Power Grid sees reduction in project delays by 6 months

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New Delhi | Published: December 14, 2015 12:52:36 AM

State-run power transmission company Power Grid Corp (PGCIL) believes that recent changes in norms for forest clearances and higher compensation for right of way will cut down project delays...

State-run power transmission company Power Grid Corp (PGCIL) believes that recent changes in norms for forest clearances and higher compensation for right of way will cut down project delays by as much as six months thus improving the cash flow for the company.

The changes in forest clearance criteria have meant that a company that has obtained stage-1 clearances for linear projects like transmission corridors can start work on the project even as it applies for the stage-2 clearance. Further, the ambit of regional offices of ministry of environment and forest (MoEF) has been increased. These offices can now issues clearances for up to 20 hectares of forest land as opposed to 5 hectares earlier.

“These changes have cut down delays due to clearances by almost half for new projects that the company has undertaken,” Indu Shekhar Jha, the chairman and managing director of PGCIL told FE. Jha, who took over as CMD of the firm last month, added that the forest clearances have ceased to be an issue for the company post these tweaks.
The company has said that it has found a way around the vexing issue of obtaining right of way (RoW) for its projects. This, along with forest clearances, have been two of the most important reasons for project delays. Based on the recommendations of an expert committee formed by the power ministry, the transmission utility has now hiked the compensation for land used for RoW.

“Although we don’t buy the land where our towers are erected, we now pay the land owner not just the compensation for crop but also 85% of the land value for the area used in the projects. Additionally, we pay a further 15% of the land value for overhead transmission lines,” Jha said.

He added that while there would still be odd cases of land owners not agreeing to the monetary compensation, the higher amount has made it lucrative for the farmers and easier for Power Grid to execute project on time.

The higher compensation, however, would lead to 10% increase in the project cost but the company believes that it would still be favourable compared to delays that run into years. “A delayed project is akin to a double jeopardy where we not only end up paying interest cost on the unfinished projects for a longer period but the internal rate of revenue for the project also comes down by as much as 50 basis points,” Jha said. He added that timely capitalisation of projects lead to availability of equity which enables the company to undertake more projects.

The firm hopes to wind up the current projects on its order book– amounting to about Rs 1.25 lakh crore– in the next 3-4 years. The central transmission utility is currently facing delays of 18-24 month in at least 8 transmission corridors due to various reasons including intentional delays when proposed generation projects fail to take off or are stalled.

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