NDA government’s emphasis on the auction route for awarding core sector contracts notwithstanding, state-owned Power Grid Corp (PGCIL) has been nominated...
Narendra Modi led NDA government’s emphasis on the auction route for awarding core sector contracts notwithstanding, state-owned Power Grid Corp (PGCIL) has been nominated to develop green transmission corridors for 20,000 MW of upcoming solar and wind power projects, effectively bypassing the competitive bidding route.
While PGCIL was earlier selected on a nomination basis for the execution of the Bhuj-Banasthali-Chittor-Ajmer 765 kV green corridor to harness solar energy in Gujarat, officials said that for the next leg of this corridor, PGCIL — a utility with a near monopolistic presence in the transmission sector and having a 35 per cent institutional shareholding — has been asked to extend this corridor from Ajmer (Rajasthan) to Suratgarh and Moga (Punjab), again on a nomination basis. For this leg of the project, PGCIL is learnt to be negotiating a soft loan through the Manila-based Asian Development Bank.
Under the Tariff Policy, transmission projects are required to be awarded through a competitive bidding process. The only exceptions are those lines that need to be built within a compressed time schedule or under an exigency, where the Central Transmission Utility (POSOCO) can offer these projects on a nomination basis.
The rationale for awarding these contracts to PGCIL on a nomination basis, thereby bypassing the competitive bidding route, is that the gestation period of transmission projects is much longer than building solar plants. However, the rush to assign the projects to PGCIL on a nomination basis has raised eyebrows as no solar or wind power project developer has so far signed the inter-state power purchase agreements.
Recently, PGCIL had won three projects through competitive bidding for the Vindhyachal, Gadwara and Feroze Gandhi Thermal Power stations, which will cost more than Rs 10,000 crore. PGCIL was the lowest bidder in all the three cases, with bids that were significantly lower than the next private sector bidder.
Till 2013, PGCIL had only won two out of eight projects that were awarded through competitive bidding, out of which it did not implement one — a 765 kV line from Vemagiri to Hyderabad via Khammam. The other companies that won five of the other six projects include Reliance Power Transmission, Essel Infra techno Electric, Patel-Simplex joint venture and Sterlite Technologies.
However, in the last two years, PGCIL has won bids for five projects where it undercut the competition through much lower price offering compared to the average price offering for these bids.
Although the power transmission sector was opened to the private sector in 2010, PGCIL continues to command 99 per cent market share and garners 87 per cent of the total revenue realised from the use of inter-state lines, including state lines used for the purpose.
In contrast, the power generation sector has private producers contributing well over one-third of the capacity after the Electricity Act, 2003, opened up the sector to private participation.