Powerlinks Transmission Ltd, a 51:49 joint venture between Tata Power and Power Grid Corporation of India Ltd, represents India’s first-ever public private partnership in the power transmission sector. Kiran Gupta, CEO & Executive Director, Powerlinks Transmission Ltd, recalls the two-decade long successful journey of Powerlinks, as she shares pertinent views on cross-border grids, private sector involvement in power transmission and even InvITs. Having been associated with the power distribution sector as well, Kiran Gupta also offers keen insights on this crucial consumer-centric link in the power value chain.
Powerlinks Transmission is India’s first ever public-private partnership (PPP) project in the field of power transmission. Please give us the rationale of why the PPP mode was chosen?
Two routes were crystallized for channelizing private investments – the Joint Venture route and the Independent Power Transmission Company (IPTC) route. The IPTC route did not attract sufficient response, save for the Bina Magda implemented by Power Grid Corporation of India Ltd (PGCIL) leading to a stronger emphasis on the JV route. This led to the private sector being accorded the task of construction, ownership and maintenance of transmission lines, while grid operation and load dispatch or scheduling and monitoring of the grid, was assigned to the central and state transmission utilities.
“A clear focus on deploying transmission infrastructure in renewable-rich regions is imperative for the modernization of India’s electricity network.”
Please recall how Tata Power’s selection as the joint venture partner was finalized. Was there competitive bidding involved? Also, why was it that the private partner was offered majority (51 per cent) equity stake?
Tata Power was selected as the JV partner for the establishment of double-circuit transmission line from Siliguri to Mandola, a span of 1,166 km.
PGCIL, which was the nodal authority for setting of transmission utilities sought bids (in July 2000) in order to select a private partner for the premier joint venture. Of the three bids that were received, the one submitted by Tata Power alone fructified leading to the formation of Powerlinks Transmission Ltd.
As per the guidelines issued by Ministry of Power for JVs, 26 per cent of equity was to be owned by the Central/State transmission utility and balance by the private sector partner. However, Tata Power management preferred an equal partnership with the government to ensure active involvement of both parties in the project.
What are the physical attributes of the Indo-Bhutan line of Powerlinks Transmission, in terms of circuit-length, no. of circuits, voltage, number of towers, transfer capacity, etc?
The primary portion of the TALA project, i.e. laying down of transmission line from the Indo-Bhutan border to Siliguri (in West Bengal) was carried out independently by PGCIL as detailed below. The transfer capacity of these 2 lines (4 circuits) is 3,000 mw.
The section of the transmission line from Siliguri to Mandola, a span of 1,166 km was implemented by Tata Power as detailed below.
“Despite the challenges, we managed to pull it off, thanks to the team and its commitment to identify and overcome any challenge.”
We recall that there were several project execution challenges whilst constructing this Indo-Bhutan power transmission line. Please elaborate.
Being a first-of-its-kind project in India’s power sector, we did encounter a few challenges including geographically challenging terrain, right-of-way issues and even some law-and-order problems. Further, normally the gestation period of such projects provides enough time to create a cohesive to ensure effective functioning. But despite these challenges, we managed to pull it off, thanks to the team and its commitment to identify and overcome any challenge we met on the way.
“Technical challenges were overcome successfully as there were professional teams on either side.”
Transnational lines such as this one, would involve much co-ordination between not just the grid operators of the two countries but also the two governments. Please discuss.
Cross-border projects like these poses political and technical challenges. The political challenges are largely around the respective country’s need to address their own national energy security needs, which is quite reasonable and understandable. This is not really such a big challenge considering the long and very cordial relations shared by India and Bhutan. The technical challenges, as cited earlier, were also managed quite well because the project was managed by professional teams on either side, and more importantly the intent to see the project succeed.
“Cross-border grids and electricity trading also supports the transition to clean, renewable energy,”
How do you gauge the importance of such cross-border lines between India’s hydro-rich neighbours like Nepal and Bhutan, and also with Myanmar (with respect to natural gas)? What is the symbiosis that India and its neighbours achieve through such cross-border lines?
India has already started to implement its ambitious Green Energy Corridors (GEC) programme, which entails domestic transmission lines that exclusively connect areas of high renewable energy generating capacity to areas of high demand. It envisages high-capacity connections to Bangladesh, Bhutan, Nepal, Myanmar and Sri Lanka. India has been making advancements in regional power trade, including its arrangements with Bangladesh, Bhutan and Nepal.
India-Bangladesh and India-Nepal power trade has helped to eliminate power shortages in Bangladesh and Nepal respectively and, during the COVID-19 pandemic, interconnected grids between Bangladesh, Bhutan, Nepal, and India (the BBIN countries) benefitted all in terms of grid security.
Cross-border grids and electricity trading also supports the transition to clean, renewable energy, helping address climate change, electricity access challenges and energy security issues.
What has been the quantum of electricity transfer (bilateral) in recent years by the Indo-Bhutan line of Powerlinks Transmission?
