Cabinet nod sought to extend power fund for 5 years

New Delhi: The power ministry has sought Cabinet approval for the continuation of the Power System Development Fund (PSDF) in the 16th finance commission cycle of FY27-FY31, people familiar with the matter said.

The fund finances projects that support the reliability, security and stability of India's electricity grid. It is mainly used to support investments important to secure power-system operations that may not be commercially viable for utilities. The union budget for FY27 earmarked around ₹1,103 crore for the PSDF.

The ministry did not respond to an email seeking comment until press time Monday. The Cabinet approval for the 15th finance commission cycle of FY22-26 period came in July 2023, with an allocation of ₹11,000 crore. As per regulations, regional power committees, electricity generation companies, transmission licensees, distribution licensees, load dispatch centres and public sector undertakings need to give details of the projects and schemes for funding from the PSDF.


Categories eligible for funding include transmission systems of strategic importance, reactive energy generators, standard and special protection schemes, pilot and demonstration projects, and renovation and modernisation of transmission and distribution systems. As India's renewable energy capacity increases, the grid needs additional voltage support, storage and protection systems to manage variable generation.

According to a Crisil Ratings report in March, addition of renewable energy capacity amid slower deployment of transmission infrastructure poses a risk of grid curtailment for more than 35 GW of capacity in fiscal 2027. This is largely because of a lack of long-term grid access. Curtailment for prolonged duration can impact the equity internal rate of return and the debt service coverage ratio of projects, the report said.