Power transmission projects: Bid value plunges from Rs 21,200 cr to Rs 9,800 cr
Despite the policy support to private-sector investments in power transmission, the projects awarded under the competitive bidding route, which are available to private companies as well, more than halved to Rs 9,800 crore in FY17 from Rs 21,200 crore in the previous year. The sluggishness is mainly because several state governments continue to follow the conventional way of awarding projects to state-run PGCIL on a nomination basis. Besides, the private firms also find it difficult to access funds as lenders are not enthusiastic about the sector; on its part, public-sector PFC is yet to start funding transmission projects in the private sector.
The investments are lagging even as the government’s 24×7-power-for-all scheme requires Rs 12 lakh crore to build and upgrade the country’s transmission and distribution systems.
Currently, only 6.7% of the transmission network is operated by private players, a stark contrast from the power generation sector where private firms contribute about 44% of the power generation capacity.
In a letter addressed to PK Pujari, who was then the secretary at the ministry of power, the Federation of Indian Chamber of Commerce and Industry (FICCI) had said that meetings of the empowered committee, which approves projects for tariff based competitive bidding, have lately been very infrequent. States are not showing signs of encouragement in taking the bidding route and are awarding transmission projects on a nomination basis, the letter, reviewed by FE, added.
The amended national tariff policy of 2011 mandated tariff based competitive bidding (TBCB) for all transmission projects after 2013. However, the revised policy in 2016 introduced a few conditions— such as projects of “strategic importance” and catering to “urgent situation”— for exemption of inter-state transmission projects from TBCB. Total capital investment in the sector since April 2011 has been Rs 3.4 lakh crore, while only 37 transmission projects worth Rs 58,500 crore have been awarded through TBCB in the period.
Companies who have been awarded such projects till date include Adani Power, Essel Infraprojects, Sterlite Power, Kalpataru Power Transmission, Larsen & Toubro, Reliance Power and Power Grid Corporation of India Ltd (PGCIL) – the central transmission utility. The two projects awarded to Reliance in FY10, worth around Rs 4,100 crore as per industry estimates, are yet to be implemented. State-backed transmission behemoth PGCIL has won ten projects, worth around Rs 18,000 crore, under the bidding route. One of the PGCIL projects was scrapped by the Central Electricity Regulatory Commission in April 2015.
Rajasthan has bid out around 12 projects through the TBCB route, becoming the state with the highest number of such projects. Uttar Pradesh, which has completed two transmission bids, has also recently floated a bid of worth Rs 4,000 crore, noted Mohit Kumar, research analyst at IDFC Securities. “We estimate an additional Rs 30,000 crore worth of projects to be awarded via auction in the next 12-18 months, thus, creating a decent opportunity for transmission companies,” Kumar added.
In the last meeting of the aforementioned empowered committee held on July 26, 2016, a senior expert of the Central Electricity Authority had pointed out that the bid process coordinators of these transmission projects were facing problems in getting transmission supply agreements (TSA) signed by the the customers, specifically for the transmission projects related to generation projects, in turn, delaying TBCB projects. Bidding for TBCB projects are coordinated by subsidiaries of Rural Electrification Corporation and Power Finance Corporation (PFC).
PFC is now planning to fund transmission projects awarded to private developers through competitive bidding. To compete with the PGCIL, the private developers look for loans of 5-7-years, Rajeev Sharma, managing director of PFC, said last month. To that end, PFC is designing its lending schemes to make them more relevant for transmission projects.
As many as 11 high capacity power transmission corridors have been finalised to meet bulk power evacuation requirement of various independent power producers mainly coming up in Chhattisgarh, Odisha, Madhya Pradesh, Sikkim, Jharkhand, Tamil Nadu and Andhra Pradesh. However, the government has lowered the target set for transmission line additions in FY18 by 1.2% to 23,086 ckm. 26,300 ckm were added in FY17.