillar of the country’s economic and industrial strategy. With a national target of 500 GW of non-fossil fuel capacity by 2030, India is aiming to fundamentally rewire its energy system. A critical, though underappreciated, driver of this progress has been the waiver of Inter-State Transmission System (ISTS) charges for renewable energy (RE) projects. As this waiver faces a phased sunset starting June 2025, India must carefully evaluate the implications of pulling back a policy lever that has quietly enabled one of the largest clean energy buildouts in the world.

The ISTS waiver was designed to make green power generated in solar- and wind-rich states economically accessible across India. By exempting qualifying projects from transmission charges, the policy has reduced the delivery cost of renewable electricity by as much as ₹0.30 to ₹0.80 per kWh. This has catalyzed RE deployment across the country through utility-scale parks, SECI-contracted projects, and, more recently, green open access models that enable C&I consumers to decarbonize their operations.

Crucially, the fiscal impact of this policy is modest. Government and industry assessments peg the incremental system-wide cost of extending the waiver at just ₹0.04 per unit. In exchange, India gets competitively priced green power, more predictable investment flows, and a stronger case for climate finance. It’s a textbook example of a market-enabling instrument that offers high economic returns for minimal systemic cost.

Yet, this strategic policy is set to lapse at a moment of growing uncertainty in the energy sector. RE developers are grappling with infrastructure delays, regulatory bottlenecks, and rising capital costs. Many are facing prolonged clearances from the Central Electricity Authority, land acquisition challenges, and environmental litigation. These are structural risks beyond the control of project developers. Withdrawing the ISTS waiver now would be tantamount to penalising investors for systemic inefficiencies, eroding confidence in India’s policy environment at a time when global capital is actively seeking credible green markets.

Instead, a rational approach would be to extend the waiver through at least 2027, with eligibility linked to clearly defined milestones. Projects that have secured grid connectivity, achieved financial closure, acquired a significant portion of land, or placed equipment orders should qualify. This would ensure that policy support flows to serious, execution-ready ventures without opening fiscal floodgates.

The Ministry of Power has already set a precedent with its milestone-based extension of the ISTS waiver for Hydro Pumped Storage and Battery Energy Storage projects. Applying the same principle to solar, wind, and hybrid projects would provide continuity while maintaining accountability.

The implications extend beyond the energy sector. Industrial consumers—who account for nearly half of India’s electricity demand but currently source less than 10% from renewables—stand to benefit immensely. Access to cost-effective interstate green power is crucial for meeting energy transition targets, enhancing global competitiveness, and responding to emerging trade and climate change mechanisms. It’s also crucial for India’s PLI-backed green hydrogen, ammonia, and manufacturing industries, all of which rely on affordable, reliable renewable energy.

Without the waiver, RE tariffs will rise, threatening the competitiveness of Indian manufacturing precisely when the country is positioning itself as an alternative to China in global supply chains. Affordable green power is no longer just a climate story—it’s a trade and investment story.

Ultimately, the ISTS waiver is not a subsidy; it is a smart, temporary enabler that corrects for structural imbalances in resource distribution, transmission capacity, and market maturity. Rather than treating it as a cost, it should be viewed as a signal of policy stability and ambition, exactly what international investors, multilateral banks, and domestic stakeholders are seeking.

India has earned a global reputation for scaling renewable energy with speed and scale. Maintaining that trajectory requires clarity, credibility, and consistency. Extending the ISTS waiver is a low-cost, high-impact decision that reinforces India’s position as a clean energy leader, not just in climate rhetoric, but in the hard economics of power sector reform and industrial policy.

Views are personal