In the matter of the CERC (Conduct of Business) and (Terms and Condition of Tariff) for truing up and determination of transmission tariff for Baharampur (POWERGRID) – Bheramara (BANGLADESH) in the Eastern Region – EQ

Summary:

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### Detailed Analysis of the CERC Order

#### 1. Background and Project Overview
– **Petitioner:** Power Grid Corporation of India Limited (PGCIL), the Central Transmission Utility.
– **Respondent:** Bangladesh Power Development Board (BPDB), the sole beneficiary of the transmission asset.
– **Asset in Question:** 400kV D/C (02nd) Baharampur (POWERGRID) – Bheramara (BANGLADESH) transmission line (Indian portion) and associated line bays at Baharampur sub-station.
– **Commercial Operation Date (COD):** July 27, 2020.
– **Project Significance:** This is the second cross-border link between India and Bangladesh, enabling the upgrade of the HVDC station at Bheramara from 500 MW to 1000 MW capacity, thereby doubling power import capability for Bangladesh.

#### 2. Key Approvals and Project Timeline
– **Investment Approval (IA):** Approved by PGCIL’s Board of Directors on September 19, 2017, at an estimated cost of ₹198.49 Crore (including IDC of ₹11.48 Crore) at April 2017 price levels.
– **12th India-Bangladesh Joint Steering Committee (JSC) Meeting (December 11, 2016):** Decision taken to construct the 2nd line.
– **Ministry of Power (MoP) Approval (March 1, 2017):** Granted approval for implementation through Regulated Tariff Mechanism.
– **Previous Tariff Order:** The Commission had earlier determined tariff for the period from COD to March 31, 2024, vide Order dated April 12, 2023, in Petition No. 7/TT/2022.

#### 3. Truing-up of Tariff for 2019-24 Period

The Commission conducted a detailed prudence check and trued-up the capital cost and annual fixed charges for the 2019-24 tariff period.

**A. Capital Cost Adjustments as on COD**

| Particulars | Amount (₹ in lakh) |
| :— | :— |
| Capital Cost claimed as per Auditor’s Certificate | 15,779.35 |
| **Less:** IDC disallowed due to time over-run not condoned | (20.59) |
| **Less:** Undischarged IDC as on COD | (0.76) |
| **Less:** IEDC disallowed due to time over-run not condoned | (47.03) |
| **Less:** Excess Initial Spares disallowed | (218.24) |
| **Capital Cost allowed as on COD** | **15,492.73** |

– **Foreign Exchange Rate Variation (FERV):** The Petitioner claimed a revised COD cost due to an inadvertent error in the exchange rate used in the previous petition. The Commission accepted the revised cost based on the Auditor’s Certificate.
– **Initial Spares:** Excess initial spares of ₹218.24 lakh (primarily for the transmission line component) were disallowed as they exceeded the normative ceiling of 1.0% for transmission lines under the 2014-19 Tariff Regulations.

**B. Additional Capital Expenditure (ACE) 2019-24**
– ACE of **₹1,344.92 lakh** was allowed for the period, primarily for payments to contractors (M/s Associated Power Structures etc.).
– This resulted in a closing capital cost as on March 31, 2024, of **₹16,837.65 lakh**.

**C. Trued-up Annual Fixed Charges (AFC) – 2019-24**

The AFC approved after truing-up for the 2019-24 period is as follows (₹ in lakh):

| Particulars | 2020-21 (pro rata 248 days) | 2021-22 | 2022-23 | 2023-24 |
| :— | :— | :— | :— | :— |
| Depreciation | 567.90 | 863.00 | 890.33 | 898.66 |
| Interest on Loan | 121.81 | 191.14 | 231.14 | 321.27 |
| Return on Equity | 597.41 | 908.25 | 937.42 | 946.30 |
| O&M Expenses | 99.68 | 151.86 | 157.18 | 162.67 |
| Interest on Working Capital | 22.16 | 31.50 | 32.97 | 39.50 |
| **Total AFC** | **1,408.95** | **2,145.75** | **2,249.04** | **2,368.39** |

– **Return on Equity (RoE):** Calculated at a base rate of 15.50%, grossed up with an effective tax rate of 17.472% (MAT rate), resulting in a pre-tax RoE of 18.782%.
– **Interest on Loan:** Calculated based on actual weighted average interest rates, which varied from 1.68% to 3.575% during the period.
– **O&M Expenses:** Allowed strictly as per the norms specified in Regulation 35(3) of the 2019 Tariff Regulations.

#### 4. Determination of Tariff for 2024-29 Period

The Commission determined the transmission tariff for the upcoming control period based on the 2024 Tariff Regulations.

**A. Opening Capital Cost and ACE**
– **Opening Capital Cost as on 1.4.2024:** ₹16,837.65 lakh (as trued-up).
– **Projected ACE (2024-29):** ₹24.16 lakh allowed for undischarged liabilities under Regulation 25(1)(d).
– **Closing Capital Cost as on 31.3.2029:** ₹16,861.81 lakh.

**B. Debt-Equity Ratio**
– Maintained at **70:30** as per Regulation 18 of the 2024 Tariff Regulations.
– Debt: ₹11,803.27 lakh (70%)
– Equity: ₹5,058.54 lakh (30%)

**C. Approved Annual Fixed Charges (AFC) – 2024-29**

The AFC allowed for the 2024-29 tariff period is as follows (₹ in lakh):

| Particulars | 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 |
| :— | :— | :— | :— | :— | :— |
| Depreciation | 919.85 | 920.49 | 920.30 | 905.53 | 888.05 |
| Interest on Loan | 295.12 | 249.00 | 209.42 | 181.24 | 160.76 |
| Return on Equity | 949.41 | 950.10 | 950.10 | 950.10 | 950.10 |
| O&M Expenses | 134.73 | 141.78 | 149.17 | 157.01 | 165.27 |
| Interest on Working Capital | 38.03 | 37.67 | 37.39 | 37.00 | 36.88 |
| **Total AFC** | **2,337.15** | **2,299.05** | **2,266.39** | **2,230.88** | **2,201.06** |

– **Declining Interest Cost:** Interest on Loan shows a consistent decline from ₹295.12 lakh in 2024-25 to ₹160.76 lakh in 2028-29, reflecting the gradual repayment of the normative loan.
– **Stable RoE:** Return on Equity remains stable around ₹950 lakh per annum throughout the period.
– **O&M Escalation:** O&M expenses increase gradually from ₹134.73 lakh to ₹165.27 lakh over the five-year period, in line with the prescribed norms.

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