The Madhya Pradesh government has issued guidelines for implementing pumped storage projects (PSPs) with incentives announced under the state’s renewable energy policy.

The state’s ‘Scheme for Implementation of Pumped Hydro Storage Project in Madhya Pradesh’ will be implemented in tandem with its renewable energy policy issued in 2022.

The policy will be valid for 10 years.

The Office of Commissioner will be the nodal agency for PSP projects.

The nodal agency for the PSP will allocate the site to the central and state public sector undertakings, the authority set by the Indian or Madhya Pradesh governments, the state project development authority, and the developer.

PSP projects can be implemented in four ways under these guidelines:

Mode I- Allotment of PSP Sites to CPSUs, PSUs, and Government Authority

The nodal agency may allot on-stream or off-stream PSP sites on a nomination basis to the central and state public undertakings and government authority under the Indian and Madhya Pradesh governments.

The Madhya Pradesh Power Management Company (MPPMCL) will have the right of first refusal of up to 100% of capacity of the projects developed under this Mode.

Mode II- Allocation to Developers

The State Project Development Authority (SPDA) will allocate the PSP site through competitive bidding.

MPPMCL will have no right of first refusal on the project capacity.

Mode III- Projects for DISCOMs and Public Organisations’ Use

The developer will be chosen through a competitive bidding process.

The PSP project can be developed under a tolling tariff model or for a PSP site with a solar project in a solar park. The SPDA must develop the solar park under the composite tariff model.

Government land for the projects will be provided at a discounted rate of up to 35%.

This land will be transferred back after 25 to 40 years.

SPDA must form a special purpose vehicle (SPV) for undertaking the project with a minimum shareholding of ₹100,000 (~$1,148.64). The SPV will be transferred to the successful bidder upon submission of the cost of the total shareholding value in the company and SPDA’s SPV operating expenditure.

SPDA must issue a detailed project report for the project.

Allotment of government land will occur in phases.

The initial allotment letter will be provided with the submission of a bank guarantee of ₹100,00 (~$1,148.64)/MW. The letter will give the developer exclusive rights to the PSP site for one and a half years.

The developer can also be provided an intermediate allotment upon meeting various criteria. The bank guarantee paid to the nodal agency will be reduced to ₹50,000 (~$574.32)/MW upon issuing the intermediate allotment. The intermediate allotment will allow the developer to a stake claim on the site/project for three years or until permanent allocation.

The project will be allocated for permanent development after the developer submits a construction bank guarantee for ₹25,000 (~$287.16)/MW.

Mode IV- Self-Identification by Developers

Developers may self-identify potential off-stream sites not identified under Mode I, II, and III.

The nodal agency will provisionally allot the site to the developer.

It will open an online window for receiving applications for allotment of the PSP site.

Developers quoting the highest operating PSP capacity, operating power generating assets, and net worth will receive allotment priority.

Alternatively, the earliest bid will receive the priority.

MPPMCL will have the right of first refusal for up to 50% of the project capacity.

The provision for phased allocation of the PSP projects will not apply to non-government lands.

For projects spanning different states, the right of first refusal will be reduced to half.

SPDA can conduct a bidding process for power procurement from the energy storage facility by submitting bid process management fees of ₹100,000 (~$1,148.64)/MW.

Viability Gap Funding (VGF)

Projects under Mode III can avail the central and state government’s VGF if MPPMCL purchases all the power.

Incentives

• The PSP projects can avail of incentives under the state’s renewable energy policy.
• Electricity duty will not apply to pumping power for charging PSP projects but will be levied on the final electricity consumption. This provision will be extended for 10 years. Additionally, no energy development cess will be payable on the power supplied by the PSP projects for 10 years.
• Reimbursement of stamp duty up to 65% will be provided.
• There will be a 50% waiver on wheeling charges for five years.
• There will be an exemption of registration and facilitation fees of up to 20%.
• Suppose the developer constructs a joint project consisting of a PSP and a project for supplying input energy to the PSP. In that case, the program’s incentives will only apply to the PSP project.

Charges

The developer must pay project registration, facilitation charges, and rehabilitation and resettlement charges.

Timeline

Projects under Mode I, II, and III must be completed within seven years of the award. A one-year extension can be provided for projects delayed due to environmental and forest clearance delays.

However, projects under Mode IV must be completed within four years.

The Madhya Pradesh government’s New and Renewable Energy Department recently issued the Madhya Pradesh Renewable Energy Policy 2025, targeting 50% of annual power consumption from renewable energy resources by 2030.

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