Policy reforms and increased confidence of lenders have made the power transmission sector in India attractive for the private sector. As announced by Power Minister Piyush Goyal last month, the sector added transmission lines at the pace of 69 km a day in the past two years as compared with 46 km a day between 2012 and 2014.
The improved pace of project implementation and stable realisation from investment have transformed this sector from what was earlier described as a stressed sector to a new promising investment destination.
Manish Mohnot, Managing Director, Kalpataru Power Transmission Limited, said, "We have seen very good traction in the last year in domestic transmission business mainly from PGCIL and SEBs. The domestic transmission business has grown by more than 50 per cent in the last year."
Industry players credit the recent policy reforms in discoms and the push for renewable energy as the drivers for fast implementation of transmission lines during the Twelfth Plan (2012-2017) at 21,912 circuit km (CKM) as on May 31, 2016. Since the seventh five-year Plan, this is the highest net addition of CKM under any five year plan.
"We are expecting the same trend to continue for next 2-3 years at least due to various government initiatives and policies, including UDAY scheme, green transmission line corridors and promotion of private players through IPCTC projects," added Mohnot.
Industry experts say India's transmission sector has key fundamentals such as strong regulatory push, expanded market base with push for renewable sector, increasing private participation and attractive risk return profiles.
"For the last three years, we have been working towards making one country - one grid to provide inter-regional connectivty to all four regions. The Central Transmission Utility (CTU) has provided much relief by being a pooling agency and this has reduced the burden of transmission companies to a great extent. In the last one year, the returns on investment for the projects have improved and the funding for projects is easily available now," said L N Agrawal, Senior Executive Vice President, Essel Infraprojects Limited.
The average project size for transmission projects ranges between Rs. 1,000 crore and Rs. 5,000 crore. Essel Infra has two projects worth Rs. 1,500 crore under implementation and three at the initial planning stage. "We will be setting up one of the longest transmission projects of 1,000 km connecting the western and southern regions," added Agrawal.
"Even as the market opportunity for private sector in transmission business has improved, strict qualifying requirements in recent tenders have ensured that the most competent bidders are in the fray. This has improved credibility and attractiveness for private sector with core competency in transmission and will ensure that bids are not aggressive and projects are completed in time," said Kameswara Rao, Partner - Grid, PwC.
Rao added that the growth prospects for transmission are driven by greater emphasis on grid reliability, decentralisation of generation due to growing share of renewable energy, and spread of new urban and rural load centres arising from urbanisation and rural electrification.
The Power Minister has repeatedly expressed his resolve to focus on expanding the transmission to the southern region "in the next 1-2 years and effectively make it three times what we had inherited."
India is also playing a key role in the cross-border transmission with neighbouring countries. "For instance, the transit agreement with Bangladesh allows India to tap hydro and gas power sources in the North-East as well as reduce transmission costs while supplying to the load centres," added Rao.
Source- The Hindu