February 2026 marks the consolidation phase of India's regulatory transformation.

With the Union Budget 2026-27 setting a record ₹12.2 lakh crore capital expenditure allocation, the EMID sectors have entered an execution-intensive phase characterized by digital integration, trust-based regulatory frameworks, and accelerated indigenization. The Ministry of Mines launched the 2nd Tranche of Exploration Licence auctions on February 12, 2026, targeting critical minerals including Rare Earth Elements, Zinc, Diamond, Copper and Platinum Group Elements. Simultaneously, the Ministry of Power released the Draft National Electricity Policy 2026, signaling a fundamental shift toward market-driven renewable energy integration and distribution reform. The Supreme Court constituted a nine-judge Constitution Bench to reconsider the definition of "industry" under the Industrial Disputes Act - a landmark review that will reshape labor law applicability across state functions and sovereign activities. This month's developments underscore a clear strategic direction: regulatory modernization through digital platforms, enhanced private sector participation, and litigation-proofed compliance frameworks.

Macro View - The Digital Integration of Indian Compliance

February 2026 is characterized by the institutional deployment of trust-based, digitally-enabled regulatory systems across the EMID value chain.

The Union Budget 2026-27 announced the rollout of the Customs Integrated System (CIS), a unified digital platform designed to replace fragmented customs processes with a single, scalable interface operational within two years. This transition from officer-centric approvals to warehouse operator-centric systems featuring self-declarations and risk-based audits reflects a broader governmental philosophy: minimize discretionary intervention while maximizing algorithmic compliance monitoring. The Draft National Electricity Policy 2026 embodies this shift by introducing flexibility for distribution companies (discoms) without mandating numerical renewable energy targets - prioritizing outcome-based regulation over prescriptive mandates.

For legal departments, this regulatory recalibration demands proactive compliance architecture. The traditional model of reactive regulatory engagement is being displaced by real-time digital compliance mechanisms. Firms operating across customs, power procurement, and mining must now audit their internal systems for compatibility with portal-based, self-assessment frameworks that presume accuracy and penalize post-facto discrepancies.

Mining and Exploration: Deepening Mineral Security

The Ministry of Mines' February 12, 2026 launch of the 2nd Tranche of Exploration Licence (EL) auctions represents the operationalization of India's critical mineral security strategy.

Building on the success of the 1st Tranche (13 EL blocks launched March 13, 2025), the 2nd Tranche targets deep-seated and critical minerals through a structured incentive framework under the National Mineral Exploration Trust (NMET) scheme, which provides partial reimbursement of eligible exploration expenditure. The event also unveiled the Next Generation Digital Portal of the Geological Survey of India (GSI), a cloud-enabled platform integrating AI/ML-based tools with the National Geoscience Data Repository (NGDR) for enhanced data-driven decision-making in mineral exploration.

Offshore Mining Enforcement: On February 4, 2026, the Ministry of Mines notified the Offshore Areas Mineral (Prevention of Illegal Mining and Transportation) Rules, 2026, introducing maximum 30-year concessions (down from indefinite terms) and mandatory water permits before mining operations.

Tighter Auction Rules: India is considering amendments to mining auction rules to penalize developers who delay seeking clearances on auctioned blocks - a measure designed to eliminate speculative bidding and ensure timely project execution .

Key Legal Implication: The 24 minerals now listed under Part D of the MMDR Act grant the Central Government exclusive authority over auctioning mining leases, with royalties accruing to the Centre rather than states. This constitutional rebalancing centralizes mineral security decision-making and requires legal teams to navigate dual compliance frameworks: central auction rules and state-level environmental clearances.

Energy Sector: Market-Driven Transition and Nuclear Liberalization

The Draft National Electricity Policy (NEP) 2026, released on January 20, 2026, seeks to fundamentally reorient India's power sector toward renewable energy integration, market-based procurement, and discom flexibility.

Core Reforms:

Discom Flexibility: The Draft NEP 2026 does not mandate numerical renewable energy targets but introduces flexibility for discoms to procure power through competitive mechanisms, signaling a shift from command-and-control regulation to outcome-based frameworks.

Renewable Energy Integration: The policy prioritizes grid modernization to accommodate variable renewable energy sources and aims to increase per capita electricity consumption while maintaining tariff predictability for consumers.

