Govt to buy PowerGrid arm for Rs 35 cr

Move to create independent grid manager; small levy on transmission charges to fund operations

The road to an independent grid manager is now clear with the government deciding to take over Power System Operation Corporation Ltd (Posoco), a wholly-owned subsidiary of the PowerGrid Corporation of India.

In a meeting last week, an inter-ministerial group approved buying out PowerGrid’s equity in Posoco. A senior government official told Business Standard that the matter would now be put up to the Cabinet for approval. “The government will be buying the equity at book value of around Rs 35 crore and it will be a non-profit company,” he said.

Power transmission utilities will be required to charge a small levy on every unit of power, which would go towards meeting the working expenses of Posoco.  The company, which has five Regional Load Despatch Centres (RLDCs) and the National Load Despatch Centre (NLDC), was set up in 2010 as a subsidiary of PowerGrid on the recommendations of a committee under G B Pradhan, then additional secretary in the power ministry and now the chairman of Central Electricity Regulatory Commission (CERC).

The panel had suggested independent and sustainable revenue streams for the grid operator through separation of commercial interests from load management functions. According to experts, liberalised power markets require the system operator to be independent entities so as to ensure impartial system operation.

“In India, PGCIL (PowerGrid) has been playing the role of a central transmission utility, owner of transmission assets and the system operator. Since now we have significant number of private transmission utilities and, going forward, even more is expected – it is important that POSOCO is made an independent entity,” said Debasish Mishra, senior director, Deloitte.

He added that typically, system operators are government-owned entities or owned by all sector players to avoid any influence over them. Apart from PowerGrid, two large private firms – Reliance Power Transmission and Vedanta Group’s Sterlite Technologies – are also executing independent transmission projects awarded by the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).

The idea behind hiving off Posoco with its load dispatch function from PowerGrid was mooted in the aftermath of the national grid collapse of July 2012.  By granting full autonomy to Posoco, the government hopes to insulate the grid operator from pressures from other players in the transmission sector which is fast opening to private participation. It would be required to ensure grid discipline, discourage overdrawal of power by the states and impose a fine on defaulters. For this, it would be governed by the guidelines of CERC.