Guidelines Issued on Competitive Bidding for Waste-to-Energy Projects

The Ministry of Power (MoP) has, on November 13, 2025, notified the Guidelines for Tariff-Based Competitive Bidding for Procurement of Power from Grid-Connected Waste-to-Energy (WtE) Projects, signalling a major transition in the manner in which municipal solid waste–based power assets are structured, procured and financed in India. Although the WtE sector has been positioned as a key pillar of urban sustainability, past project performance has been hampered by fragmented procurement practices, unclear risk allocation and limited bankability. The newly issued guidelines, framed under Section 63 of the Electricity Act, 2003, introduce a nationally uniform procurement and contracting framework for States, Urban Local Bodies (ULBs) and distribution licensees, thereby integrating the WtE segment more firmly within the PPP and project-finance ecosystem.

With cities across India generating nearly 70 million tonnes of municipal solid waste each year, landfill capacities and public health systems remain under severe stress. The new framework aims to convert this challenge into a bankable PPP model by linking long-term power offtake with transparent and competitive procurement. By mandating tariff-based competitive bidding under Section 63 and discouraging negotiated tariffs, the MoP has strengthened regulatory certainty and improved investor confidence across the project lifecycle.

Key Features of the New Guidelines

1. The Guidelines apply to all future WtE projects procured through tariff-based competitive bidding and retain a technology-neutral approach, permitting any MoHUA-approved and commercially proven MSW-derived fuel technology. ULBs continue to be responsible for waste segregation and pre-processing. Projects already awarded or commissioned are excluded; however, ongoing bid processes with deadlines more than 90 days after notification must comply.
2. Roles and responsibilities are clearly delineated among the Implementing Agency, WtE developer, procurer and intermediary procurer, addressing implementation gaps that previously delayed WtE projects.
3. Before issuing the bid, the implementing agency is required to prepare a pre-feasibility assessment covering waste availability, calorific value and projected power generation. It must also ensure land allocation, access to an engineered sanitary landfill, obtain statutory and environmental clearances, and finalise the tipping fee and VGF framework. Further, the agency must update or develop the model Concession Agreement (CA), Land Lease Agreement (LLA) and Power Purchase Agreement (PPA), and the Request for Selection (RfS) must clearly set out project milestones and reporting obligations.
4. Commercial Bid evaluation will be based on either levelised tariff with pre-defined VGF or VGF requirement against a fixed tariff, ensuring transparency and economic efficiency.
5. A single-stage, two-part e-bidding process is mandated, with bid evaluation carried out by a three-member committee, including at least one member having expertise in financial/bid evaluation.
6. Successful bidders must execute a 20-year PPA coterminous with the CA, commencing from the Scheduled Commencement of Supply (SCSD) or any duly approved extension. The PPA will also include provisions relating to penalties for delays in SCSD, payment security mechanisms as per the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, standard force majeure provisions, event of default safeguards and change in law adjustments in line with the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021.
7. The Guidelines introduce a strictly time-bound procurement schedule. A minimum period of 45 days must be provided between issuance of the RfS and the final bid submission date. Within 30 days from the date of issuance of the RfS, bid clarifications, bidder conferences and opening of the online data room are required to be completed, while technical and financial evaluation (including any e-reverse auction) must be concluded within 60 days of issuance of the RfS. The Letter of Award is required to be issued within 90 days, and the CA, LLA and PPA must be executed within 180 days of issuance of the RfS, subject to tariff adoption. Financial closure is to be achieved within 180 days from acceptance of the LoA.
8. The security package comprises EMD of at least 1% and a performance guarantee of at least 3% of the project cost, with flexibility to submit bank guarantees or payment-on-order instruments issued by the Indian Renewable Energy Development Agency (IREDA), Power Finance Corporation Limited (PFC) and REC Limited (formerly Rural Electrification Corporation Limited).
9. To curb speculative bidding, the successful bidder must retain 51% equity shareholding in the SPV until one year after SCSD, while lenders continue to hold substitution rights.

Overall, the guidelines set out a structured and commercially grounded framework that can make WtE a credible part of India’s urban and clean-energy ecosystem. The success will hinge on robust implementation ensuring payment discipline, and securing land and clearances will ultimately determine the success of this regime. If these elements align, the policy has the potential to convert India’s escalating waste challenge into a sustainable and financially viable source of power for the future.