In what could give a further fillip to private investments in electricity transmission projects, the government is set to divest state-run Power Grid Corporation of India Ltd (PGCIL), which owns and operates the bulk of inter-state and inter-regional transmissions, of its regulatory mandate.

The Union power ministry has prepared a Cabinet note to “completely separate” PGCIL from the newly created Central Transmission Utility of India (CTUIL), which is now wholly owned subsidiary of the former, a source privy to the development told FE, on condition of anonymity.

The rationale behind the creation of the new entity was also to create confidence among private investors the tariff-based competitive bidding (TBCB) that gathered pace in recent years for award of transmission projects, is transparent.

However, even after the creation of CTUIL, private players and potential bidders have remained concerned about the chances of PGCIL accessing sensitive information and making robust margins on nomination-based contracts and using it to cross-subsidise TBCB bids.

A complete institutional separation between PGCIL and CTUIL has been demanded by the private power companies in order to ensure a fair bidding process of transmission projects.

“PGCIL gets a lot more projects on RTM (Regulated Tariff Mechanism) basis or the nomination basis. It can possibly deploy the resources which have to be used in projects that have been awarded through the tariff-based route,” an industry official said.

“There is also an issue of PGCIL using its dominance to exclude private players from using EPC (engineering, procurement, and construction) vendors,” he added.

Since January 2011, the PGCIL has won 44% of the TBCB bids and the private sector bagged 56%. This is apart from the strategic projects nominated to the PGCIL under the RTM.

The number of companies who participate in the bids, on average, has gone up. On the other hand, many also feel the margins have been squeezed as many tendered projects were difficult to implement in the medium to long term.

The country’s power transmission sector may require investments worth Rs 2.4 trillion e to connect estimated renewable energy capacity of 371 giga watt to the grid by FY2032, Kotak Institutional Equities said in a report in March this year.

According to industry estimate, the transmission sector may see investments to the tune of Rs 60,000 crore in 2024-25.

In the current financial year, Rs 26,000 crore worth projects have already been awarded and bids for Rs 11,000 crore worth projects have been submitted.