Ministry Of Power Issues New Guidelines For Fair Row Compensation On ISTS Lines

The Ministry of Power has issued supplementary guidelines to address the concerns raised by landowners regarding compensation for land used in the laying of Inter-State Transmission System (ISTS) lines. These new guidelines were released through a letter dated 14th June 2024. Earlier, compensation for the Right of Way (RoW) for ISTS lines was determined based on circle rates or guideline values of the land. If the market rate was found to be higher than the circle rate, the land value was to be determined by the District Magistrate or Deputy Commissioner as per the state government’s specifications. However, many states have not yet specified how the market rate should be determined. As a result, several landowners, particularly in urban and semi-urban areas, have complained that the compensation they are being offered is too low.

The issue is especially problematic in urban areas where landowners are unable to use their land for other developments due to restrictions caused by transmission lines. While land in rural areas under RoW corridors can still be used for agriculture, land in urban and urban planning zones often cannot be used for other purposes. Because of this, the standard 30% compensation paid in rural areas is seen as inadequate in urban settings where the opportunity costs are much higher.

To resolve these concerns, the Ministry of Power has issued supplementary guidelines that aim to make the determination of market rates for RoW compensation more transparent and fair. These guidelines apply only to ISTS lines where landowners have objected to the compensation offered because it is based on circle rates lower than actual market rates. States can either adopt these guidelines or create their own versions. These guidelines are specifically for states that have not yet established a method for determining land market value.

Under the new rules, a Market Rate Committee (MRC) will be formed to determine the land’s market value. This committee will include the District Magistrate or Deputy Commissioner as the chairperson, a representative of the landowners, and a nominee from the ISTS Transmission Service Provider (TSP). The committee may also include up to two additional members if needed. The MRC will appoint two valuers—one chosen by the TSP and one by the landowners. These values must be listed with the Insolvency and Bankruptcy Board of India (IBBI) and preferably be from the same or nearby states.

The valuation process is designed to be fair and consistent. If the difference between the two valuations is less than 20%, the average of the two will be taken as the reference market rate. If the difference exceeds 20%, the MRC may negotiate a rate. If negotiations fail, a third valuer will be engaged, and the reference rate will be the average of the two closest valuations. The fees for these valuers will be paid by the TSP and included as part of the RoW compensation cost.

Regarding compensation rates, the tower base payment will follow the guidelines issued earlier in June 2024. However, the compensation for the RoW corridor has been revised. It is now set at 30% of the land value in rural areas, 60% in areas under municipal corporations and metropolitan zones, and 45% in municipalities, nagar panchayats, and other urban planning zones.

The District Collector may allow the construction of ISTS lines to proceed without obstruction, provided that compensation will be paid later based on the market rates determined by the MRC. Ideally, this process should be completed within one month of the TSP’s application.

If the actual compensation paid differs from the base compensation under the Tariff Based Competitive Bidding (TBCB) guidelines, it will be eligible for pass-through under Change in Law provisions by the Central Electricity Regulatory Commission (CERC).