Private Players Stay Away From Power Transmission Business

Despite a very open market and all sorts of provisions to ensure a level playing field, the Indian transmission scene has not progressed as it was expected to. Though the Electricity Act, 2003 has changed some things for private players in the power sector, yet, the transmission side is highly skewed towards the public sector. It is interesting to note in this context that PSU major Power Grid Corporation owns more than 90 per cent of the country’s transmission assets.

We, at DSIJ, tried to probe into the reasons for such a subdued response of private players in transmission. While it is commonly understood that the reason why private players have distanced themselves from transmission is the requirement of licenses, it seems that the real itch is the profitability levels. Explains Rita Acharya, Joint Secretary, Ministry of Power, “The margins in transmission are low, and private sector players don’t want to enter the transmission business. The margins are not as huge as those in power generation”.

Acharya said that the margins in transmission are not likely to increase beyond a point, which caps the profitability. Private sector players’ reluctance to enter this field has meant that the government has to take up the activity through Power Grid Corporation. “Companies are keen to have generation capacity as the margins are astounding, whereas in spite of huge requirement of transmission infrastructure, private sector don’t come either individually or via the PPP model”, she added.

This becomes particularly relevant as the Indian power sector is lagging behind sorely on the transmission front, with transmission facilities to the southern states in bad shape. In the total additions made during the 11th Plan period, around 50 per cent of contribution in generation came from private players, while in transmission, private sector contribution was nominal. For the 12th Plan period too, the government is looking to add 80000 MW of additional capacity and 30000 MW of inter-regional capacities, and requires 120000 circuit km of transmission lines.

PGCIL is planning to invest Rs 1.10 lakh crore in 12th Plan for transmission capacity expansion. Even accounting for this, a lot of capacity needs to come from the private players.

The private sector players are unanimous and relentless in their demands for various incentives in the power sector and also for a level playing field in transmission in terms of relaxation in selection criteria and a shorter bidding process. Officials in the ministry are of the opinion that during the last 4-5 years, the government has bowed down to most of the demands of private sector players, and yet, they are inclined to enter into only those areas which offer sureshot returns like those from generation. This is surely a cause for concern, as the power sector is not likely to make much-needed strides forward without a robust transmission network.