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Reducing cycle time for PPP projects is the key challenge

Venugopal Pillai ,  Monday, October 03, 2011, 17:09 Hrs  [IST]

Lalit Jalan— Lalit Jalan, CEO & Whole-time Director, Reliance Infrastructure Ltd

Part of the Anil Dhirubhai Ambani Group, Reliance Infrastructure Ltd is India's leading utility company with a turnover of over Rs15,000 crore. It has a formidable presence across major highgrowth sectors like highways, power, metro rail, airports and speciality real estate. In the power sector, RInfra spans all aspects—generation, transmission, distribution, EPC contracting and trading. RInfra needs special mention for its deep involvement in PPP-based infrastructure projects. Lalit Jalan, who oversees all the business verticals of RInfra, speaks at length about its power transmission business. An interview by Venugopal Pillai.

Reliance Infrastructure became India's first developer of a power transmission line awarded on tariff-based competitive bidding when it clinched WRSSS-II. Tell us more on this project and its current status.
WRSSS-II (Western Region System Strengthening Scheme) was split into four packages of which two packages (A & D) are being developed by Power Grid Corporation of India, while Packages B and C were offered on tariff-based competitive bidding, which were awarded to RInfra. This is the country's first ever 100 per cent privately owned transmission project that executes inter-state lines, which are elements of the National Grid.

WRSSS-II projects, being developed by RInfra on BOO basis, consist of nine 400kV transmission lines, spanning 1,500 km across Maharashtra, Gujarat and Madhya Pradesh. RInfra has already commissioned three lines, which have started earning revenues. Another two lines are expected to be commissioned shortly, which would add to the revenues. The remaining four lines are scheduled for commissioning in FY2012.

How are the two ultra mega power transmission projects awarded to Reliance Infrastructure (North Karanpura and Talcher-II) progressing? Could you elaborate on RInfra invoking the "force majeure" clause on the two projects?
The special purpose vehicles (SPV) created for these projects have already been transferred to RInfra in April/May 2010 and financial closure was also achieved in September/October 2010. However, enabling clearance to start project construction under Section 164 of Electricity Act 2003 is yet to be received from the Government of India. As a result of this delay, which is beyond our control, we have sent out notices invoking "force majeure" clause to the beneficiaries and subsequently approached the CERC for redressal, which is currently under consideration of the Hon'ble Commission

India has plans to award a series of mega power transmission projects using the tariff-based competitive bidding route on the Case-2 model. What challenges do you see in this endeavour?
The Case-2 model is specific to power generation projects and not to the transmission projects, which will be awarded on a tariffbased competitive bidding. Government of India has notified five transmission projects recently and two of these are already in qualification stage. The key challenge will be to reduce the cycle time from NIT to handover of SPV to the successful bidder, which is currently taking a little bit longer.

How do you gauge India's success rate so far and how do you see the PPP model unfold in the power transmission sector in the years to come?
Till date eight projects in the Central Sector and six projects in state sector by Rajasthan, UP and Haryana have been awarded under tariff-based competitive bidding. Experimentation that started with the WRSSS-II projects has been successful with commissioning of first three lines by RInfra. From now on all inter-state transmission projects but for a few exclusions shall be awarded on tariff-based competitive bidding, open for private participation. The state sector may follow suit in some time, meanwhile more states can be expected on the lines of Rajasthan, Haryana and UP to opt for PPP model.

Untitled - 28Thanks to the "Open Access" policy, progressive states are now allowing consumers to import power from other states. Do you see this, coupled with upcoming IPP plants, spurring the demand for inter-state transmission lines?
This has already been the driving force for the planning at Central and State sector. At current levels of ten percent of the power generated in the country being traded, lots of such transactions have been held up due to network congestion. This clearly indicates increased need for faster augmentation of inter-state and intrastate transmission network across the country.

Power transmission projects are by nature very land-centric and can be bogged down by right of way and forest clearance issues. How can India reduce procedural delay and hasten the development of bulk power transmission corridors?
Transmission lines traverse through long distances and have to cross agricultural lands, forests and industrial zones. While implementing transmission lines, managing right of way is most critical to complete to project in time. Many times issues like handling law & order situation, obtaining clearances from multiple governmental agencies pose as challenges. In the present structure, private developer is compelled to handle all these risks that beyond its direct control. For facilitation quick implementation of transmission projects, it is essential to have a government agency to facilitate managing right of way as is done by NHAI in roads sector

Reliance Infrastructure had formed a joint venture with PGCIL for setting up evacuation infrastructure for the Koldam and Parbati projects. What is your view on PGCIL's philosophy in forming minority JVs with private developers for power transmission infrastructure?
Our JV, named Parbati Koldam Transmission Company Ltd, has already achieved financial closure and obtained other critical clearances. Construction contracts have been awarded and construction has commenced. These JVs were formed under the earlier guidelines where tariff fixation was possible through costplus route. Under the current policy framework, any such JV formed by PGCIL shall have to participate in tariff-based competitive bidding for the projects put up for the same.

What is your general take on India's attempts to build UHVAC 1,200kV power transmission infrastructure?
A 1,200kV UHVAC transmission line is expected to carry about 6,000 to 8,000 mw of power. This is about 10 times that of a 400kV line, which is the current backbone of Indian inter-state transmission network. This technology has been under development and testing.

States like Maharashtra, Gujarat and Haryana are building interstate power transmission infrastructure through private participation. What is RInfra's plan of bidding for intra-state lines?
RInfra has incorporated Reliance Power Transmission Ltd as a subsidiary focused on such business opportunities. Based on the size and other factors, we have been participating and are open to participate in all models.

Untitled - 29Very briefly, how would you rate India's overall success in terms of private participation in power transmission? What has been India's biggest achievement at the policy level?
The government of India has taken a long time since enactment of Electricity Act 2003 in evolving the enabling policy, regulatory and contractual framework for private participation in transmission business. In the Central sector, private participation has been successfully experimented whereas the state sector is trying to catch up. Major policy shift in central sector has been to move from a monopolistic model of transmission development to a total competitive model. Similar move in state sector is expected.

Can you suggest three policy recommendations to boost private sector participation in India's power transmission sector?
I would say:
  • Statutory and regulatory clearances essential to start project construction should be made available prior to handing over of the project to private developer
  • Facilitation of obtaining RoW and Forest clearance by Government
  • Commodity Risk during construction period above a certain threshold be made pass through
Please summarize RInfra's growth plans in the power transmission sector for the next 5-7 years.
Future investment opportunity in transmission sector is currently estimated to be in excess of Rs200,000 crore. RInfra's growth plan is emanating from this investment opportunity. Presently RInfra has five transmission projects with an outlay of about Rs7,000 crore which the company is executing in full swing. In view of the ample opportunities available, the company would continue to participate in profitable opportunities in the sector.
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