Stakeholder Consultation: The Ministry of Power sought stakeholder comments on the Draft NEP 2026 by February 19, 2026, indicating imminent policy finalization.

Nuclear Sector Developments: The SHANTI Act, 2025, continues to enable private sector participation in nuclear power generation, with customs duties on nuclear power equipment imports lifted under Union Budget 2026-27 to facilitate technology access.

Litigation Risk: Kerala's Electricity Minister raised concerns on February 24, 2026, that certain proposals in the Draft NEP 2026 could adversely impact state-specific power procurement models - highlighting potential federalism disputes over discom autonomy versus central policy mandates.

AP Green Energy Open Access Reform: On February 19, 2026, the Andhra Pradesh Electricity Regulatory Commission (APERC) issued a Draft Second Amendment to its Green Energy Open Access Regulations, 2024, introducing a landmark framework for Renewable Hybrid Energy Projects. The amendment explicitly permits non-colocated hybrid projects, defining them as electricity generation from combined renewable sources connected at the same or different interconnection points, provided one resource constitutes at least 25% of the other's capacity and achieves a minimum 40% Capacity Utilization Factor (CUF). Critically, the regulation allows individual sources of a hybrid project to be connected "anywhere in the State" subject to technical feasibility, while treating the entire project as a single generating unit for regulatory purposes. The amendment restructures wheeling charges by exempting Distribution/Wheeling charges when injection and drawal occur at the same voltage level irrespective of DISCOM boundaries, though charges apply when hybrid components connect at different voltage levels. This flexible framework removes the restrictive single-interconnection-point requirement, signaling a broader regional trend toward facilitating enhanced participation in Green Energy Open Access through simplified metering and energy accounting for hybrid renewable systems.

Defense and Manufacturing: ISM 2.0 and Procurement Reforms

India's defense and semiconductor manufacturing sectors received substantial policy momentum in February 2026, driven by the announcement of India Semiconductor Mission (ISM) 2.0 and continued implementation of the Defence Procurement Manual (DPM) 2025.

India Semiconductor Mission 2.0: Announced in Union Budget 2026-27, ISM 2.0 focuses on producing semiconductor equipment and materials indigenously, designing full-stack Indian semiconductor intellectual property (IP), and establishing industry-led research and training centers. With a budget allocation of ₹1,000 crore for FY 2026-27 and an overall outlay increase to ₹8,000 crore (nearly doubling from ISM 1.0), the mission emphasizes ecosystem development beyond fabrication plants.

Defense Budget Increase: India's fiscal year 2027 defense budget increases overall defense spending by more than 15%, with capital expenditure on roads, ports, and high-speed railways increasing 9% to a record USD 133.1 billion.

DPM 2025 Implementation: The Defence Procurement Manual 2025, effective November 1, 2025, continues to govern revenue procurement with industry-friendly provisions including lowered liquidated damages (capped at 0.1% per week for indigenization projects) and guaranteed orders for indigenous products for up to five years.

Infrastructure: Record Capex and Digital Right of Way

Union Budget 2026-27 allocated ₹12.2 lakh crore for infrastructure, a 9% increase from FY 2025-26, positioning infrastructure development as the core of India's economic strategy. This encompasses roads, ports, railways, and maritime infrastructure - with the maritime sector emerging as a critical pillar in India's journey toward becoming a top-five global shipbuilding nation by 2047 under the Maritime Amrit Kaal Vision.

Key Infrastructure Initiatives:

Infrastructure Risk Guarantee Fund: A new fund offering partial credit guarantees to lenders aims to attract private developers and bond investors by absorbing construction-phase risks.

Freight Corridor Expansion: A dedicated freight corridor connecting Surat to Dankuni and 20 new national waterways will be operationalized over the next five years.

Telecommunications Integration: The Telecommunications (Right of Way) Rules, 2024, introduce "Deemed Permission" under Rules 7(6) and 9(6) - if public entities fail to respond within mandated timelines, the portal automatically generates system-deemed approval for fiber and tower deployment.

