This paper is developed in collaboration with The Energy and Resources Institute (TERI), is aimed at proposing the improvement of clean development mechanism (CDM) in the power generation sector based on the experience through the implementation of capacity building while describing the recent information and identifying issues and challenges in India's power generation sector through IGES CDM capacity-building programme. Thermal power generation is an important area to focus on in terms of GHG emission reductions in India. The CDM has, to some extent, contributed to the development of energy efficiency and fuel-switch projects in India's power generation sector. However, there are also certain types of projects which have not been or will not be able to fully utilise CDM, such as improvement of energy efficiency at existing power plants and construction and operation of new supercritical coal power plants. CDM energy-efficiency project development at existing power plants could, however, be enhanced by clarification of which technologies are eligible, but implementation of CDM for supercritical coal power plants is limited as expected emission reductions will decrease with further implementation of such projects. Modification of methodologies could overcome some of the specific difficulties in CDM project development in India's power generation sector, and, where project development is limited under CDM, a support scheme to provide incentives—financial in particular—should be put in place by the government.