PGCIL to merge 17 TBCB subsidiaries to improve administrative efficiency

T&D News

Venugopal Pillai
June 11, 2025

With a view to reducing legal and regulatory compliance and bringing about administrative efficiency, Power Grid Corporation of India Ltd (PGCIL) has planned major restructuring of its TBCB subsidiaries.

Accordingly, PGCIL will be merging/transferring a total of 17 ISTS-TBCB subsidiaries into two other TBCB subsidiaries. In the first case, five ISTS-TBCB subsidiaries will be merged with “Powergrid Vataman Transmission Ltd” and in the second, twelve such subsidiaries will be transferred to “Powergrid Bidar Transmission Ltd.”

As reported by T&D India in July 27, 2024, the board of PGCIL had approved the merger of 17 TBCB subsidiaries into two subsidiaries. Though PGCIL had not provided details then, T&D India had indicated that this could be related to its TBCB subsidiaries. (Read full story)

It is now reliably learnt that Central Electricity Regulatory Commission (CERC), in two very recent orders, has permitted PGCIL to carry out the restructuring exercise.

According to information available, the following five subsidiaries will be merged into “Powergrid Vataman Transmission Ltd”:

Similarly, the 12 subsidiaries that will be merged with “Powergrid Bidar Transmission Ltd” are:

The 17 subsidiaries are referred to as the “transferor” companies while the two subsidiaries in which these 17 will be collectively merged as referred to as the “transferee” companies.

The reason why two transferee companies have been chosen (and not just one) is to conform to the equity investment ceiling that Central PSUs need to maintain in their subsidiaries or joint ventures. The two groups also have communality with respect to the geographical location of their projects.

Rationale

The move to consolidate its subsidiaries is seen as a means to achieve simplification of administrative tasks, improve management efficiency and streamline the decision-making process. The sheer reduction in number of companies within the group will also obviate multiplicity of legal and regulatory compliance.

Apart from achieving better administrative efficiency, this restructuring is also seen as a means to separate the RTM (regulatory tariff mechanism) business and the TBCB business of PGCIL.

In general, projects that PGCIL executes under the RTM framework come directly under the balance sheet of the company. However, for TBCB projects, PGCIL, as would be the case with other transmission service providers as well, needs to create a wholly-owned subsidiary for each project. In practice, this subsidiary is incorporated by the bid process coordinator (either RECPDCL or PFCCL) and then acquired by the winning developer (PGCIL or any other TSP) selected under the TBCB mechanism. Each TBCB subsidiary is a corporate entity by itself, and as such, has to comply with all administrative and legal formalities.

PGCIL is a major creditor to its TBCB subsidiaries in which PGCIL extends credit facility through inter-corporate loans.

Modalities of transfer

As per the CERC orders, the equity shares of the 17 transferor companies will stand extinguished and shares of the respective transferee company will be issued as per a share exchange formula. On a technical note, the 17 transferor companies will be “dissolved” but not “wound up”.

The various agreements that the 17 TBCB subsidiaries have entered into, especially the transmission service agreement (TSA), and the transmission licence issued by CERC, will be transferred to the respective transferee companies.

Acquisition of subsidiaries

According to information available with T&D India, all the 19 subsidiaries under discussion (17 transferor companies and two transferee companies) were acquired by PGCIL during the period March 21, 2023 to February 9, 2024, under the tariff-based competitive bidding (TBCB) mechanism. The projects of all the subsidiaries – with the exception of two – are currently under construction. Those of Powergrid Dharamjaigarh Transmission Ltd and Powergrid Raipur Pool Dhamtari Transmission Ltd were commissioned recently – in March 2025.

The way forward

Given that PGCIL will indeed derive operational efficiency with this restructuring, it is likely that PGCIL will extend this exercise to its TBCB subsidiaries in future as well. As of March 31, 2025, PGCIL had 73 TBCB subsidiaries (including the 19 under discussion) spread over its interstate and intrastate transmission system schemes – both completed and under-construction. These 73 subsidiaries exclude the five subsidiaries were transferred by PGCIL to Powergrid Infrastructure Investment Trust (PGInvIT) in May 2021.

Further, it is unlikely that PGCIL would sell any of its TBCB subsidiaries to PGInvIT in future as it is learnt that PGCIL, in keeping with power ministry guidelines, will adopt the “securitization” route as opposed to “monetization,” for its fund-raising exercise. As such, PGCIL can continue to consolidate its TBCB subsidiaries with a view to further improving administrative efficiency.