Spot­light

Power Watch India - - CONTENTS - By AM Deven­dranath

De­vel­op­ments in trans­mis­sion and long-term im­pli­ca­tions by AM Deven­dranath AVP & BU Head, En­ergy Ver­ti­cal, Feed­back Busi­ness Con­sult­ing Ser­vices Pvt Ltd.

The in­ter-state trans­mis­sion space in the coun­try had been hold­ing a mo­nop­oly for a very long time un­der the wing of Power Grid Cor­po­ra­tion of In­dia Ltd. (PGCIL), which fully ex­er­cised its pow­ers as the Cen­tral Trans­mis­sion Util­ity (CTU) of the coun­try. Till date, PGCIL has achieved re­mark­able feats in the trans­mis­sion sec­tor of the coun­try. The big­gest of them – the or­gan­i­sa­tion was able to in­ter-con­nect the re­gional grids to bring it un­der syn­chro­nised op­er­a­tion as a sin­gle grid. In re­cent years, it has been able to bring in HVDC tech­nol­ogy in a big way into the coun­try. Mean­while, the com­pany is test­ing the high­est volt­age lev­els in power trans­mis­sion by test­ing and build­ing 1200 kV AC trans­mis­sion links to trans­mit mam­moth amounts of power across the coun­try. It has also been re­spon­si­ble for car­ry­ing thee grid over dif­fi­cult ter­rain to re­mote ar­eas un­der the In­dian ge­og­ra­phy.

But there were some prob­lems also with this as­so­ci­a­tion. Let us ex­am­ine th­ese in de­tail:

The Prob­lem of PGCIL be­ing a CTU

PGCIL be­ing the CTU and there­fore in­volved in plan­ning, ex­e­cu­tion of projects, own­ing as­sets and man­ag­ing the trans­mis­sion net­work was al­ways seen as a mono­lith block­ing the way for pri­vate sec­tor in­vest­ment in the trans­mis­sion sec­tor – some of the key is­sues were:

By virtue of be­ing a plan­ner, all com­mer­cial and tech­ni­cal in­for­ma­tion about the project’s cost sen­si­tiv­ity, pric­ing in­for­ma­tion, avail­abil­ity of cor­ri­dors for con­struc­tion etc is avail­able to PGCIL far ahead of time, pro­vid­ing them with an ad­di­tional ad­van­tage in mak­ing a con­sid­ered bid vis-a-vis the other play­ers. In ad­di­tion to en­joy­ing the ben­e­fit of more eco­nomic cost of cap­i­tal by getting sov­er­eign back­ing of the gov­ern­ment, PGCIL avails cer­tain cus­tom duty ben­e­fits and project im­port duty ben­e­fits that are not avail­able to pri­vate play­ers.

Fur­ther, the clear­ance pro­cesses are dif­fer­ent for pri­vate play­ers. For in­stance, in the case of for­est clear­ances, while pri­vate play­ers are re- quired to ac­quire the com­pen­satory af­foresta­tion land and hand over to for­est au­thor­i­ties, PGCIL is re­quired to just pay dou­ble the for­est com­pen­sa­tion with­out ac­quir­ing land, mak­ing the process shorter and eas­ier for PGCIL.

PGCIL, by be­ing in the plan­ning role could ef­fec­tively move many projects from Open bid­ding to “Ex­emp­tions” and thereby give it out as a cost-plus model putting the pri­vate play­ers on a dis­ad­van­tage. This is ex­plained be­low: > Amend­ment in Na­tional tar­iff pol­icy is­sued on 8th July 2011, in­tro­duced com­pet­i­tive bid­ding in all Cen­tral Sec­tor trans­mis­sion projects with cer­tain ex­emp­tions. Large num­ber of projects were moved to cost plus route un­der th­ese ex­emp­tions.

First two ex­per­i­men­tal works for 1200 kV HVDC

Works re­quired to be done cater to an ur­gent sit­u­a­tion re­quired un­der a com­pressed time sched­ule

In­trastate trans­mis­sion projects up to 6th Jan 2013

Re­cently, the Min­istry of Power has pro­posed fur­ther amend­ment to the tar­iff pol­icy, widen­ing the scope of ex­emp­tions, some of which are listed be­low.