Maritime and Ports Modernization: India's maritime sector witnessed significant policy momentum in February 2026, aligned with the Maritime Amrit Kaal Vision 2047 targeting India among the world's top five shipbuilding nations by 2045 and increasing port cargo handling capacity to 10,000 MTPA. Minister of State for Ports, Shipping and Waterways Shantanu Thakur, addressing the CII EXIM Conference 2026 in Kolkata on February 26, 2026, emphasized that nearly 95% of India's trade by volume and 70% by value flows through ports, positioning the maritime sector as a strategic enabler rather than merely a transport channel.

Shipbuilding Financial Reforms: In January 2026, the Ministry of Ports, Shipping and Waterways notified modified guidelines for the Shipbuilding Financial Assistance Scheme (SBFAS), expanding eligibility to chemical tankers and refining indemnity mechanisms. The Maritime Development Fund, announced in Union Budget 2026-27 with a ₹25,000 crore corpus (government holding 49% stake), channels equity and debt for vessel acquisitions, greenfield projects, and interest subvention - aiming to raise the share of Indian-flagged ships in global cargo from approximately 4.11% to 20% by 2047.

Digital Port Integration: India is advancing digital transformation across ports and logistics, with AI-based berth allocation and maritime single-window software targeted for rollout by 2026. Systems including e-Samudra (online vessel registry) and the Online Dredging Monitoring System (Sagar Samriddhi) are already operational at major ports, while the Sagar Manthan platform and SAGAR-SETU mobile app provide stakeholders with real-time data on vessels, cargo, finance, and regulatory compliance.

International Collaboration: Japan's Mitsui O.S.K. Lines has expressed interest in partnering with Indian companies to build tankers domestically, reflecting India's modernization of maritime laws to allow foreign participation in shipbuilding, ports and shipyards - targeting a reduction in freight outgoings to foreign firms by at least one-third by 2047.

Judicial Developments

Supreme Court Reconsiders "Industry" Definition

On February 16, 2026, the Supreme Court announced that a nine-judge Constitution Bench will convene on March 17-18, 2026, to reconsider the scope and definition of "industry" under Section 2(j) of the Industrial Disputes Act, 1947.

Legal Context: Section 2(j) defines "industry" as "any business, trade, undertaking, manufacture or calling of employers, and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen".

Questions Before the Bench:

Impact for EMID Sectors: This review could fundamentally alter labour law applicability for public sector undertakings (PSUs), government-owned defense manufacturers, state-run mining entities, and infrastructure corporations. If the Court expands the definition of "industry," it may subject state-controlled entities to stricter labour dispute resolution mechanisms, collective bargaining obligations, and unionization rights.

Timeline: Parties have been directed to update written submissions by February 28, 2026.

Supreme Court Upholds Liquidated Damages in Solar Project Delays

On January 30, 2026, in M/s Saisudhir Energy Limited vs. NTPC Vidyut Vyapar Nigam Limited (2026 INSC 103), the Supreme Court issued a watershed ruling reinforcing strict enforcement of liquidated damages in public utility renewable energy projects under the Jawaharlal Nehru National Solar Mission (JNNSM). The case arose from a 20 MW solar PPA executed on January 24, 2012, where the developer failed to meet the February 26, 2013 commissioning deadline-commissioning 10 MW after a two-month delay and the remaining 10 MW after a five-month delay. A split arbitral award granted only ₹1.2 crores in liquidated damages instead of the ₹49.92 crores stipulated in the PPA. The Delhi High Court's Single Judge modified this to 50% (₹27.06 crores), which the Division Bench further reduced to ₹20.70 crores.

The Supreme Court restored the Single Judge's order, holding that in public utility projects promoting green energy, delay itself constitutes loss (environmental degradation, deprivation of social objectives) without requiring proof of actual financial loss. Relying on Construction and Design Services vs. DDA, the Court ruled that the burden shifts to the defaulting party to prove no loss was caused-a burden the developer failed to discharge. The Court affirmed that Section 34 courts possess limited power to modify arbitral awards under the Gayatri Balasamy doctrine to prevent "extra rounds of arbitration," but held that Division Benches under Section 37 cannot substitute their own calculations if the Single Judge's view was "plausible" and not arbitrary. This ruling establishes a formidable precedent against diluting pre-estimated damages in renewable infrastructure delays.

