Mint Explainer | Why India's CEA is pushing for power transmission asset monetization
The CEA says a well-planned asset monetization programme could be a source of resource mobilization for capital expenditure in the power transmission space.
NEW DELHI: With exponential growth in India’s energy transition requirements, power transmission has emerged as a key component of this green push. The Central Electricity Authority, which advises the government on policy matters, recently came up with a draft plan to monetize intra-state transmission assets such as power lines and towers.
Mint explains the strategy to unlock the value of India's nationwide power transmission system and finance the expansion of this network with an estimated investment of ₹9.16 trillion
What has the CEA proposed on monetization of transmission assets?
The CEA, under the ministry of power, outlined the draft regulatory framework to monetize public sector transmission assets in states in a concept note released on 7 November.
It proposed a public-private partnership model of 'Acquire, Operate, Maintain and Transfer.' This allows the transfer of public transmission assets to private entities for a defined period, aiming to enhance efficiency and unlock the financial value of existing infrastructure.
The CEA noted that hiving off the assets of transmission companies to a special purpose vehicle is key to the monetization process. It proposed three options for the hive-off – slump sale, demerger and direct asset transfer.
Why is there a push for monetization of transmission assets?
The government is looking at expanding the transmission network, which is a key element of the power system and plays a pivotal role in terms of energy transition. As more green energy capacity is added, India will need a robust power transmission network, given that both solar and wind power are intermittent sources of energy.
The CEA estimates India will require more than ₹9 trillion till 2032 to strengthen and enhance the transmission network across the country. It says a well-planned asset monetization programme could be a source of resource mobilization for capital expenditure in the power transmission space.
Transmission assets, with their established track record of service agreements and stable cash flow generation, are seen as a low-risk and familiar asset class globally, making them attractive to both global and domestic institutional investors.
The CEA notes that asset monetization offers twin benefits to governments – providing short-term liquidity through upfront payments and enabling private sector-led operations and maintenance, thus reducing the scope of the public sector while leveraging private expertise.
More than 50% of the transmission capacity addition needs to be done at the state level.
“As states undertake heavy lifting, asset monetization will be essential to meet these significant investment needs. States have significant potential for monetizing their transmission assets by leveraging brownfield assets. This can mobilize proceeds for new infrastructure investments, creating a multiplier effect on state economies," it said.
Have similar monetization efforts been taken up previously in the power transmission space?
The Centre has undertaken similar steps for its own network under the National Monetisation Pipeline. State-run Power Grid Corporation of India Ltd has already monetized a set of interstate transmission lines through its infrastructure investment trust, raising funds by transferring operational assets into the trust and allowing private investors to participate.
The National Monetisation Pipeline covers 28,608 circuit-km (ckm) of primarily 400 kV and above transmission lines owned by Power Grid Corporation, valued using an assumed rate of ₹1.58 crore per circuit km.
What is the current status of India’s power transmission network?
India’s transmission network is one of the largest in the world, at 495,405 ckm. The Centre’s National Electricity Plan released in October 2024 has set a target to add 191,000 ckm of transmission lines by 2032 and add 1.31 million mega volt amperes of transformation capacity from the current 119 GW to 168 GW by 2032.
However, the growth of the transmission network has been significantly slower than the required momentum, raising concerns over meeting the targets and catering to the growing power generation capacity and demand.
Mint reported that even as new power generation capacity almost tripled to 26.8 GW so far this fiscal year, expansion of the transmission backbone is faltering. Just 1,998 ckm of new lines were added as of August, 30% less than a year ago, against a full-year target of 15,382 ckm.
A JMK Research study estimates that 50 GW of renewable capacity nationwide cannot be transmitted because of inadequate infrastructure, inflating per-unit transmission costs, weakening project viability and deterring private investment.
Are monetization efforts being taken up in other areas of the power sector?
The government is pushing for monetization and privatization of assets and utilities across the power sector. A group of ministers recently proposed a debt recast plan for the power distribution sector and suggested three reform paths – privatize majority ownership, divest a limited stake, or list utilities within three years.
Each option is said to link financial support to performance, including access to 50-year interest-free loans and equity grants to modernize grids. The power ministry has been pushing for monetization and privatization of generation companies to unlock value and bring in liquidity.
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