Next 5 years to see investments boost in Power Transmission Segment

As per the ICRA report, India’s power transmission segment is expected to attract investment of INR 1.8 lakh crore between FY21 to FY25 mainly on account of transmission infrastructure augmentation drive for the evacuation of renewable energy.

The credit rating agency, ICRA in its recent report has predicted a positive investment environment for the Indian power transmission sector, over the coming years.

According to the report, the power transmission segment in India is expected to attract an investment of INR 1.8 lakh crore in the next five years.

The report pointed out that in line with the government’s policy focus shift from conventional power generation sources to renewable power sources; the power transmission segment would see a boost in investments towards augmenting evacuation infrastructure for power generated by RE projects.

Sabyasachi Majumdar, group head and senior vice president (corporate rating) of ICRA, stated that the government has lined up 14 transmission projects under the tariff-based competitive bidding route (TBCB) to evacuate power of a 25-gigawatt RE project.

He further added that the government has also started another six projects in the intra-state segment, which provides a healthy pipeline for private sector players.

He also remarked that there is a possibility of a slowdown in electricity demand and investment in 2020-21 amid COVID-19-induced disruption, but recovery is expected from 2021-22 onwards.

Private Players Participation

In regards to scope for the private sector, the agency stated that though the Central and other state transmission utilities will continue to play a key role in the power transmission segment, however, it is expected that over the next four-five years, the private sector’s share would also witness healthy growth.

Throwing light on the issues in the segment, the agency stated that, the key challenge for the TBCB winning bidders was project execution delays. The agency specified that “The median delay for awarded projects under the TBCB route has been around 8.5 months.”

The main reason for this delay could be attributed to delays in securing the “Right of Way” and in certain cases for forest clearances and rerouting requirements. This, in turn, results in cost overruns thereby putting pressure on the returns and debt coverage metrics for the developers – it further added.

Disruption due to Pandemic

Girish Kumar Kadam, sector head and vice-president (corporate rating) of ICRA, stated that the under implementation transmission projects in the country is estimated to be delayed by 3-5 months. This is as a result of lockdown restrictions during the first quarter of the current fiscal and consequent constraints in terms of labor availability.

He added that such projects are bound to see cost overrun. Thus, it would be important for such projects to have the availability of a force majeure clause relief from the appropriate regulatory commission.

He further added that the COVID-19 pandemic induced lockdown since March 2020 has adversely affected the finances of the distribution utilities. As a result, there were delays in payments from these distribution companies to power generation and transmission companies.