India’s Power Transmission Infrastructure Needs Private Investment

India's Advisory Group for Integrated Development of Power, Coal, and Renewable Energy calls for private investment.
Published: Wed 28 Jan 2015

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There should be private participation in India’s power transmission sector which is largely government held. This is according to a report compiled by the government’s Advisory Group for Integrated Development of Power, Coal, and Renewable Energy which was chaired by Suresh Prabhu (Union Minister for Railways). The advisory group submitted its findings in its report to the Ministry of Power.

Attracting private investment

Private firms account for 35% in power generation as against only 3% in transmission. "This needs to be enhanced," said the group in the report. It also suggested that bidding for transmission projects should be expedited, the time period for clearances should be shortened and the transfer of SPVs (special purpose vehicles) should be done within three months.

Other suggestions include:

  • Prepare a list for the projects that are to be developed by the private sector, to be opened up for development by public and private players as soon as possible

  • Prepare a long-term transmission plan and monitor the progress

  • The availability of transmission infrastructure should be set up ahead of power generation

  • The mechanism to identify critical transmission constraints, formulate specific projects and have these carried out in the most effective manner, should be put into place to attract potential investors

The report points out that the Ministry of New and Renewable Energy, Ministry of Power, Central Electricity Authority and Power Grid Corporation should interact on a regular basis through an institutionalised mechanism due to the unpredictable nature of renewable energy.

Other suggestions made by the group include enhancement of coal production in short, medium and long terms. It has called for improvement in Coal India and its subsidiaries. The group added that the opening up of the coal sector may be necessary in order to supplement, in a significant way, the domestic production by Coal India and a few other companies.

Aiming to double power output

Last year, Power Minister Piyush Goyal announced that India needs US$250 billion of investment in power generation and transmission over the next five years to meet its goal of doubling electricity output and connecting everyone to the grid. Most of the money would need to come from the private sector.

He added that US$50 billion would be ploughed into transmission development.

The Bharatiya Janata party government of Narendra Modi, prime minister, has plans to develop Indian infrastructure and has promised to provide 24-hour electricity to all 1.3 billion citizens by 2019.

Currently, 53 million homes are without grid power and many businesses rely on costly diesel generators to produce electricity during lengthy power cuts. In the summer of 2012, the grid in northern India collapsed, leaving hundreds of millions of locals without electricity for up to three days in the worst outage in history.

India's power market is fundamentally attractive for investment, given the country's growing demand for electricity. Companies like CLP and Toshiba have already snapped up the opportunity. [Engerati - Hong Kong’s CLP Invests in India’s Energy Sector and Toshiba Reinforces Its Transmission and Distribution Business In India].