Powering The Economy Through Efficient Transmission

SOURCE : NEW18 NEWS

Last Updated:May 25, 2025, 15:23 IST

India’s power transmission sector will see Rs 10 lakh crore investment by 2032 to meet NEP goals.

Authored by GP Upadhyaya, IAS (Retd.), DG – EPTA and Dr Manvendra Deswal, DDG – EPTA: India’s power transmission sector is poised for significant growth with an estimated Rs 10 lakh crore ($120 billion) investment envisaged by 2032 to achieve the stated NEP (National Electricity Plan) goals. Transmission capacity is expected to increase fivefold in the next eight years itself with over 90% of projects expected to be awarded through TBCB (Tariff Based Competitive Bidding) instead of RTM (Regulated Tariff Mechanism) highlighting the importance of private sector. This ambitious expansion is fuelled by rising electricity demand, renewable energy integration and infrastructure modernization.

Private sector participation in India is not a recent phenomenon – in fact, Electricity Act, 2003 and Tariff Policy, 2006 (amended in 2016) laid down the legal framework to encourage private sector participation in the transmission sector. Besides, the Ministry of Power (MoP) issues periodic guidelines and amendments to Standard Bidding Documents (SBDs) to facilitate competition and attract private investment. An Empowered Committee oversees the identification and bidding process for interstate transmission (ISTS) projects, with several of them already awarded and under implementation via private Transmission Service Providers (TSPs).

Impediment

Despite all these policy initiatives, all the private players have together managed to contribute only about 8.5% of the total transmission lines in India till date, with the majority being developed by the Union (38%) and State governments (54%). The private sector’s share of transmission projects awarded through TBCB is about 37%, while Power Grid Corporation of India Ltd (PGCIL) dominates with 63%. Between FY 21-25 itself, PGCIL alone has won 64% of the total awarded projects, including those through the RTM (read nomination). This is primarily because only a few states are actively involving private players. Despite the 2021 advisory from the MoP, TBCB has still not been followed by many states and union territories, including the national capital. It defies logic as unlike the RTM mode where developer is paid tariff on the actual cost of the project, TBCB incentivizes cost optimization, leading to significantly reduced tariff. It has been calculated that TBCB tariffs are 30-40% lower than RTM 2 tariff, eventually leading to lower cost for the end consumer. This translates to several thousand crores of savings over the life cycle of these projects, with end-consumer as the real beneficiary. Besides this, some of the other proven benefits of TBCB include optimized usage of state funds, faster project execution, superior asset quality and implementation of modern technology, among others. Poor fiscal and institutional health of numerous State DISCOMs that will be exposed in the impending summer season has not motivated the state governments to provide a saving grace to millions of consumers in these times of steep inflation. Even states that have a stated TBCB guidelines, look for avenues to circumvent the same, primarily by ad-hoc revision of the pre-set TBCB threshold.

Access to cheap and reliable power is critical to economic growth of the country and hence it is imperative that transmission projects at state level are also awarded through competitive bidding. Efficient project and financial management practices of private sector can certainly ensure swifter implementation of projects and access to cheap reliable and affordable power. Indian private sector has come of age and is currently building power lines across the length and breadth of a diverse country of the size of a subcontinent.

Imminence

Ignoring the private sector and awarding the projects to one dominant entity has its own disadvantages. Prima facie, it leads to concentration risk – with ownership of about 95% of the transmission assets and control of 85% of the inter-regional transmission capacity, any operational disruption or financial stress in that entity could have widespread impact on the national grid stability and power supply.

Further, limited private sector participation would eventually lead to reduced competitive pressure and incentive to innovate, reduce costs or improve service quality. In the long run, this is bound to lead to inefficiencies and slower adoption of new technologies in transmission infrastructure.

Any delays, cost overruns or technical failures in the dominant entity projects could delay critical grid expansion and modernization efforts, impacting the integration of renewable energy and overall grid reliability.

A natural corollary of all these factors is that this entity’s dominant position can crowd out private sector players, hindering the sectoral growth and the government’s goal of attracting private investment for capacity expansion and modernization.

thwarting the private sector, it is also noteworthy that though this entity’s transmission charges are collected centrally via the Central Transmission Utility (CTU), the company is exposed to credit risks from state distribution utilities, many of which have weak financial profiles. If multiple utilities default or delay the payments, company’s cash flows and ability to maintain infrastructure could be severely strained.

Improvisation

To enable wider private sector participation and reduce the concentration of projects with a single entity, each developer should be allowed to bid for new projects at any given point of time only if their current market share by (capex) w.r.t the projects under construction is less than 50%. This cap is proposed keeping in mind factors like economies of scale, expected competition and need for market development. Capping already has precedence in the country’s Telecom, Renewable Energy and Aviation verticals.

Another crucial intervention would be Asset Monetization Plan (AMP) for 2025-30 that is expected to plough back INR 10 lakh crore in new projects. As India heads towards becoming the third largest economy, this issue needs to be pursued proactively, especially with the state utilities, most of whom aren’t doing too well. It presents a unique opportunity to the latter to receive one-time massive capital infusion while still retaining the asset ownership. With multiple successfully operating InvITs in the vertical, there is enough traction in the market. By releasing a tentative timeline and quantum in pipeline, Government would not only attract credible investors, but would also ensure resource efficiency and optimization.

Last, but certainly not the least, state governments should set up their act in addressing the operational and institutional issues being increasingly faced by private sectors and the dominant entity alike. These include land acquisition & RoW issues, supply chain constraints – especially CRGO steel & HVDC transformers and faster project clearances, among others. Setting up of war rooms at CM’s level to monitor critical infrastructure projects (including transmission) on the lines of PM Modi’s 4 ‘Pragati’ portal could be a game-changer. Further, allowing Insurance Surety Bonds in place of Bank Gurantees (like in many other infrastructure projects), a huge amount of capital shall be freed, thus reducing the cost of it and ultimately benefitting the end consumer.

With robust policy support, technological advancements and sustained private sector participation, Indian transmission sector is poised to become the backbone of a resilient, efficient and future-ready large economy.

It is authored by Authored by GP Upadhyaya, IAS (Retd.), DG – EPTA and Dr Manvendra Deswal, DDG – EPTA

The views expressed in this article are those of the author and do not represent the stand of this publication.

First Published:

May 25, 2025, 15:00 IST