Transmission - Economics and

Finance

Anil Raawal
21st May 2015

Contents
Lots of Work in Pipeline
Lots of Positives The Trends
Lots of Positives Transmission as Infra
Business
The reality check
The Lag despite Enabling Framework
The Power and the Prayer
The Concerns
Key Risks
The Way Forward

Transmission Scenario

Lots of Work in Pipe Line

Historic Investment
Deficit

Source CARE
Research

o Despite Rs 4,50,000 Crs investment

planned in generation for 12th and
13th plan, the investments in the
transmission sector not adequate.
o For every Rupee invested in
generation, 50 % should be invested
in transmission.
o In India, this ratio stands at 30%.
o Investment deficit - Required more
than 0.5 times of the future
investments made in generation into
transmission.

Source -Metis

Additions during 12th Plan

o As per the latest estimates of MoP
90,000 ckm transmission lines and
1,54,000 MVA transformer capacity is
projected to be added in XIIth plan .

Transmission Scenario

Lots of Work in Pipe Line

th
12
12thPlan
Plan Targets
Targets- 1,10,000 ckm of Transmission lines and 270000 MVA of
1,10,000 ckm of Transmission lines and 270000 MVA of

transformation
transformationcapacity
capacityaddition
addition
th
12
12thPlan
Plan Capex
Capexestimates
estimates
Central
CentralSector
Sector
State
Sector
State Sector
Total
Total

125,000
125,000Cr
Cr
55,000
Cr
55,000 Cr
1,80,000
1,80,000Cr
Cr

Out of kitty Rs 25000 Cr for Private Participation

Out of kitty Rs 25000 Cr for Private Participation

(State sector opportunity yet to emerge )

th
13
13thPlan
Plan Capex
Capexestimates
estimates
PGCIL
PGCILand
andStates
States 130,000
130,000Cr
Cr
Private
1,10,000
PrivateSector
Sector
1,10,000Cr
Cr
Total
2,40,000
Total
2,40,000Cr
Cr

(Source: NEP for 12th Plan, CEA and Prospective plan, GoI )

Lots of Positives The Trends

Competitive Bidding Trends

o Sector is Maturing QRs were amended, No of players have settled to a reasonable number
with major players in keen contest.
o Trend line of Est IRR @ 12% indicates upward trending

Lots of Positives Transmission as Infra

Business
Competitive Bidding
-Approach

o Larger number of projects are being put for bidding

year on year with larger project Costs.
o Concept to Commissioning period has come down
o Has come down from about 60 months previously to about 50 months

o Exemption for State Sector from TBCB is over and

more projects from State Sector are expected
o Time period for Construction has been aligned with
the time period provided under Tariff Regulations
2014-19
o Early Commissioning is under Consideration by
MoP for recognising tariff
o Change in Approving Authorities for
o Section 164
o Powers now with CEA Chairperson, shall save time.

o Section 68
o Powers now with CEA Chairperson, shall save time.

o Selection of projects
o Powers now shifted to MoP as required under Gazette
Notification

Lots of Positives Transmission as Infra

Business
Amendment in EA Expanding Horizons

o Section 14 Amendment
The Appropriate Commission may, on an application made to it under section 15, grant a
licence to any person-(a) to transmit electricity as a transmission licensee; or
(b) to distribute electricity as a distribution licensee; or
---------------------------(c) to undertake trading in electricity as an electricity trader, or
(d) to supply electricity as a supply licensee.

PoC Mechanism

o National Electricity Policy mandates that the national tariff framework implemented should be
sensitive to distance, direction and related to quantum of power flow.
o Billing, Collection and Disbursement Agreement ensure a clearing mechanism for all licensees
Effective management of Collection Risk through power regulation.

Media Focus

o Honble Ministers statement of Rs 1 lac crores, transmission has come high on Media agenda
To invite private sector investment in the power transmission sector, the government is
likely to adopt reverse bidding for awarding projects. The new bid document, officials said,
would set a benchmark price below which the companies would need to bid. The move
comes in wake of the government's intention of awarding transmission projects worth Rs 1
lakh crore during the year. Power Finance Corporation (PFC) is in the process to award
around eight new transmission lines.
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The Reality Check

Transmission - the real bottleneck

o In recent times transmission has worked as major bottleneck, some facts o Millions of DG sets working, cumulative capacity of 90,000 MW, nearly equal to what was Indias total installed power
generation capacity just over a decade ago (March 2002) and about 36 per cent of the current installed generation capacity.
o DG capacity is growing at a rate of 5,000 MW to 8,000 MW every year. That is higher than the cumulative nuclear and solar
capacities being added year-on-year in the country.
o In 2012-13, domestic power exchanges Indian Energy Exchange and Power Exchange of India failed to consummate salespurchase deals worth Rs.1,350 Crores , amounting to 15% of total traded volume of power, due to transmission constraints.
o Resource rich states like Chhattisgarh are also unable to evacuate the excess power. With an expected power
generation capacity in excess of 30,000 MW by end of 12th plan, against the state's peak demand requirement of about
3,300 MW, currently there is only 7000 MW of transmission capacity available to evacuate power from the state. (ET)

