Power Grid's aggressive diversification into intra-state projects comes at a time when the government has approved a scheme to address gaps in rural electrification programme
New Delhi: Power Grid Corp. of India Ltd, which lays heavy duty cross-country power lines, is set to invest heavily in local power transmission infrastructure of states, a new front of growth resulting from the government’s ‘power for all’ goal.
Power Grid, which has a joint venture with Bihar State Power Holding Co. Ltd, is currently exploring a joint venture with some other state utilities, Power Grid chairman and managing director I.S. Jha said in an interview. Power Grid will also directly participate in state government auctions of intra-state transmission projects, expanding its portfolio of nearly a dozen such ventures, Jha said.
Power Grid’s aggressive diversification into intra-state projects comes at a time when the central government has approved a scheme to address the gaps in its rural electrification programme and to facilitate last mile electricity connectivity to homes.
On 25 September, Prime Minister Narendra Modi launched the Rs16,320 crore Sahaj Bijli Har Ghar Yojana, or Saubhagya, which complements the village electrification programme, the Deen Dayal Upadhyay Gram Jyoti Yojana, under which 78% of 18,000 identified villages have been electrified since its launch in July 2015.
The goal of ‘electricity for all’ to be achieved by 31 December 2018 under Saubhagya is expected to improve electricity consumption, a key development metric.
“Today, the per capita power consumption is 1100 units, which is low. If we have to raise it to 3,000 units or more by 2030, then the power sector has to grow three to four fold. State governments intend to invest in intra-state projects which is estimated to require Rs1.5 trillion. We are setting up joint ventures and are participating in tariff based competitive bids for state projects," said Jha.
Saubhagya scheme is a positive for the power sector as its implementation is likely to improve energy demand besides benefiting the capital goods industry, especially in the distribution segment, ICRA Ratings said in a note last month.
A shift to electric mobility in the medium term is also expected to add to electricity consumption, boosting the business of power generation companies and transmission utilities. “As transportation is the largest user of oil, electrification of public and private transport will significantly boost power demand," said Kameswara Rao, partner, PwC.
For the five-year period from 2017-18 to 2021-22, Power Grid has projects worth about Rs1.3 trillion to commission. The capital spending to be made during the period will also include the requirement of new projects to be won. The aggressive push for state-level projects also coincides with the government’s encouragement to state-owned firms to spend on infrastructure that could have the effect of a fiscal stimulus to economic growth.
“Capex for the current financial year is Rs25,000 crore, out of which Rs12,000 crore has been spent. We are on track in commissioning projects," said Jha. Power Grid is also building new revenue streams around its telecom tower business.