Good riddance

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Updated: July 29, 2015 3:41:43 AM

Power Grid says govt to move to take away CTU status would help rather than hurt it

In all probability, transmission behemoth Power Grid Corporation (PGCIL) will lose its status as a central transmission utility (CTU). But the company is unfazed. It rather calls the eventuality as a blessing in disguise that would unshackle it and help it diversify into other power sector domains, especially into electricity distribution and trading.

The government has set up a committee under the Central Electricity Authority (CEA) to chalk out a plan for freeing PGCIL from the CTU responsibility. This was a prompted by industry cries of a conflict of interest, since the PSU also participates in the tariff-based competitive bidding (TBCB) for projects. As a CTU, Power Grid is responsible for the planning, implementation, operation and maintenance of inter-state transmission systems and operation of the national and regional grids—a job it has been doing from 1998.

“The committee would submit its recommendations to the government in a month. The recommendation would deal with the options that can be exercised in case PGCIL ceases to be a CTU,” a senior CEA official told FE. He also hinted the CEA could take over some CTU responsibilities currently shared by both the entities.

PGCIL rejects concerns of a conflict of interest, saying it has never enjoyed special access to any privileged or additional information about a TBCB project. A senior PGCIL official told FE that the CTU status rather came with restrictions on the company’s ambition to leverage its expertise and foray into other segments of the power sector. By norms, a CTU is not allowed to have interests in generation, trading and distribution sectors.

“We are more than keen to start power trading and also use our vast network to foray into the ‘carriage’ or ‘wire’ part of the distribution business,” said the official, who didn’t want to be named.

Planned amendments to the Electricity Act 2003 seeks to bifurcate the wire and supply businesses. “The separation would allow us to lay claim to the carriage side of the sector as it fits perfectly with our domain knowledge,” another senior official told FE. The amendments would be tabled in the ongoing monsoon session of Parliament.

Currently, PGCIL runs inter-state transmission corridors, which evacuate power from the generation unit and take it to the target state’s substation. The state’s transmission utility then delivers the stepped-down power to the distribution substation, which is subsequently delivered to the consumers by discoms. The company is eyeing the wire business beyond what its current mandate, in the event of ‘carriage and content’ is separated by law.

“PGCIL is ideally placed to foray into intra-state distribution networks as it already operates such transmission systems in the states of Odisha and Bihar in joint ventures with the state power companies,” an industry expert told FE. He said apart from the distribution business, the company is equally well-placed to enter the power trading business by virtue of it owning and operating 95% of the transmission network across the country.

PGCIL’s is the latest instance of state-run power companies expressing an interest in diversifying their businesses. NTPC, India’s biggest thermal power producer, is looking to integrate its business vertically by entering into coal mining and the power distribution sector. Similarly, NHPC has been looking for opportunities to add thermal power generation to its portfolio to hedge against the uncertainties in developing hydro power plants.

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