The quantum of electricity transfer through the 400KV TALA-Siliguri Transmission line averaged 2,846,683 million kwh per month, in FY21, up from 2,405,158 million kwh per month in FY20.
As such, export of power through this line is zero as this line is mainly focussed on evacuating the surplus hydro-electric power generated from TALA Project to India.
“Projects awarded through the TBCB route can help to bring down project costs.”
Powerlinks Transmission was formed many years before the tariff-based competitive bidding (TBCB) culture gained root, sometime in January 2011. How do you see the scope for such JVs given that power transmission lines are largely based on the TBCB route?
An analysis of the resultant tariffs of projects awarded in recent years when compared with cost-plus tariffs shows that projects awarded through the TBCB route can help to bring down project costs. For cost-plus bids, the tariff-to project cost ratio is in the range of 14-17 per cent. But in the case of competitively derived tariffs, the ratio is in the range of 8-10 per cent.
The development of the TBCB route opened up transmission development projects to private sector participation through competitive bidding. Since 2011, there have been 101 projects, of which 43 projects were awarded under the TBCB route. But let us also remember that the tariff policy mandates development of transmission projects under competitive route and TBCB projects have proven to be up to around 30 per cent cheaper, had the same projects commissioned under cost-plus route.
“The need for interregional grid connectivity will increase even in economically weaker regions.”
In general, how do you view the increasing role of private sector in India’s power transmission sector?
The domestic power transmission segment is expected to attract investments worth Rs.3.5 trillion over the next five years. In line with a shift in policy focus from conventional sources to renewable power sources, the focus of the transmission segment is towards augmenting infrastructure for evacuation of power generated by renewable energy projects.
Considering India’s geographic spread of renewable-rich states on the western and southern coasts, inter-regional transmission capacity for transmitting power from energy surplus states to deficit states, as well as better load balancing capacity, will be necessary. The need for interregional grid connectivity will increase, with a rise in demand for power even in economically weaker regions, as India’s economy is foreseen to grow at 7-8 per cent per annum over the coming decade. A clear focus on deploying transmission infrastructure in renewable-rich regions is imperative for the modernization of India’s electricity network.
On the same note, how important would infrastructure investment trusts (InvITs) be in the field of power transmission? The first two – IndiGrid and PGInvIT – have been quite successful, we assess.
A CRISIL Rating analysis shows InvITs and Real Estate Investment Trusts (REITs) can potentially raise substantial capital for India’s infrastructure build-out over the next five fiscals. Combined assets under management (AUM) of IEA and REITS have logged a considerable compound annual growth rate (CAGR) since the launch of the first InvIT in fiscal 2018. Currently, there are 11 InvITs and REITs in India. Credit ratings on ten of these demonstrate the highest safety level (AAA) for three reasons: low debt, combined debt-to- AUM (assets under management) ratio of less than 35 per cent, and over 90 per cent of AUM deployed in operational assets.
“Though distribution franchisee models have evolved from being merely collection-based ones, only a handful of them are operating successfully.”
Let us now come to a few questions drawing upon your long experience in the power distribution space. First, the distribution franchisee (DF) model has by and large been unsuccessful in India. What is your view?
Although the Electricity Act, 2003 has included several provisions, including the DF model, to encourage private participation in the sector and bring in competition and transparency in the sector, this form of limited involvement has not succeeded due to legacy problems in the sector. Challenges like inadequate profit margins, unattractive bid structures, unfair allocation of risks between the licensee and the franchisee, and inflexibility in operations, need to be addressed.
Second, do you think that the PPP route for privatization of distribution licensing, as seen in Delhi and now in Odisha, would be the way forward for privatizing power distribution?
In India, the Delhi government had privatized the distribution of electricity in 2002 under the PPP model. The experiment model turned out to be a grand success for all stakeholders. Consumers are getting uninterrupted supply, new connections are created faster, accurate billing, upgraded network and above all AT&C (aggregate technical and commercial) losses reduced to as low as less than 10 per cent from over 53 per cent in 2002.
Now, Odisha has also been privatized for the distribution of power and many other states are ready to take this route to improve power distribution, which is largely consumer-centric. With further revision in Electricity Act, that will open up new avenues under distribution, de-licensing is also bound to happen which would further pave the way to retail supply.
“Privatization, which is fundamentally market-friendly, is the best way to move ahead.”
Lastly, what is your take on the government’s proposal of completely privatizing power distribution in Union territories? We learn through reports that the first two cases – Chandigarh and DNH&DD – have faced litigation issues.
Today, distribution is the biggest challenge in India’s power sector and we believe privatisation, that is fundamentally market-friendly, is the best way to move ahead. In simple terms, this means we need to bring in greater consumer-focus. This way we will not only be able to effectively address the quality and access-related challenges in the power sector, but also create enough surplus (profitable distribution) to ensure we can invest in the future of the power sector, which is renewable or clean energy.
