Power Grid bids aggressively for key transmission projects

Power Grid Corporation of India (PGCIL) has again bid aggressively for the latest power transmission projects, discomfiting private bidders.

Last year, state-owned PGCIL had bid 40-70 per cent lower than the average for Unchahar Transmission Limited and for a project under the strengthening system for the northern grid. The recent auction for the Vindhayachal-V power transmission line also saw PGCIL bidding the lowest. Other bidders included Essel Infra, Sterlite Grid and Kalpataru Power Transmission.

Bidding for the Rs 6,000-crore Gadarwara A&B transmission line will open by the end of February, and industry insiders fear PGCIL will outbid everyone again. Already, of the 11 private companies which bought the request for proposal, only three— Adani Power, Essel Infra and Sterlite Grid—have bid. Two European developers — Isolux Corsan and Inabensa— pulled out before the technical bid.

The bids were called by Rural Electrification Corporation, a wholly-owned subsidiary of the ministry of power for the Gadarwara transmission project. The project would evacuate the power generated from the upcoming 1,600 megawatt (Mw) thermal power project of NTPC in Gadarwara, Madhya Pradesh. Bidders are supposed to give two technical and two financial bids each.

Power transmission was opened to the private sector in 2010 by awarding the western regional system’s strengthening to Reliance Infra and the east-north Interconnection line to Sterlite Energy. PGCIL, however, still has a 99 per cent market share.

PGCIL maintains its expertise, and market visibility bring it projects. “We get cheap credit and the image of a government-backed company helps us acquire land. This puts us in a better position than private companies,” said a senior executive with PGCIL, who did not wish to be named.

“At times, PGCIL gets projects on nomination and at other times, it bids so aggressively that it is difficult for us to grab any project. This is a blatant misuse by a monopoly,” said an executive with one of the private companies in the fray.

In December, a Rs 26,000-crore power transmission project set aside for competitive bidding was awarded to PGCIL on nomination. This is when the commissioning of at least 13 projects by PGCIL has been delayed. The Vemagiri-Khammam transmission line, which went to PGCIL, saw a petition by the company to defer its execution.

“There are several reasons for delays. Our bids cannot be questioned; competition is open and as a public sector undertaking, we have the additional task of keeping the cost low. The market balance needs to be maintained if the private sector is quoting high,” said the PGCIL executive.

“There has always been this view from the industry that PGCIL should separate its business to ensure it is not passing on costs of projects bagged through competitive bidding to projects awarded under the cost-plus mechanism,” said a senior executive with one of the private companies bidding against PGCIL.

Due to conflict of interest, the power sector has been asking for split of functions of PGCIL – one of that of as ‘Central Transmission Utility (CTU)’ and transmission licencee like other private transmission licencee. There are also recommendations in the Electricity Act 2014 that as a transmission company PGCIL should be on same grounds as private companies.