The country’s power evacuation infrastructure, driven by the rapidly growing renewable energy segment, could see an investment of ₹1.8 lakh crore over the five-year period from FY21 to FY25, according to ICRA.

In line with the shift in policy focus from conventional sources (coal and gas) to renewable power sources (wind and solar), the focus of the transmission segment is towards augmenting the transmission infrastructure for evacuation of power generated by renewable energy projects.

Sabyasachi Majumdar, Group Head & Senior Vice-President, Corporate ratings, ICRA, says, “The Government of India has lined up 14 transmission projects under the tariff-based competitive bidding (TBCB) route for developing transmission infrastructure for evacuating power from 25 GW renewable power projects and another six projects in the intra-state segment, providing healthy pipeline for private sector players. While there is likely to be a slowdown in electricity demand and investments in the sector in FY21 amid the Covid-19 induced disruption, the same are likely to recover from FY22 onwards.”

In the past five-years, the power transmission segment has witnessed a healthy growth with average annual capex of ₹50,000 crore, in line with the significant growth seen in the installed power generation capacity. The investments in the power transmission segment have been led by the Power Grid Corporation of India Ltd (PGCIL) and state transmission utilities, followed by the private sector.

While the National Tariff Policy mandates that transmission projects must be awarded through the competitive bidding route, many projects continue to be awarded to PGCIL and the state transmission utilities under the regulated tariff mechanism citing certain exceptions. As a result, the share of private sector in the transmission capacity remains low at 7 per cent in transmission lines and 4 per cent in sub-station capacity as of March 2020.

The share of private sector has been growing, with private players securing close to 75 per cent of the projects awarded under the TBCB route so far. While PGCIL and state transmission utilities are likely to remain the major players in the segment, the share of private sector is expected to witness a healthy growth over the next four to five years.

Girishkumar Kadam, Sector Head & Vice-President - Corporate ratings, ICRA, adds, “Based on ICRA’s analysis of a sample set of TBCB projects, it is estimated that a 5 per cent escalation in capital cost for an independent power transmission project is estimated to lower the project return and the cumulative debt service coverage ratio is estimated to decline by 5-9 bps.”

The lockdown induced by Covid-19 pandemic since March led to an adverse impact on the finances of distribution utilities, leading to delays in payments to power generating and transmission companies. The collection efficiency is witnessing a gradual improvement for the inter-state power transmission projects over the last four-month period. ICRA expects the credit profile of the inter-state power transmission projects to remain stable.

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