India’s Transmission Projects-A National Economic Concern

Government clearances, with land acquisition a major hurdle, stands in the way of India’s transmission development.
Published: Fri 10 Jul 2015

India’s generation capacity has increased from nearly 100GW to 255GW in the last fourteen years. But, despite this achievement, India has a 10% peak power deficit, even though the requirement is for 150GW only - this is mainly attributed an inadequate transmission infrastructure.

Transmission projects not reaching completion

A lack of planning and investment in the transmission sector has led India to a situation where there is a power surplus in states such as Chhattisgarh, which struggle to evacuate and sell power on one hand, and power deficient states such as Tamil Nadu and Telangana, which face challenges due to a high electricity deficit on the other hand.

Government pronouncements as well as industry projections regarding capacity additions in the power sector, suggest that an investment of over US$50 billion is likely to be made in the transmission sector over the next five years. However, in order to ensure the economic viability of such large scale investments and to facilitate timely addition of transmission capacity to meet the demands of a growing Indian economy, it is critical that obstacles for investment realization and project completion are analyzed and addressed without delay.

Only a few projects, awarded through tariff-based competitive bidding (TBCB), have achieved commissioning. Although commissioning took place during the period 2013-2015, work on these projects has yet to start.

These projects were awarded by Power Finance Corporation and Rural Electrification in 2010-12, under the government's plan to open the sector by awarding projects to the private sector under TBCB. State-owned Power Grid Corporation also participates in the process.

The five major projects won by the private sector were scheduled to be commissioned between 2012 and 2015 but only three have been seen the light of day. Two are by Sterlite Grid, a subsidiary of Sterlite Technologies. One of these was for enabling the purchase by the northern region of surplus power from the northeast and eastern regions. The other was for system strengthening in the western region. A transmission system for the Krishnapatnam (Andhra) Ultra Mega Power Project was commissioned by a consortium of companies, Raichur Sholapur Transmission Company Limited (RSTCL).

The lines to connect the south with the rest of the nation, called 'Talcher-II augmentation system' and a system strengthening in the northern region by Anil Ambani's Reliance Power Transmission Company are also delayed. These are still incomplete despite work starting in September 2012. The power evacuation system for the 4,000MW Kudgi thermal power station in Karnataka was awarded to Larsen & Toubro but this project has also been delayed.

Around 15 transmission projects, to be constructed by PowerGrid, are experiencing delays as the associated generation projects have not yet developed, according to senior government officials.

Land availability and Right of Way are obstacles

Land availability and Right of Way (RoW) are major threats to the completion of transmission projects.

Power Grid agrees that RoW is a major challenge for transmission companies. An official explains, “For us, being a state entity, it takes six months. For a private company, the task is uphill to get the signature of every panchayat and tehsildaar in all the villages that the line crosses."

There are also no standard rules for RoW compensation so transmission line developers and land-owners feel that the current compensation is too low.

Saurabh Bhatnagar, MD, Resources, and Anurag Johri, Principal, Resources-both from Accenture in India, say that a clear and comprehensive (and binding) formula-based compensation method may help to ensure that both landowners and developers get a fair deal, thereby also reducing project clearance delays. This method has been adopted in the US, UK and New Zealand. There is also a need to use the existing RoW and bring down the land requirement per megawatt. This could be achieved in a number of ways by upgrading existing corridors to a higher voltage instead of laying out new lines. Of course, this may not always be possible.

Special permissions are often needed where transmission lines are built across environmentally vulnerable areas such as forests and wildlife sanctuaries. Approvals for these project applications often take longer, often six months and longer.

Two solutions according to Mr Bhatnagar and Mr Johri are:

  1. Publish clear timelines for approvals with a penalty clause for any undue delays.

  2. Replicate the model of Ultra Mega Power Projects (UMPPs in the electricity generation sector) where the government takes all required approvals before the project is handed to a developer.

Wire theft is another thorn in the side of project execution. Loss of materials and downtime of transmission lines increases developers’ costs. While efficient law enforcement may help to combat this issue, it may help to keep exact source/seller records on aluminum purchases (wire is primarily used to extract and sell aluminum which is an expensive commodity). Also, severe penalties for convictions may curb theft.

Once the obvious challenges are removed, it may be an idea to incentivize developers for faster commissioning of lines through benefits such as a longer concession period (the time during which the transmission line developer can charge users).

The delay in the completion of transmission lines, a very necessary national infrastructure, is bound to have a major impact on sectors throughout the economy. When it comes to clearances and theft reduction, the government needs to put some serious muscle behind these projects as it is a matter of national concern.