After the Centre cleared the power transmission Bill, allowing private sector investments in power transmission as an independent activity, several utilities have expressed their interest in investing in this sector. Companies like the National Grid Corporation (NGC) of the UK have been in the country since 1993, working in partnership with the Power Grid Corporation of India under a utility collaboration agreement. In addition, it has provided consultancy services in connection with the power sector reform project in Orissa. The company is also associated in the first private sector electricity transmission project in India, estimated at $200 million. Roger Woods, head of NGC's Indian operations, spoke to Kandula Subramaniam on issues in the area of transmission and the Indian power sector.
Q: After the government cleared the power transmission Bill, what is the country's investment potential in the area of transmission?
A: After the government cleared the electricity laws (amendment Bill, 1998), it is now possible to address the problems caused by the limited investment in the transmission and distribution network of the country. For far too long, the Centre and states' attention has been riveted on generation of power.
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Studies by the Central Electric Authority (CEA) reveal that the development of inter-regional links could reduce the requirement for new generation capacity by around 7,000 mw by the end of the Tenth Plan. This is a fraction of generating costs for equivalent power.
As generating capacity is increased to meet demand, the strain on existing power transmission networks will become unbearable without correspondingly huge investments in transmission assets. Simply put, it will be impossible to get the power to the people because the transmission system _ the highway for power _ will not be there.
Q: Even though the Centre has cleared the transmission Bill, do we have a viable policy for power transmission?
A: An outline policy framework was developed by the Shankara Guruswamy Committee. However, this needs strengthening to ensure adequate investment. Thus a more detailed framework is required using models from other countries.
Q: Is there need for a uniform power transmission policy or can states follow different models?
A: A number of different models for restructuring the electricity industry are being developed around the world. A common feature in all of them is greater transparency by the separation (unbundling) of generation, and transmission and distribution activities.
This enables the management to focus on improving efficiency and reducing costs while ensuring the needs of customers are met.
Q: As a company that is investing in power transmission what is the internal rate of return (IRR) that a company will require before investments are made?
A: Companies will need a return similar to those negotiated recently in the generating sector after taking account relative risks. Unfortunately, the level of risks the transmission companies will be able to take has not yet been defined.
Q: Typically speaking what is the level of losses that the country should have and can the private sector achieve it?
A: Poor resource allocation in the T&D sector has resulted in alarmingly high T&D losses of almost 23 per cent of power generated in India as against around 7 per cent in China, 10 per cent in Thailand and 12 per cent in Argentina.
The states contemplating private participation would be encouraged by the performance of private utilities operating in Mumbai, Surat, Ahmedabad that have managed to bring down the T&D losses to below 12 per cent, install a modern grid and distribution system and be profitable.