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Central transmission utility Power Grid Corporation of India Ltd was
recently awarded two power transmission projects through the tariff based
competitive bidding route. With this, the CTU appears to have
come a full circle.
Till not very long ago, PGCIL was the de facto implementation agency for all
inter-regional power transmission lines. It was a "nominated champion" that
could implement projects using the traditional cost-plus method. Tariffs could
be determined by mutually-agreeable bulk power transmission agreements.
The advent of the private sector, and more importantly, the mandatory
requirement of all power purchases to be done using the tariff-based
competitive bidding route have changed the picture completely. PGCIL is now
as much a contender in a transmission line project as a new entrant is.
This new culture marks a clear shift in paradigm and reflects the maturing of
India's power sector. Tariff-based competitive bidding is a very welcome move
as it is the only instrument that could make power tariffs competitive and
indeed, lower. All said, the tariff-based bidding philosophy also has its share
of demerits. Conditions beyond the control of developers could render the
"winning tariffs" unviable. One has experienced this with some ultra mega
power projects where rising prices of imported coal have seriously upset the
project economics. Power transmission projects are also exposed to time and
cost overruns that could impair the techno-commercial viability of projects.
Even from a construction point of view, power transmission projects are very
susceptible to land-related issues, mainly securing right of way. Power
generation projects, on the other hand, have a finite geographical footprint
and are therefore less likely to encounter such shocks.
When it comes to experience, PGCIL is clearly the richest player in interregional
power transmission. One can expect the CTU to deploy all its
expertise towards timely implementation of its projects, and also without
significant cost overrun. Private sector players might have relatively limited
experience as of now, but they can certainly gain it over time. Though India
has world-class EPC contractors, owning and managing a power
transmission line is an endeavour very different from merely constructing a
line. Private players have the advantage of roping in foreign technical and
commercial partners, potentially bringing latest technology and practices to
India. No matter what the relative merits and demerits of the two ownership
forms are, power transmission in India represents a huge business
opportunity that can only enlarge with time.
India has had a legacy of inadequate investment in power transmission—a
phenomenon that looks to be corrected from the ongoing XII Plan onwards.
Private enterprise can potentially play a big role in various capacities and
help the power transmission sector notch up a "towering" performance in
the years ahead.
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