o Despite more than 250 GW installed power, peak demand of 141 Gw, peak deficit exists of
about 9%, impacting 0.4% of GDP
o Transmission Constraint because of a Pocket of High Demand SR, N2, N3
o Transmission Constraint because of a Pocket of High Generation W3, NER
o CERC Congestion Report - June 2015o There are examples that power could be reached through National Grid into the State, but such transmission would be
handicapped because the State level transmission and/or sub-transmission system may not be able to absorb.
o NR import -average Short Term requirement - 1000 MW to 3500 MW, Power import 1000 to 2000 MW, No WR NR corridor
margin, ER NR margin 500 to 1500 MW thus perpetual shortage
o WR import - ER WR (W3) corridor on Short term is 0 MW around the year, no power flow from ER to WR, NR route already
under pressure.
o no corridor available in WR-SR and ER - SR route in advance basis on short term. Further, there is no corridor available under
MTOA till FY 2016 for import of power from NEW grid.

The Lag despite Enabling Framework

Numbers tell it
all............
It is also a fact that in the
architecture of electricity sector,
generation
is delicensed and, accordingly,
generation capacities have
come up
and will continue to come up
based on technical and
commercial
feasibilities of these projects.
Therefore, the contention that
massive
capacity additions, in a
delicensed regime, pose a
major challenge to
transmission system planning
and, therefore, this type of
mismatch is
inevitable, cannot be taken as
an acceptable argument. In a
situation
of power sector being starved
of generation capacity,
delicensing have
been a correct strategy and
transmission system planners
will have to
devise strategy to cope with
this CERC Congestion
Report June 2015

11th plan - Rs 1,40,000 Crs

11th plan - 67548 MW

Central

22%

23%

55%

12th plan - Rs 1,80,000 Crs

Private

12th plan (2 yrs) - 45516 MW

Central

19%

14%

68%
Source - APP

Private Investment is must to match the monstrous demands

State

State

Private

The Power and the Prayer

10

The Power and the Prayer

"I dont know how I am going to decide this case, but it appears from the paperwork, we have a bar owner who

believes in the power of prayer and we have an entire church and its devotees that does not."

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The Concerns
Project Selection

o Reconstitution of Empowered Committee-

Before
Member CERC
Member (PS) CEA
Member (E&C) CEA
Joint Sec (MoP)
Director (Proj) PGCIL

After
Member (PS) CEA
Member (E&C) CEA
Joint Sec (MoP)
Director (Proj) PGCIL
Advisor (Energy), NITI Ayog

Former Chairman, CEA

Former Chairman, CEA

Former Chief Sec, Mah

Ex-Member(PS), CEA

Director (Trans) MoP

Chief Eng (Plan & SP&PA), CEA

Secretary, CERC

Representation and confidence building for private parties to invest

expected
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more than Rs 1 lac Crores!!!

The Concerns
Enabling Framework

o Tariff Policy Exemptions proposed Leaves practically nothing which necessarily has to be
put under TBCB Policy without ends.
Before
First two Experimental works for 1200
kV HVDC
Works required to be done cater to an
urgent situration required under
compressed time schedule.
Intrastate transmission projects up to 6 th
Jan 2013

After
First two 1200 kV AC substation
Up-gradations of existing lines of
CTU/STU/PGCIL
Some more up-gradations of lines
Augmentation of existing/under
construction substations of
CTU/STU/PGCIL
Evacuation from Nuclear Power Plants
Projects under compressed time
schedule.
Projects where no bidders comes
forward.

State Sector

o Not opening, exemption period elapsed, Inner ring being too weak for evacuation

Resulting Scenario - 14 Projects for about Rs 38,000 Crs. (including HVDC

project) initially identified for TBCB have been shifted to Regulated Tariff
13 Committee
th Empowered
Mechanism recently. List available in 33 and 34 th

The Key Risks

Contractual Framework

o No TSA Post PoC, no TSA for pre-commissioning period, current TSA is not valid
o TSA provisions the penal payment of additional CPG in case the developer fails to obtain
Transmission License or get the tariff adopted within stipulated time frame.
o No recognition of delays caused by the reasons beyond control of the developer including the
clearances like forest, wild life, section 164 approval etc.
o No incentive for early commissioning, the change now under consideration is also half hearted
as it does not spell out any incentive and only recognizes early commissioning, which means
early start of 35 years earning stream.
o Very Steep LDs can eat up to first year tariff

Price Variations beyond a band

o Variable component of bid pricing can not handle the steep variation of commodities
o No long term instruments of hedging on steel and aluminium available in India

45 clearances involved, processes for some of

which are open ended with no timely redressal

o As many as 120 transmission projects have faced delays because of the developer's inability to
acquire land and get timely clearances from all stakeholders
o Forest, Wild life clearances

Courts issuing directions for FIRs against

14
developers on RoW case without hearing
the

Encouraging Private Sector Participation

The Way Forward

Developmental Issues

15

Encouraging Private Sector Participation

The Way Forward

Project Implementation Issues

16

Encouraging Private Sector Participation

The Way Forward

Financial Issues

17

Acknowledgements
i.
ii.
iii.
iv.
v.
vi.
vii.

Congestion Report CERC, 2015

Gazette Notifications of GoI
FICCI Report on Transmission
CARE Research Inputs
APP presentation to MoP
Power-line
Newspapers ET, Business Line and Financial Express

Thank You
Anil.rawal@relianceada.com,anilraawal@gmail.com
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