CERC Clarifies Jurisdictional Boundaries: Regulatory Adjudication vs. Arbitration

In MB Power (Madhya Pradesh) Limited vs. PTC India Limited (CERC order dated January 17, 2026, in Petition No. 71/MP/2023), the Commission rejected a generator's attempt to refer Change in Law and Force Majeure disputes to arbitration, reinforcing that disputes with tariff implications fall exclusively within CERC's regulatory jurisdiction regardless of how parties frame their pleadings. MB Power, owner of a 1200 MW thermal project, sought discharge from a 50 MW PPA with PTC India (supplying Torrent Power) on grounds of Force Majeure (coal shortage due to CIL circulars) and Change in Law. The petitioner invoked APTEL's DVC judgement (Appeal No. 309 of 2019) arguing the dispute concerned PPA validity/termination-a non-tariff matter requiring arbitration-while respondents contended the core issues were tariff disputes within CERC's exclusive jurisdiction.

Relying on the DVC precedent, CERC reiterated the critical distinction: disputes having direct or indirect bearing on tariff, including Change in Law, delayed completion, and Force Majeure invocation, fall solely under Section 79(1) regulatory jurisdiction; only disputes regarding termination or breach without tariff impact are referable to arbitration. The Commission analyzed the petition's prayers and found they specifically sought declarations that CCEA decisions and Coal India circulars constituted Change in Law and Force Majeure events affecting tariff-quintessentially regulatory issues. Even the claim regarding PPA non-conformity with MoP Guidelines was held to concern regulatory deviation examination rather than contract validity simpliciter. This decision prevents forum shopping by clarifying that artificially labeling regulatory disputes as "contract termination" cannot strip the Commission of jurisdiction when underlying causes affect regulated tariff structure.

Protecting RE Generators from Unjust Enrichment During Regulatory Delays

In M/s JK Minerals vs. Madhya Pradesh Electricity Regulatory Commission (APTEL order dated January 19, 2026, in Appeal No. 375 of 2019), the Tribunal held that Discoms cannot retain the benefit of power injected by renewable generators during wrongful denial of Long-Term Open Access (LTOA) without paying compensation, applying the doctrine of unjust enrichment and the maxim actus curiae neminem gravabit (act of court harms none). The appellant, operating a 1 MW solar plant in Shajapur, was denied LTOA despite seeking no additional contract demand, with the nodal agency citing system congestion. During the denial period, the generator injected power based on a "free of cost" undertaking letter from the holding company dated September 14, 2016, pending LTOA grant.

MPERC's initial LTOA rejection (September 15, 2017) was set aside by APTEL on remand (March 19, 2019). The Commission subsequently granted LTOA effective May 11, 2018, but in its August 16, 2019 order, retrospectively acknowledged LTOA should have been granted earlier while denying compensation for power injected from August 22, 2016 to May 10, 2018, relying on the "free of cost" undertaking. APTEL rejected this reasoning, distinguishing cases where generators gave voluntary undertakings to avail fiscal benefits from situations where undertakings were extracted under regulatory compulsion. The Tribunal ruled that had MPERC correctly granted LTOA initially, the generator would have earned revenue from September 15, 2017; the generator cannot suffer due to the Commission's error. Consequently, APTEL directed the Discom to pay compensation at the Average Power Purchase Cost (APPC) rate for energy injected from September 15, 2017 to May 10, 2018, plus carrying costs at SBI PLR + 2%, ensuring complete restitution including time value of money. This precedent establishes that when generators lawfully inject power and Discoms consume it without demur during regulatory approval pendency, a quasi-contractual liability to pay arises under Section 70 of the Contract Act, regardless of formal PPA absence.

CERC's Power to Grant Interim Relief in Emergency Power Directions

In Gujarat Urja Vikas Nigam Limited vs. CERC (Supreme Court order dated January 16, 2026, in Civil Appeal No. 15195/2025), the Court upheld CERC's authority to grant interim financial relief under Section 94(2) in proceedings to offset financial impact under Section 11(2) of the Electricity Act. The case involved the Ministry of Power's 2023 Directions requiring imported coal-based plants, including Tata Power, to operate at full capacity during energy crises. While a Ministry-appointed Committee set a provisional benchmark Energy Charge Rate (ECR), TPCL claimed this was insufficient to cover actual imported coal costs. CERC granted interim relief allowing recovery of 50% of the difference between claimed and benchmark ECR.

