INDIA: An Introduction to Projects, Infrastructure & Energy

Infrastructure at a Crossroads: Boosting the Next Generation of Infrastructure Growth

A pivotal juncture

Infrastructure forms the backbone of a country’s economic development. Over the past three decades, India has made significant and steadily increasing investments in its infrastructure, through a mix of greenfield development, brownfield expansion/refurbishment and the monetisation of built-up assets with attendant structural and regulatory reforms. Infrastructure development gained a renewed focus after 2014 when the government constituted an expert committee led by Dr Vijay Kelkar to recommend ways to rejuvenate infrastructure development through public-private partnership (PPP). The 2015 report produced by that committee led to a set of structural reforms from 2016 onwards that included fast track resolution of infrastructure development disputes – amending the Arbitration Act, enacting the Commercial Courts Act and amending the Specific Relief Act.

Faced with stranded PPP projects and rising non-performing assets on bank and private sector balance sheets, the government initiated measures to liquidate stressed debts and revive banks through the Insolvency & Bankruptcy Code, 2016. Simultaneously, the Indian government took the lead in launching an ambitious National Infrastructure Pipeline (NIP) in 2019, projecting an estimated capital expenditure of USD1.3 trillion over five years (with a mere 21% private investment). In 2021, the government took another step to liquidate operating publicly owned assets through the National Monetisation Pipeline, which is aimed at freeing up to USD80 billion.

In recent years, energy security and the transition to clean energy, transport connectivity, urban development and industrial corridors have been prioritised by the government as part of its mission to make India the third largest economy in the world.

• India’s energy transition efforts are showing strong results. In December 2024, 52.9% of India’s installed generation capacity of 4.62 GW was based on fossil fuels. It is estimated that around 26.26% of the energy output came from non-fossil fuel sources.
• With a focus being placed on the electrification of vehicular fleets, achieving 500 GW of non-fossil fuel capacity by 2030 (and the attendant shoring up of battery storage capacity and capabilities, augmenting domestic manufacturing capabilities, and expansion of the transmission grid), and commercialisation of green hydrogen, India has one of the world’s most significant energy transitions.
• The growth of India’s transportation sector (comprising its road network, airports, navigable rivers, ports and railroads) has been driven by an increase in commuter demand (itself a function of rising household wealth), the growth of industrial/development clusters in new geographies, and India’s attempts to plug into global supply chains.

Key trends and challenges

Growth in India’s infrastructure space has maintained an enviable pace. Some significant challenges remain – ranging from regulatory uncertainties, complexities and immaturity to demand risk and cost-competitiveness. It is crucial that India balance investor confidence, consumer affordability and energy security. This requires a combination of regulatory certainty and financial reforms, with a more effective dispute resolution system to secure infrastructure development and strategic global partnerships.

Energy sector

The growth of renewable energy

India’s renewable energy sector continues to expand rapidly with the government implementing policy measures to help achieve the energy transition.

• A key focus has been on the adoption of green hydrogen as a substitute for fossil fuels and fossil fuel-based feedstocks. The Ministry of New and Renewable Energy (MNRE) launched the National Green Hydrogen Mission in January 2023. This was followed by a series of targeted schemes, such as the development of hydrogen hubs, integration of green hydrogen in the shipping and steel industries, incentives for electrolyser manufacturing, and regulatory exemptions for renewable energy plants supplying power exclusively for hydrogen production.
• The government continues to leverage India’s high solar potential with a strong push towards distributed solar energy generation. Schemes such as the Grid Connected Rooftop Solar Programme Phase-II and the PM-Surya Ghar Muft Bijli Yojana aim to enhance household solar adoption, reduce dependency on conventional power sources, and support India’s long-term clean energy transition.
• To boost domestic capacity enhancement, the government introduced a production-linked incentive scheme offering financial incentives to companies engaged in solar module manufacturing, advanced energy storage systems, green hydrogen production and electronic vehicle (EV). The government’s strategic push for local production is expected to position India as a global hub for RE technology and supply chains.

Challenges

To achieve its goals in this area, India must also overcome a number of challenges:

• regulatory uncertainty in tariff structures;
• implementing grid operation with non-discriminatory open access;
• fast resolution of disputes arising out of changes in law and the provisions of power purchase agreements (PPAs);
• getting a grip on state-level policy inconsistencies and delays in approvals, which remain a major concern, to secure effective private sector participation;
• the country’s dependence on imports for critical minerals such as lithium, cobalt and rare earth materials, which adds an additional risk to the scalability and cost effectiveness of energy storage and EV adoption.

