The Ministry of Power has proposed amendments to the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, to extend payment security provisions to standalone energy storage system providers. The draft amendment aims to bring energy storage service providers under the existing regulatory framework, ensuring they receive timely payments for electricity and storage services. The ministry has invited stakeholders to submit their comments and suggestions within 30 days of the notification issued on November 10, 2026.
The Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, were introduced to address the growing problem of delayed payments by electricity distribution companies (DISCOMs) to power generators and other suppliers. The rules establish a structured mechanism for clearing outstanding electricity dues and discourage payment delays across the power sector. They prescribe timelines for bill payments, impose late payment surcharges based on applicable State Bank of India lending rates, and require payment security arrangements such as letters of credit.
The existing framework also includes provisions to restrict entities with overdue payments from accessing short-term power markets and power exchanges. These measures are intended to improve financial discipline among DISCOMs, strengthen payment collection systems, and maintain the financial stability of electricity suppliers. However, standalone energy storage service providers have not been explicitly covered under the existing rules. As a result, these companies have largely depended on individual commercial agreements to secure payments for their services.
The proposed amendment seeks to address this gap by introducing a formal definition of an “energy storage service provider” into the rules. Under the proposed definition, the category will include entities that provide energy storage services or supply electricity through energy storage systems independently owned by them. The definition excludes storage systems owned by generators, transmission licensees, distribution companies, or electricity consumers.
By including standalone storage providers in the regulatory framework, the Ministry of Power intends to extend payment protection and default-related safeguards to this emerging segment. The proposed changes would provide storage developers with a more structured mechanism for recovering payments and managing financial risks associated with delayed payments by electricity buyers.
The amendment comes at a time when India is expanding its renewable energy infrastructure and increasing its focus on energy storage. Solar and wind power generation are growing rapidly, but their variable nature creates challenges for maintaining a stable electricity supply. Energy storage systems can help address these challenges by storing electricity during periods of surplus generation and supplying it when demand increases or renewable generation declines.
India is expected to witness substantial growth in storage infrastructure over the coming decade. Battery Energy Storage Systems (BESS) are projected to reach 321 GWh, while Pumped Hydro Storage (PSP) capacity is expected to expand to 630 GWh by 2035–36. Achieving these targets will require significant investments in project development, equipment, infrastructure, and grid integration.
For investors and lenders, payment security is an important factor when evaluating the financial viability of large-scale storage projects. Extending the LPS framework to standalone energy storage providers could improve confidence in project revenues, reduce payment-related risks, and support access to financing.
The proposed amendment is also expected to benefit DISCOMs and electricity consumers. Distribution companies that make payments within the prescribed timelines will not face additional surcharge costs, as the late payment surcharge applies only when payments are delayed. At the same time, stronger financial protection for storage developers could encourage greater investment in energy storage infrastructure.
The proposal represents another regulatory step towards supporting India’s evolving electricity market and strengthening the financial framework for energy storage development. Following stakeholder consultations, the ministry will consider the feedback before proceeding with the proposed amendment.
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