Power Grid Corporation of IndiaNSE 0.40 % Limited (PGCIL) chairman IS Jha blamed private companies for power system transmission woes and rubbished allegations of monopolistic practices levelled against the state-run company by its competitors. In an interview to ET, he said that 80% of transmission projects awarded to private sector were delayed. Edited excerpts:
How would you respond to private companies’ allegation that PGCIL purposefully mismanages transmission planning so that the lines get delayed and are given to PGCIL on nomination basis?
The transmission planning process is collaborative and transparent. There is a well-established procedure of planning of transmission system, under which transmission planning is carried out by the Central Electricity Act (CEA) in association with CTU, POSOCO and other stakeholders. The technical approval of the transmission scheme is given by the Standing Committee on Power System Planning, which is convened by the CEA and is comprised of stakeholders including the CEA, CTU and POSOCO. Once the system is approved, the empowered committee convened by the CEA recommends the modalities, and based on this recommendation the power ministry decides the implementation route (through bidding or otherwise).
The transmission system planning is done on need basis, assessed taking into consideration the applications, inputs provided by state transmission utilities, operational feedback report from POSOCO and other inputs from various other stakeholders. When transmission system is planned, the required date and the timeframe for implementation are clearly mentioned. As on date, no LTA application case is pending with the CTU for planning consideration. The allegation that the CTU purposefully delays the transmission planning is absolutely incorrect. In the past three years, all the major transmission projects have been awarded only through TBCB (tariff based competitive bidding) route.
Private companies allege government bias and say a proposal to give large green energy corridor projects to PGCIL may render them non-competitive….
We are not aware of any such proposal to give any large green energy corridor project to Power Grid. This allegation is completely unfounded. In fact, the transmission systems are yet to be evolved for the new renewable energy additions. For that purpose, I understand that a committee comprising of members from renewable energy ministry, Solar Energy Corp of India, CEA and CTU has been constituted to study and evolve new transmission system based on the potential locations for renewable energy.
Have projects awarded to PGCIL been completed on time? Private companies say a lot of your projects are late, defeating the purpose of allotment on nomination basis.
This allegation is also completely baseless and devoid of any facts. Power Grid has commissioned (projects worth) more than Rs 90,000 crore in the last three financial years. Our important projects such as Green Energy Corridor-I are on schedule and being commissioned matching with generation. Similarly, for the HVDC Raigarh-Pugalur project, as on date, the progress so far is six to 12 months ahead of schedule.
Let us compare the performance in TBCB projects. Till date, 14 TBCB projects have been commissioned – three projects by Power Grid and 11 by different private companies. All our three projects were completed on time. While only two out of 11 projects by private companies have come up on time. The balance nine projects, all by private companies, have had delayed commissioning. It translates into a delay in more than 80% of the projects which are awarded to private players. Apart from the delays, one grave area of concern is that some of the projects have not taken off even years after the award. We have seen four such cases awarded to private companies during the competitive bidding regime. In two of the cases, DGEN and North Karanpura, the generation has come up but the evacuation system to be developed by the private companies under TBCB has not even taken off. It is a matter of serious concern with the potential to cause huge economic losses and impact the entire power sector value chain.
There may have been genuine reasons for the delays but to issue a blanket statement that Power Grid projects get delayed and private players come up on time is not correct and misleading.
Private players also accuse PGCIL of profiteering, saying your tariff-to-cost ratio for cost-plus projects is 17.5% but comes down to 13.5% if there is competition.
This statement is again misleading. In cost-plus, tariffs are higher in the first year, decreasing gradually every year and falling considerably from 13th year onwards due to higher depreciation rates allowed for principal repayment of loans for initial 12 years, while in the TBCB projects, the levelised tariff depends on the discounting factor. All quoted tariffs for each year are reduced to a single number using this discount rate.
For the sake of comparison, if we consider a hypothetical transmission line project, the 1st year tariff in cost-plus regime comes out approximately 16-17% of total project cost. For the same cost-plus project, if we compute the levelised tariff, it comes to around 12-13% of project cost. If we further leverage and reduce equity from 30% to 20%, the levelised tariff in cost-plus project shall further be less than 12%.
From the above calculations, it is amply clear that 1st year tariff of 17.5% in cost-plus is in no way superior to the 13% levelised tariff in TBCB regime. Over and above this, the cost-plus projects have to deal with regulatory uncertainty of returns.
If you go through the details of tariffs quoted for TBCB projects, you can notice that in a few of the projects wherein Power Grid could not participate, the tariff quoted is much higher than what it would have been in cost-plus basis. In fact, Power Grid’s participation in the TBCB route has ensured that the prices obtained are reasonable and the nation gets the infrastructureNSE 0.00 % at the right cost.