The Supreme Court, affirming APTEL's decision, held that CERC possesses "extremely wide" power under Section 94(2) to grant interim relief in Section 11(2) proceedings, ensuring generators need not await final orders to mitigate financial impact of coercive government directions. While the Court identified mathematical errors in CERC's computation (CFR vs. FOB shipping cost treatment), it declined to set aside the order because the effective price granted was actually lower than the procurers' own internal calculations. The Court imposed strict safeguards requiring unconditional bank guarantees for interim amounts and undertakings to pay carrying costs if the main petition is eventually dismissed, while directing CERC to adjudicate the substantive dispute within six months. This precedent balances national energy security imperatives with generator viability and procurer protection.

Regulatory Arbitrage and Market Evolution: The Coupling Mandate

The Appellate Tribunal for Electricity (APTEL) dismissed the Indian Energy Exchange’s (IEX) appeal against the Central Electricity Regulatory Commission’s (CERC) directions on market coupling. The ruling is a significant jurisdictional precedent, characterizing the CERC’s actions as a "preparatory" regulation-making exercise. Under Regulation 39 of the Power Market Regulations, 2021, coupling can only be operationalized after separate, formal regulations are notified; thus, the appeal was deemed "premature."

NHPC Limited vs. HCC Arbitration Award

The dispute centers on the civil works construction of the Kishanganga Hydroelectric (HE) Project, a major initiative managed by NHPC Limited, a Government of India Navratna enterprise. On February 21, 2026, an Arbitral Tribunal pronounced a significant award in favor of the contractor, Hindustan Construction Company (HCC). The project, which is a critical component of India’s hydroelectric infrastructure, became the subject of extensive litigation due to costs incurred during its execution phase.

Award: The tribunal has directed NHPC to pay:

While this ruling favors HCC, the legal proceedings are not fully concluded; NHPC’s counter-claims of ₹738.67 crore remain pending, with arguments scheduled to commence soon.

Questions Before the Arbitrator: The tribunal adjudicated on a wide array of claims raised by HCC, primarily focused on project scope and legislative impacts:

Impact for EMID Sectors: This case serves as a major cautionary note for Engineering, Procurement, and Construction (EPC) developers. It validates that "Changes in Legislation" and "Unscoped Work" are legitimate grounds for substantial recovery, but also highlights the danger of having Bank Guarantees encashed during active disputes.

ESG and Carbon Markets: February 2026 Compliance Readiness

In early February 2026, the Government of India officially notified the Carbon Credit Trading Scheme (CCTS), marking a key milestone in the operationalization of the Indian Carbon Market (ICM). The programme covers emissions generated between April 2025 and March 2026, with verification interviews for participating entities already underway as of February 2026. Approximately 490 industrial units across seven key sectors have been issued greenhouse gas emission targets through official notifications completed in October 2025 and January 2026. The market regulator confirmed at a conference in early February that trading of first carbon credit certificates in the compliance market is expected to happen in October 2026. Under this compliance-based market mechanism, entities that emit fewer greenhouse gases than their allocated target will earn carbon credits, which can be traded or sold on a dedicated platform once operational.

ESG Disclosure Transformation: On February 18, 2026, regulatory observers noted that India's corporate sector is entering a new regulatory era, as environmental, social and governance (ESG) norms shift from voluntary disclosures to enforceable standards, driven by the shift to a low-carbon economy and heightened transparency requirements. The top 250 listed entities must now disclose ESG performance across their value chains, extending responsibility beyond internal operations. To reduce administrative strain and streamline the transition, SEBI is allowing companies to focus on key partners accounting for 75 per cent of total purchases or sales by value, with a de minimis exemption for those contributing less than 2 per cent.

Once all nine energy-intensive sectors are notified, around 740 entities will have legally binding emission intensity targets for the compliance years 2025-26 and 2026-27. The CCTS compliance mechanism is set to initially cover over 700 million tonnes of CO2e, placing India among the world's largest emissions trading systems. For energy, minerals, and infrastructure sectors, this creates overlapping compliance obligations: mining projects involving aluminium and steel must navigate mineral licensing under MMDR amendments alongside carbon intensity compliance, while listed infrastructure developers face mandatory BRSR Core reporting with value chain ESG disclosures becoming mandatory from FY 2025-26.

This publication contains general information and is not a substitute for specific legal advice. No client-lawyer relationship is created by its receipt.

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