Competition and transparency in the energy sector

The electricity market is shifting toward greater competition and transparency, with several key regulatory mechanism now in place.

• The General Network Access (GNA) framework allowing industrial and commercial users to procure power directly from independent generators including group captive power plants, thereby fostering competition.
• The expansion of real time markets (RTM) – Improving power trading flexibility, allows distribution licensees and large-scale consumers to adjust their electricity procurement in real time based on demand fluctuations. This provides a real time price discovery mechanism and so reduces dependency on day ahead markets.
• Market-based economic dispatch (MBED) – This is expected to enhance efficiency in power scheduling. Instead of states individually managing power procurement, MBED proposes a unified national level dispatch system. This would allow generators to compete in a centralised real time market rather than for state-specific power contracts. The MBED mechanism is still under discussion.

Grid modernisation

India’s transition towards a competitive electricity market is linked to grid modernisation. A fully integrated electricity market requires a robust transmission infrastructure. It is against this backdrop that the Central Electricity Regulatory Commission (CERC) has notified the Indian Electricity Grid Code, 2023. India has made notable strides in grid modernisation, such as the development of smart meters and the expansion of renewable energy infrastructure. These efforts form part of the National Smart Grid Mission launched in 2015. Over 20 million smart consumer meters have been installed across the country, but much remains to be done since the installation stands at about 5%. India is increasingly expanding electricity trade with neighbouring countries like Nepal, Bhutan and Bangladesh under a Cross Border Electricity Trade (CBET) framework. The goal is to create a regional electricity market, leveraging hydro power from Bhutan and Nepal, surplus power from India and demand from Bangladesh.

Transportation – the rise of the aviation sector in India

The Gati Shakti National Master Plan launched in October 2021 seeking multi-model connectivity infrastructure for a variety of economic zones. It aligns railways, roads and highways (“Bharatmala”), ports (“Sagarmala”), waterways, airports (“UDAN”), mass transportation and logistics infrastructure. Progress has been remarkable, integrating digital technology into multi-model transport, and it comprises the largest component of NIP – to connect people, goods and projects.

More specifically, the aviation sector is experiencing unprecedented growth. India is the third largest aviation market globally and is witnessing a massive fleet expansion by carriers. The Air India divestment, the launch of Digi Yatra operations, growing provision of aircraft manufacturing facilities, and utilisation of Indian airspace as a “green zone” for drones flying up to 400 feet are pertinent growth factors. India is negotiating air service agreements with various countries to enhance bilateral aviation partnership and new flight routes. The government is promoting a domestic aircraft manufacturing facility, which is intended to manufacture 40 aircraft to be delivered from September 2026 to August 2031.

Across all sectors in transportation, the industry must address pressing operational and financial constraints, balancing manufacturing capacity, supply chain bottlenecks and component shortages to ensure sustainable and viable long-term growth.

Evolution of regulators

With the increased complexity of electricity tariffs and the implementation of renewable energy projects, regulatory commissions are witnessing a surge in disputes: change in law disputes under PPAs, tariff rationalisation to address financial distress of power distribution companies, disputes arising out of grid congestion and transmission access, renewable energy curtailment disputes, etc. Bodies like CERC, the State Electricity Regulatory Commissions (SERCs) and the Appellate Electricity Tribunal (APTEL) have been instrumental in resolving these disputes. CERC has been at the forefront of designing market-based mechanism. APTEL has settled many issues by interpreting regulatory provisions in the power sector.

In the aviation sector, regulatory bodies such as the Ministry of Civil Aviation (MoCA), the Directorate General of Civil Aviation (DGCA), the Bureau of Civil Aviation Security (BCAS) and the Airports Economic Regulatory Authority (AERA) are playing a significant role in shaping policies and navigating operational challenges. DGCA has recently introduced stricter regulations on flight duty time limitations to address pilot fatigue. DGCA has also introduced financial health monitoring mechanisms in view of the recent financial collapses of Jet Airways and Go First.

Future regulatory interventions will need to strike a balance between protecting investors and ensuring affordability for consumers. The latest Protection of Interests in Aircraft Objects Bill, 2025, in line with the Cape Town Convention (CTC) 2001 along with the protocol to the CTC, is a step in the right direction that (once notified) ensures predictability for creditors in cases of financial default.

Given the rapidly evolving nature of India’s energy and infrastructure legal landscape, guiding stakeholders through policy, regulatory and dispute resolution mechanisms is vital. As the landscape evolves, proactive regulatory and legal intervention will be the key to ensuring stability and investor confidence, fostering competition and driving sustainable growth.