The Electric Power Transmission Association (EPTA) has sought exemption for power transmission companies from Rule 144 (xi) of the General Financial Rules, 2017, till December 2030.
In a note, EPTA said that India’s power transmission sector is grappling with supply-side constraints that are causing a significant delay in completion of ongoing projects. The situation is particularly alarming in the case of High Voltage Direct Current (HVDC) equipment, which is critical for long distance evacuation of renewable energy to align with India’s Renewable Energy 2030 goals.
The problem has been particularly accentuated due to the restrictions imposed under Rule 144(xi) of the General Financial Rules, 2017, through the Department of Expenditure’s (DoE) Order on July 23, 2020 and its revised version on February 23, 2023.
The order restricts bidders from countries sharing land borders with India from participating in public procurement. Further, under works contracts, including turnkey contracts, contractors are not allowed to subcontract to any contractor from a country that shares a land border with India.
Only two domestic OEMs provide HVDC LCC technology, while global vendors are fully booked for the next few years. This restricted market is pushing project costs upward and extending execution timelines, the note pointed out.
Despite domestic manufacturing, the demand for transformers and reactors is expected to exceed supply for ISTS and InSTS by 40-50 per cent in the next two financial years (FY6 and FY27). This may further widen if demand data of the generation plants, railways, captive power, and other infrastructure is included.
The EPTA note said that while the order is binding on ministries, autonomous bodies, public sector enterprises, and projects under PPP model, the restrictions have also been extended to players that are building transmission infrastructure under BOOT with 100 per cent private investment and no government support.
The RE bias
Further, restrictions are being treated differently by two ministries operating within the power value chain. While transmission companies under power ministry face full restrictions, Ministry of New and Renewable Energy issued a clarification in October 2022 that SECI’s procurement of power qualifies as public procurement, but the contracts will not be classified as ‘works contracts,’ the note said.
Therefore, subcontracting restrictions under GFR Rule 144(xi) do not apply to the RE sector. As a result, this allows RE park developers to import key components —including from China — facilitating faster infrastructure deployment. Few other sectors categorized as sensitive in the Department of Expenditure’s (DoE) Order dated July 23, have also been importing from China for the past five years.
According to an official of a leading power transmission company quoted in the EPTA note, “RE projects are being built in 12-18 months and they are ready to generate power whereas transmission projects are taking 3-4 years while the execution time frame is even longer in the case of HVDC projects. This mismatch between generation and transmission is hurting the overall power sector and delaying addition of capacity.”
HVDC projects hit
The regulations are especially hurting HVDC projects since the technology and equipment is available only in a handful of countries, including China. However, the OEMs in Europe and US have their capacities booked until 2030 because of rapid renewable energy integration in the west. On the other hand, imports from China are ruled out since it shares its land border with India. Central Electricity Regulatory Commission has also acknowledged that constraints in HVDC component supply are significantly impacting project costs, thereby justifying the higher L1 bids relative to levelized norms.
According to industry officials, the recently concluded bids for two HVDC projects with an implementation timeframe of 54 months shows that it required 19 months to only conclude the bids.
Exemption till December 2030
According to Electric Power Transmission Association, addressing the disparities in the application of Rule 144(xi) is essential to ensure the synchronized development of generation and transmission infrastructure. The Association wants that transmission companies should be exempted from GFR Rule 144(xi) until December 2030 so that procurement and subcontracting of critical HVDC components from global vendors can happen in a seamless manner.
“A systemic gap has emerged between generation readiness and transmission infrastructure timelines, particularly for HVDC-dependent RE zones like Rajasthan and Khavda in Gujarat. The timely execution of HVDC systems is critical path for achieving India’s renewable energy targets,” said G. P. Upadhyaya, Director General of EPTA. It is thus important that the government grants an exemption to transmission companies from GFR Rule 144 (xi) until December 2030 so that procurement and subcontracting of critical HVDC components from global vendors can happen in a seamless manner. The exemption will also provide a level playing field for private transmission developers, reducing costs, and ensuring the timely execution of projects in line with India’s 2030 renewable energy goals.
Featured photograph (source: Siemens) is for representation only
