Power outages persist in North India amid rising demand and heatwaves

Trouble could be mounting in the intra-state systems affecting power supply as states are still unwilling to bid out the lines at prices that would attract investors to upgrade capacities

Since mid-May, the median power drawn from the grid has been 240 GW, at least 20 GW more than the same period last year. The national grid is holding up well, but regions like North India still experience daily power outages despite the overall positive outlook.

In the intense heat waves, these outages can be disastrous, particularly in smaller towns where investments in state-level transmission lines are often lagging. The situation is quite different for inter-state transmission lines. “Investments there are quite healthy,” said former power secretary Alok Kumar. Major private sector players like L&T Power, Adani Power, and Sterlite Power, along with public sector company MahaTransco, are performing well in this area.

A recent report on the Indian power sector by ICRA Research noted concerns about the distribution sector but hardly any about the transmission segment. Vikram V, Vice President & Co-Group Head - Corporate Ratings at ICRA, said the segment’s performance has been robust.

However, trouble could be mounting in the intra state systems and for the same reasons as those afflicting the power supply to the end consumers in the distribution segment. States are still unwilling to bid out the lines at prices which will draw investors to upgrade capacities. 

The main issue is the cost of building the infrastructure. The best practice would be for states to bid out the lines through descending auctions where the lowest bidder wins, allowing for efficiency in the transmission systems. If costs are low, the ultimate beneficiary is the end consumer.

“Instead, some states use the cost-plus principle to maintain their transmission infrastructure,” said Kumar. The Central government has advised states to adopt competitive bidding instead of regulatory tariffs, but with limited success. As a result, the repair and extension of transmission lines within states have developed a backlog.

At the central level, decisions to build or add to transmission infrastructure are usually made by the Central Electricity Authority, but these pertain to inter-state lines. The Grid Controller of India Ltd (formerly Posoco) provides data from regional load dispatch centres to support this process.

Costs and tariffs do not come into play until approvals come through from the Central Electricity Regulatory Commission, at which point auctions are called for. Companies bid, offering the lowest possible cost to build or maintain the lines.

There is, of course, a challenge here too. Power Grid Corporation, as the largest central sector power transmission utility, bids for these assets alongside private sector counterparts.

“It is not often a level playing field for us in the private sector,” said Prateek Agarwal, managing director of Sterlite Power. He expressed concerns about the pricing power of Power Grid Corporation, noting that more than 50 percent of new projects are still won by the state-owned company in auctions.

However, Kumar says the picture is changing. He believes that except for urgent lines, fair competition is increasing, expanding the market for private players.

An emerging challenge in the inter-state transmission line business is disputes over land acquisition. Recently, a case involving lines crossing Rajasthan, claiming to infringe on the territory of the Great Indian Bustard, was shot down by the Supreme Court. While these are valid concerns, they make it costlier to develop alternative lines. In West Bengal’s North 24 Parganas, a dispute over land acquisition has stalled the expansion of power lines into some interior areas.

As the heatwave takes its toll, faster repair and expansion of lines are necessary. The industry is gearing up, but last-mile connectivity often falls short due to disputes over who will bear the costs.