India needs a green grid fund in Union Budget to build transmission networks, says Sterlite Power MD on Budget expectations – EQ
In Short : The Managing Director of Sterlite Power has suggested the need for a green grid fund in the Union Budget to support the development of transmission networks in India. This fund would be instrumental in building the necessary infrastructure for the transmission of renewable energy across the country.
In Detail : While transmission charges for renewable energy projects have been waived, infrastructure development costs persist, hindering the widespread adoption of renewable energy. Pratik Agarwal shares his expectations from Budget 2024.
While transmission charges for renewable energy projects have been waived, infrastructure development costs persist, hindering the widespread adoption of renewable energy.
Pratik Agarwal, MD, Sterlite Power, & Chairman, Serentica Renewables
Over the past decade, India has risen as a leader in climate action. As finance minister Nirmala Sitharaman gets ready to unveil the vote on account on February 1, all eyes will be on her to build on India’s relentless commitment to power up the nation with green energy.
The ambitious goal of setting up 500 GW of renewable energy capacity by 2030 will not only require an aggressive buildout of solar and wind power, but an equally robust and reformed transmission grid. This interim budget presents a crucial opportunity to fortify India’s clean energy transition.
Fund for green transmission
Transmission’s place in energy transition is well-established today. It is no longer an afterthought in India’s ambitious clean energy drive. Recognising this, a comprehensive roadmap has already been put in place that clearly outlines an investment requirement to the tune of Rs 2.44 lakh crore to integrate the massive renewable energy influx.
We are witnessing unprecedented investments in the Indian transmission sector. In 2023, the Central government alone proposed Rs 75,000 crore worth of projects for developers to build, own and develop. Most of these projects will cater to the 13 GW of renewable capacity added with an investment of Rs 74,000 crore.
A key policy catalyst has been the waiver of transmission charges for renewable energy projects, granting developers the flexibility to locate projects where resource potential reigns supreme. However, while transmission charges for renewable energy projects have been waived, infrastructure development costs persist. This burden currently falls on the already strapped state distribution companies, hindering the widespread adoption of renewable energy.
To break this logjam, the interim budget can create a green grid fund to pay for transmission projects being developed to evacuate renewable energy. Much like how taxpayers fund road construction, we have an opportunity here to socialise renewables-related transmission costs.
In 2010, the government created the National Clean Energy and Environment Fund (NCEEF) through a cess on domestically produced and imported coal. Over the years, till it was subsumed under GST in 2017, about Rs 8.64 lakh crore had been collected through coal cess.
The fund provided for initiatives like the Green India Mission, solar water heaters, and the establishment of 1200 KV national test stations.
A similar green grid fund will greatly promote transmission for renewables, significantly easing the burden on distribution companies, making green energy more competitive and accelerating its adoption. Free transmission would create a level playing field for renewables, boosting their integration and propelling India towards its net-zero emission target.
Mending the last mile
Over the years, numerous schemes have been launched to improve the financial health of distribution companies, yet their condition remains far from ideal. The Revamped Distribution Sector Scheme (RDSS), a Rs 3 lakh crore package, was the fifth bailout scheme from the Centre in the past two decades.
After meeting the qualification criteria, 38 distribution companies received funding approval to the tune of Rs 1.9 lakh crore. Despite these repeated bailouts, most distribution companies continue to incur huge losses annually.
The burgeoning debt on the balance sheet of state distribution companies – which has reached Rs 6 lakh crore at an all-India level – has significant ramifications for the economy. Any further reforms upstream (in generation) will not yield any benefit unless the last mile is fixed.
To revive the distribution companies, far more stringent implementation of the “carrot and stick” approach is crucial. The budget should provide for large fiscal incentives for distribution companies linked to key performance indicators like SAIDI (System Average Interruption Duration Index), SAIFI (System Average Frequency of Interruptions Index), and AT&C losses.
Distribution companies demonstrating improvement across these parameters should be rewarded with financial incentives. Conversely, those lagging should face consequences.
However, it is in the implementation of stronger disincentives that we need to focus. Barring distribution companies from trading on power exchanges or procuring from short-term markets or even disconnecting them from the interstate transmission system network could be effective measures.
Such disincentives have already proven to be successful in addressing payment dues, demonstrating their potential impact. With the implementation of the Electricity (LPS and Related Matters) Rules, 2022, a remarkable improvement has been seen in the recovery of outstanding dues of distribution companies to generating and transmission companies.
The total outstanding dues of states, which were at about Rs 1.4 lakh crore, have been reduced to Rs 69,957 crore with timely payment of 12 equal monthly instalments. Distribution companies are also paying their current dues on time to avoid regulations under the rule.
Similarly, a performance-based approach for key performance indicators would incentivise distribution companies to become more efficient and financially viable.
Investing in crucial areas within the power and renewable energy sectors is not just about economic progress, but also about strategic foresight. By allocating budgetary resources to these critical areas, we can not only maintain the momentum towards achieving our clean energy goals but also secure a brighter future for generations to come.
The time for action is now, and the upcoming interim budget presents a golden opportunity to translate aspirations into concrete steps towards a greener and more energy-secure future.
