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Interaction | August 2015

We are migrating to higher transmission voltage

Vimal Kejriwal, MD & CEO, KEC International Ltd is less stressed as he expects domestic ordering activity to improve, driven by planned capacity enhancement of inter and intra-state lines.

Don´t you think that despite having installed capacity, transmission infrastructure in India did not receive due attention?
There is a paradox with regards to the pace and quantum of growth in transmission and distribution as compared to growth in generation, as although progress is happening on the transmission front, the current transmission infrastructure is highly inadequate and imbalanced. Blackouts and power shortages still plague India and power theft is rampant. Another downside is that SEBs are cash strapped due to which they have not been able to invest significantly on intra-state lines, thus not being on par with inter-state lines.

Power capacity has witnessed commendable growth. Where are we placed in terms of interstate transmission networks in India?
India is effectively progressing on the transmission front and the sector has witnessed reasonable growth over the years. Today, India is migrating to higher transmission voltages of upto 1,200 kV, working on new technologies for bulk power transmission, has a fully synchronised National Grid, is developing high capacity power transmission corridors (HCPTCs) and inter-regional links in the grid etc. Speaking of inter-state transmission lines in particular, much is being done on this front. PGCIL, which mainly owns and operates inter-state lines has already made huge investments for their development and is managing them. Quite a few inter-state lines are already awarded on PPP mode, wherein the private sector has enthusiastically partnered.

Going forward, do you think that there will be increase in project awarding in the current year?
Things appear to be moving, quantum of orders from SEBs is increasing and that too large orders are coming especially in Tamil Nadu, Karnataka, West Bengal, Bihar and Orissa. There is significant traction in the way SEBs are ordering. Their capex is expected to match that at PGCIL of around Rs 22,500 crore. During FY15, more than 50 per cent of our total order intake of Rs 8,223 crore was from the domestic market and we also secured the highest ever single order in SEB sector from Karnataka PTCL worth Rs 543 crore.

The government has also announced awarding Rs 100,000 crore worth of transmission projects in the next six months, of which tenders worth Rs 4,000 crore have already been floated. Thus, going forward, we expect ordering activity to improve on the domestic front, mainly driven by planned capacity enhancement of both inter and intrastate lines, T&D strengthening initiatives underway in the north-eastern region, expected doubling of existing capacities, refurbishment demand and green energy corridors etc.

List out your agendas to wake up this government from slumber?
I would not say the government is in slumber, rather their approach has been encouraging and it has showcased reasonable sensitivity with regards to the issues and bottlenecks of this sector. On the positives, they have brought down the number of stalled projects. We have closed many of our unfinished or stalled projects post the new government coming to power.

Recent reports also suggest the government is expected to commission 47 per cent of 258 stalled projects in 2015-16, of which around 30 projects likely to be cleared are pertaining to the power sector alone.

However, there has not been much picked up on the new projects front and we have not witnessed any major policy level outcomes necessary for this sector, although deliberations appear to be in progress. Ideally, robust reforms have to be developed in areas of:

  • Land acquisition, Right of Way and Forest clearances
  • T&D industry should be granted the´Infrastructure Industry´ status
  • Distribution sector policies and reforms
  • Enhanced incentives and support for exports
  • Incentivising innovation and R&D
  • Manpower planning and skill upgradation

Being a prominent player in the field of transmission, do you sense a growing interest of private players in the space of transmission, despite lack of interest of the banking fraternity to finance transmission projects?
Yes, there is growing interest by the private players, although PGCIL continues to be the largest player.

The lack of interest by banks can be attributed to uncertainties in payments on account of the project getting delayed due to sectoral bottlenecks. Also, in many cases projects are delayed, as in order to maximize returns the EPC projects are broken down and awarded on a piecemeal basis to the private players at fairly low rates. Such an arrangement may not be preferred by Banks and they may prefer the EPC contracting route instead, which is a more secured form of construction contract. In addition, where the end buyers are SEBs, payment guarantee is also a concern owing to their frail credit standing.

What is the one factor you think that can make a transmission project more financially viable, and gives a return on investment at par with generation?
First and foremost, the Government has to work on removing the hurdles impacting timely completion of the projects, the biggest of them being issues pertaining to RoW and forest clearances.

The second major factor is to work towards improving the credit standing of the end buyers such as SEBs.

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