Upbeat power transmission sector will now have to read the fine print

Following the announcement of projects worth Rs 1 lakh crore, the upbeat power transmission sector will now have to look at the fine print. Of the first tranche of projects to strengthen power evacuation, a major chunk is with state-owned PowerGrid Corporation of India Limited (PGCIL).

According to senior PGCIL executives, the company has been given on a nomination basis approximately Rs 35,000 crore worth of the projects. Another Rs 40,000 crore is for the Green Corridors project - alternative transmission system for renewable energy. The intra-states lines would be built by the beneficiary states and inter-state by PGCIL - according to the plan designed by the company three years ago.

Around Rs 26,000 crore of transmission projects are put in the basket of 'tariff-based competitive bidding', for which private sector majors would compete along with PGCIL.

This could be a dampener for the private transmission project developers eyeing a larger share of projects. "The government needs to solve legacy issues in the power sector and invite fresh investment from the private sector. Augmenting the transmission network and building it competitively to ensure least tariff burden on end users should go hand-in-hand," said a senior power sector executive.

According to industry experts, tariff-based projects prove to be cheaper than projects awarded through cost-plus regime or under compressed time schedule to the PowerGrid.

Last week, the Cabinet Committee on Economic Affairs (CCEA) approved the creation of an intra-state transmission system in the states of Andhra Pradesh, Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra and Rajasthan at an estimated cost of Rs 8,548.68 crore under the Green Corridors project. The intra-state lines would be owned by the states and sub-tender to contractors for building it.

"A major hiccup in creating the transmission network for renewable energy is that intra-states lines are to be built by state agencies. Even though PGCIL is building inter-state lines, it's difficult to keep it in tandem with the states as they don't have any forecast of load or supply," said a senior PGCIL official.

While big-ticket projects are being announced, there is no planning for transmission alongside generation, according to the Central Electricity Regulatory Commission (CERC). The executives in CERC have been pursuing the states to come on board for a common transmission planning but to minimal avail. This leads to delayed projects lining up for tariff revision at CERC.

"The projects which are coming up now were supposed to evacuate the generation capacity three-four years ago. The congestion in the network is because transmission did not precede generation," said a CERC official, who did not wish to be named.

Last week, the Power Finance Corporation and the Rural Electrification Corporation bid out four major projects for evacuation of power from Chhattisgarh. Three were won by Adani Power by putting aggressive bids and one by Sterlite Grid.

"The southern grid is still reeling under demand-supply mismatch and the west region has no evacuation facility to sell its surplus power. There is no immediate short-term plan to resolve this," said a power market executive.

Eight more lines would come for bidding in the coming six months. Most of these stranded projects would start production in 12-18 months. As the delayed transmission schemes find ground, there is already a mismatch in the national grid.

According to senior power ministry officials, there could be a re-look at the distribution of projects as with the targets for renewable energy being five-fold now, even the transmission project size would be increased accordingly. Also, the trend of generation would also be decisive of the transmission. Business Standard reported last week that the government was preparing a 'Perspective Transmission Plan for 20 Years' to keep pace with the growing generation sector.