First two 1200 kV AC sub­sta­tion Up-gra­da­tions of ex­ist­ing lines of CTU/STU/ PGCIL

Aug­men­ta­tion of ex­ist­ing/un­der con­struc­tion sub­sta­tions of CTU/STU/PGCIL Evac­u­a­tion from nu­clear power plants Projects un­der com­pressed time sched­ule. Projects where no bid­ders come for­ward.

> The above ex­emp­tions leave prac­ti­cally noth­ing out­side the scope of ex­emp­tions which means that it shall be dis­cre­tion with em­pow­ered com­mit­tee in all cases to rec­om­mend or not rec­om­mend the com­pet­i­tive rout­ing of projects. This is cer­tainly against the true spirit of com­pet­i­tive bid­ding and leaves lots of un­cer­tainty on the pol­icy of com­pet­i­tive bid­ding. There­fore, the pri­vate sec­tor in­dus­try al­ways

wanted PGCIL to be cur­tailed of its mul­ti­ple roles. The solution to the prob­lem to re­move the con­flict of in­ter­est of PGCIL be­ing a plan­ner, rec­om­menda­tory au­thor­ity and a com­peti­tor, is to sep­a­rate CTU from PGCIL and also take PGCIL out of the em­pow­ered com­mit­tee to make em­pow­ered com­mit­tee an in­de­pen­dent, un­bi­ased and un­in­flu­enced de­ci­sion mak­ing body.

Now it seems that th­ese fre­quent ap­peals from in­dus­try have hit the right note in the Min­istry and ef­forts are se­ri­ously on to curb its role as given in re­cent me­dia state­ments.

Now, let us ex­am­ine the im­pact of this cub on PGCIL’s busi­ness.

> With PGCIL’s role of a CTU be­ing cur­tailed with a new en­tity – POSOCO (ear­lier a sub­sidiary of PGCIL). Ef­fec­tively PGCIL will lose the fol­low­ing ad­van­tages and will be seen more as an­other player in trans­mis­sion projects:

It is not sup­posed to be part of plan­ning and the em­pow­ered com­mit­tees which over­looks the var­i­ous projects to be awarded and there­fore will lose the ad­van­tage of prior hand in­for­ma­tion for them to bid (at least on pa­per)

The other ad­van­tages of be­ing a PSU such as bet­ter ac­cess to funds and clear­ances etc is likely to con­tinue

PGCIL will con­tinue to be favoured for ex­empted projects and projects of na­tional sig­nif­i­cance – but play­ers ex­pect this list to be cur­tailed and not a laun­dry list like it is cur­rently.

> Over­all this move, sig­ni­fies to pri­vate play­ers (both na­tional and in­ter­na­tional) that the gov­ern­ment is very se­ri­ous to in­vite pri­vate sec­tor par­tic­i­pa­tion in trans­mis­sion and there­fore a sig­nif­i­cant part (as compared to pre­vi­ous years) of Rs 1 lakh crore in­vest­ment in this year should at­tract pri­vate play­ers.

> PGCIL will face pri­vate play­ers’ stiff com­pe­ti­tion now and will de­pend on their fi­nan­cial and project man­age­ment skills to be more com­pet­i­tive in project bid­ding.

> There are sig­nif­i­cant trans­mis­sion projects at the state level, which have not yet gone to pri­vate play­ers and this por­tion is also likely to opened up and pri­vate play­ers would be look­ing at this por­tion as well.

