Madhya pradesh govt issues guidelines for pumped storage projects

The Madhya Pradesh government has announced new guidelines for implementing pumped storage projects (PSPs) under its renewable energy policy. These guidelines come with incentives and will be in effect for 10 years. The initiative aligns with the state’s 2022 renewable energy policy.

MP announces PSP guidelines, incentives

The Office of the Commissioner is the nodal agency for PSP projects, responsible for allocating project sites to central and state public sector undertakings (PSUs), government authorities, the state project development authority, and private developers.

The government has outlined four ways to implement PSP projects. The first mode is allocation to government entities, where PSP sites can be allotted directly to central and state public undertakings and government authorities without competitive bidding. The Madhya Pradesh Power Management Company (MPPMCL) will have the right of first refusal for up to 100% of the project capacity.

The second mode involves allocation to developers, where the State Project Development Authority (SPDA) will allocate PSP sites through competitive bidding. MPPMCL won’t have the right of first refusal for these projects.

The third mode is for DISCOMs and public organizations. Developers will be selected through competitive bidding. Projects may use a tolling tariff model or a solar park. Government land will be available at a discounted rate of up to 35%, reverting to the government after 25 to 40 years. SPDA must form a special purpose vehicle (SPV) with a minimum shareholding of ₹100,000 (~$1,148.64), transferred to the successful bidder. Government land will be allotted in phases, with developers required to provide bank guarantees at various stages.

The fourth mode allows developers to self-identify potential off-stream sites. An online system will be available for developers to apply for site allocation. Priority will be given based on project capacity, operational assets, and net worth. MPPMCL will have the right of first refusal for up to 50% of project capacity.

The phased allocation process doesn’t apply to non-government lands. For projects spanning multiple states, the right of first refusal is halved. SPDA may conduct a bidding process for power procurement from the PSP energy storage facility, requiring a bid process management fee of ₹100,000 (~$1,148.64)/MW.

Mode III PSPs get incentives

Projects under Mode III can receive financial support from the central and state governments if MPPMCL agrees to purchase all the generated power. PSP projects are also eligible for incentives under the state’s renewable energy policy. No electricity duty will be charged on power used to charge PSPs for 10 years, but it will apply to final electricity consumption. No energy development cess will be levied for 10 years. Up to 65% of stamp duty will be reimbursed.

A 50% waiver on wheeling charges will apply for five years. Developers will receive an exemption of up to 20% on registration and facilitation fees. If a developer constructs a combined PSP and an energy input project, incentives will apply only to the PSP component.

Developers must pay charges for project registration, facilitation, and rehabilitation and resettlement. Projects under Modes I, II, and III must be completed within seven years, with a one-year extension for delays caused by environmental and forest clearance issues. Projects under Mode IV must be completed within four years.

Recently, Madhya Pradesh’s New and Renewable Energy Department introduced the Madhya Pradesh Renewable Energy Policy 2025. The policy aims for 50% of the state’s annual power consumption to come from renewable sources by 2030.

Greenko's 1920 MW PSP advances

The Greenko Group's 1920 MW pumped storage project in Khimla village, Neemuch district, revolutionized the region in 2024, bringing significant benefits to Neemuch, Mandsaur, and surrounding areas. With an estimated cost of Rs 11,470 crore, the project is advancing rapidly. The foundation stone was laid on October 4, 2023, and Chief Minister Dr. Mohan Yadav has recognized it as a milestone achievement for Madhya Pradesh. The Gandhi Sagar Pump Storage Project (PSP), with a storage capacity of 1920 MW / 10,326 MWh, is the largest of its kind in the country.

The project includes the Gandhi Sagar Lower Reservoir (already existing) and the Upper Reservoir, which is under construction. The scheme plans to reuse 1.24 TMC of Gandhi Sagar Reservoir water by recirculating it between the two reservoirs. The upper reservoir will store water pumped from the lower reservoir and use it for power generation. The project, requiring around 402.50 hectares of land, is expected to be completed within 3.5 years. The project will connect to a 400/220 KV PGCIL substation at Neemuch for power transmission.

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