What APTEL’s Ruling on Market Coupling Means for India’s Power Market Design
– By Mayuri Singh and Nishant Saxena
India’s electricity markets are now central to capital allocation across generation, storage and trading. Liquidity depth in the Day-Ahead Market, robustness of price discovery, and predictability of regulatory design influence financing assumptions across the value chains. In such an environment, structural reform carries financial consequence well before it takes binding form.
Market coupling sits within this transition. Envisaged under Regulation 39 of the Power Market Regulations, 2021, it contemplates aggregating bids across exchanges to determine a uniform market clearing price through a designated operator. The stated objectives include improved surplus optimisation, better transmission utilisation and potential support for renewable integration.
On 23rd July 2025 (Suo Motu Petition 8/SM/2025), the Central Electricity Regulatory Commission (CERC) issued directions setting out preparatory steps toward phased implementation. These included operational readiness measures involving exchanges and grid institutions. The Indian Energy Exchange (IEX) challenged those directions before the Appellate Tribunal for Electricity (APTEL), arguing that the Commission had effectively advanced coupling without first notifying separate regulations as contemplated under Regulation 39.
APTEL dismissed the appeal.
The significance of that dismissal lies less in market coupling itself and more in what it clarifies about regulatory sequencing, legal thresholds and market confidence.
Why APTEL Dismissed the Appeal
The Tribunal’s reasoning turns on a foundational principle that appellate intervention requires demonstrable legal injury.
CERC’s July proceeding was characterised as an administrative order (despite CERC’s corrigendum on 8th Jan 2026 reclassifying it as “directions”) that initiated preparatory steps. It was not a regulation framed under Section 178 of the Electricity Act. It did not invoke the statutory previous publication process. It did not amend licence conditions or impose binding trading obligations.
On that basis, APTEL held that although the proceeding qualified as an “order” capable of appeal in principle, the appellant was not yet a “person aggrieved.” No enforceable right had been curtailed. No new statutory burden had been imposed. The legal architecture of the market remained unchanged.
The Tribunal was equally clear that this does not foreclose future challenge. Once draft coupling regulations are issued through the prescribed consultation process and final regulations are notified, their validity may be tested in judicial review before the appropriate High Court.
In effect, the ruling reinforces institutional sequencing. Policy direction may precede regulation. Judicial scrutiny attaches when regulation alters legal rights or obligations.
Market Design in a Capital-Intensive System
Electricity markets operate within a financing ecosystem that prices regulatory risk explicitly. Exchange liquidity influences price discovery. Price discovery influences dispatch revenues. Revenue visibility shapes lender comfort. Lender comfort shapes cost of capital. Cost of capital influences the pace and scale of renewable and storage deployment.
Structural changes to market design therefore reverberate through valuation models and boardroom risk assessments.
India’s power exchanges have grown significantly in scale and participation over the past decade. The Day-Ahead Market constitutes a substantial share of exchange turnover, and its design features are closely watched by generators, traders, discoms and financial stakeholders. Proposals that affect clearing mechanisms or liquidity concentration are evaluated not only on efficiency grounds but also for their implications on competitive structure and revenue predictability.
APTEL’s restraint preserves a period of regulatory stability while the design question matures through consultation. That stability has its own economic value. It signals that preparatory regulatory exploration does not automatically translate into binding structural change.
Consultation as the Real Arena
The centre of gravity now shifts to the Regulation 39 pathway. Draft regulations, stakeholder submissions and reasoned hearings will determine the architecture of any eventual coupling framework.
This stage will require disciplined engagement across several dimensions:
- Empirical benchmarks for measuring surplus enhancement in Indian conditions
- Transitional safeguards to protect liquidity depth
- Design features that preserve competition and innovation incentives
- Operational protocols that align with grid reliability objectives
The statutory consultation process under Section 178 provides the formal mechanism for this engagement. The quality of evidence placed on record during this phase will shape both the substance of final regulations and their resilience to subsequent judicial scrutiny.
This is the moment to move from positional resistance to data-backed participation for power exchanges and market participants.
Communication as Governance Discipline
In capital-intensive infrastructure sectors, communication operates as an element of governance discipline.
Regulatory institutions influence market behaviour through sequencing, clarity and framing. Distinguishing clearly between a preparatory administrative direction and a binding regulation reduces unnecessary volatility. Investors and lenders calibrate risk assessments based on perceived regulatory trajectory. Precision in institutional communication narrows uncertainty bands and moderates risk premiums.
For incumbent exchanges, engagement strategy during consultation carries reputational weight. Submissions grounded in transparent analysis of liquidity impacts, system efficiency and competitive dynamics are more persuasive than reactive challenge. Positioning reform concerns within broader system objectives enhances credibility.
For the CERC, consistency in process strengthens confidence in reform pathways. A predictable shift from staff paper to draft regulation to final notification signals maturity in market governance. That maturity supports long-horizon capital deployment.
Strategic communication in this context is not promotional. It is structural. It shapes how reform is absorbed by markets whose financing assumptions extend decades into the future.
A Template for Future Reform
India’s power sector is entering a period marked by storage integration, hybrid procurement models, deeper renewable penetration and evolving market instruments. Structural adjustments will remain a feature of this evolution.
The APTEL ruling offers three enduring lessons in this context:
→ Legal remedies attach to crystallised regulatory change.
→ Statutory process provides the forum for shaping design before implementation.
→ Institutional clarity in sequencing strengthens market confidence during transition.
→ Market coupling remains under active consideration. The consultation process will determine its contours. Judicial review, if invoked, will test its legality after formal notification.
In transition-era electricity markets, the credibility of reform depends as much on disciplined process and clear communication as on economic design.
The consultation table now becomes the primary site of influence.
How stakeholders engage at this stage will shape not only the future of market coupling, but the broader trajectory of India’s evolving power market architecture.
Also read: Uttar Pradesh’s Discom Reforms Challenge Conventional Privatization Assumptions
When Electricity Policy Becomes UPSI: Inside SEBI’s IEX Case and CERC’s Parallel Probe
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