> We have heard about some in­ter­na­tional (Euro­pean util­i­ties) who are very ac­tively plan­ning for a role in In­dia’s trans­mis­sion busi­ness. They will now see this as a posi-

tive sig­nal and will in­vest in In­dian projects. > PGCIL, will now see a lot of band­width and the need to look at de­liv­er­ing on oth­ers ar­eas in the power value chain – there are ob­vi­ously some related ex­pan­sions which they will be ac­tively con­sid­er­ing – such as power trad­ing but also they could be look­ing at dis­com busi­ness in some states as well. PGCIL will now be also look­ing at tak­ing over many other in­ter­na­tional projects with border na­tions and could also look at in­ter­na­tional mar­kets for EPC busi­ness. The other ex­pan­sions and diver­si­fi­ca­tion in ar­eas such as so­lar etc is not known to us. Re­cently, PGCIL has been look­ing at pro­vid­ing con­sul­tancy ser­vices to states and part­ner­ing in joint ven­tures with states to take up in­tra-state trans­mis­sion projects. Th­ese de­vel­op­ments are com­pletely chang­ing the trans­mis­sion land­scape as we know it.

But, of late, the pri­vate sec­tor has been gain­ing a pres­ence in this seg­ment through the tar­iff –based com­pet­i­tive bid­ding mech­a­nism. After 2011, pro­cure­ment of trans­mis­sion has been made manda­tory on com­pet­i­tive bid­ding, ex­cept for projects of ‘strate­gic im­por­tance/time bound de­liv­ery’, which are given to PGCIL on a nom­i­na­tion ba­sis. This has laid inroads into the sec­tor for ma­jor pri­vate sec­tor play­ers such as L&T, Re­liance Power, Ster­lite, Es­sel In­fra etc.

Th­ese re­cent changes can have far-reach­ing cir­cum­stances for the in­dus­try:

> More num­ber of trans­mis­sion sys­tem de­vel­op­ers would al­low more projects to be ex­e­cuted in par­al­lel, with in­de­pen­dent ac­count­abil­ity as­signed for each project

> In­creased com­pe­ti­tion would en­sure that the cost of such projects are kept rea­son­ably low, while main­tain­ing the qual­ity of in­fra­struc­ture > Mean­while, PGCIL could fo­cus on strate­gi­cally im­por­tant projects, in­clud­ing in­ter­na­tional grid ties and con­ti­nen­tal grid devel­op­ment, and projects sport­ing com­pressed time­lines > State transcos would gain ex­per­tise in plan­ning, ex­e­cut­ing and main­tain­ing ex­tra and ul­tra-high volt­age trans­mis­sion cor­ri­dors from PGCIL’s ex­pe­ri­ence

> PGCIL, on the other hand, could as­sist the state dis­coms with the sep­a­ra­tion of sup­ply and wire busi­ness, in ef­fect bring­ing in com­pe­ti­tion in the power dis­tri­bu­tion seg­ment

> The in­de­pen­dent ex­is­tence of POSOCO would al­low it to main­tain a firm pres­ence as the power sys­tem op­er­a­tor in the coun­try and pro­vide bet­ter net­work man­age­ment ser­vices > PGCIL would find more band­width to delve into strate­gic trans­mis­sion sys­tem plan­ning and eval­u­at­ing futuristic tech­nolo­gies like Gen­eral Net­work Ac­cess (GNA)

This will also bring along chal­lenges like:

> The Right-of-Way priv­i­leges and ease of getting en­vi­ron­men­tal clear­ances as en­joyed by a PSU like PGCIL might not be avail­able to pri­vate sec­tor coun­ter­parts

> The re­moval of the CTU tag would al­low it to di­ver­sify into power gen­er­a­tion and dis­tri­bu­tion busi­ness. If PGCIL ex­er­cises this op­tion, in a way, it would take the sec­tor back to the era of ver­ti­cally in­te­grated util­i­ties

As of now, we can only spec­u­late on the fu­ture of the sec­tor un­der the chang­ing regime. The real con­se­quences of this move will only un­fold with the pas­sage of time. While some or­gan­i­sa­tions would take this as an op­por­tu­nity to dive into the sec­tor, the risk-averse ones are ex­pected to wait and watch.

The au­thor is AVP & BU Head, En­ergy Ver­ti­cal, Feed­back Busi­ness Con­sult­ing Ser­vices Pvt Ltd.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.