Power transmission needs competition
By Shriram Subramanian, Founder and MD, InGovern Research Services
India’s ambition to deploy 500 gigawatts (Gw) of non-fossil energy capacity by 2030 depends on a robust interstate transmission network. While generation capacity can be built in 18-24 months, transmission corridors often require about four years and multiple clearances. The current national grid has already achieved synchronous integration of all five regional grids. India’s renewable energy ambition is among the loftiest globally. Meeting it will depend as much on the efficiency and inclusiveness of its transmission architecture as on the megawatts being built. A competitive transmission sector is therefore not just good economics—it is good grid governance.
A key reform—the Tariff-Based Competitive Bidding (TBCB) framework—was introduced to open up transmission to both public and private sector companies. Private sector companies bring value through faster execution, adoption of new technologies, like drone-based monitoring or advanced tower designs, and access to global finance. Yet, recent trends point to a shrinking competitive field and many projects being awarded to one company. In FY25, the state-owned Power Grid Corporation of India Ltd (PGCIL) secured 26 out of 45 interstate transmission projects. This accounts for nearly 60% of the projects by value. While PGCIL has had a history of building our national grid, such a high concentration of new project awards to a single company signals a market that is becoming less competitive.
The core issue is the structural advantage that PGCIL enjoys as a public sector company with a cost of capital that is significantly lower than that of any private developer. The lower cost of capital is not a reflection of efficiency but of financial stature. In a bidding process heavily weighted on tariff, this creates an uneven playing field where private players, despite bringing genuine efficiencies and new technologies, consistently finish second. Rational market participation is not possible when there is no level playing field. When private developers repeatedly lose bids despite significant investment in preparation, they will inevitably pull out of participation. This leads to narrower competition, and the sector loses the very diversity and innovation that competition was meant to inject.
The consequences can be disastrous for India’s energy security. A report by the Institute for Energy Economics and Financial Analysis highlights a worrying shortfall as in the last fiscal year, India commissioned only 8,830 circuit kilometres of new transmission lines against a target of 15,253 circuit kilometres, a 42% deficit. Additionally, with PGCIL handling an enormous portfolio of projects worth over `1.50 lakh crore, capacity strain is a real concern. The Central Electricity Authority has noted delays in several transmission projects.
This is not just a transmission sector problem; it becomes a renewable energy problem and an energy security problem. Delays in building transmission corridors mean that completed solar and wind projects are left waiting for connectivity, leading to power curtailment and financial losses for power generators. This, in turn, hurts investor confidence, both domestic and international, at a time when it is most needed. The solution is not to sideline PGCIL, but to create a framework where multiple players can thrive, ensuring inter-state grid build-out is resilient and efficient. A few policy adjustments can help bring the build-out on track.
First, bid allocation must be rationalised. Similar to renewable energy auctions, a ceiling should be applied so that a single participant cannot win more than a set percentage of projects in a bidding round. For instance, a single bidder cannot be allocated more than 50% of capacity within a given tranche. This would ensure PGCIL remains the main market participant while creating space for other participants.
Second, institutional neutrality should be ensured. The Central Transmission Utility, which plans and procures these projects, must be perceived as entirely impartial. To bolster confidence, its processes, from project design to bid evaluation, should be subject to periodic independent review.
Third, the bidding model warrants a revisit. The current emphasis on low tariff discovery as opposed to the e-reverse auction generates aggressive tariff bids that strain execution. A shift to a sealed-bid process combined with quality and cost-based selection (QCBS) would be a positive reform. Under QCBS, qualitative parameters such as execution track record, proposed technology, and operation and maintenance plans would weigh alongside cost. Given the long-term asset nature of transmission, quality matters.
India’s green energy transition is a marathon, not a sprint. India’s progress on transmission will ultimately determine how fast renewable energy can scale. For it to succeed, every capable market participant should be performing at peak efficiency. By ensuring a genuinely competitive transmission sector, India can build a grid that is not only unified but also reliable, innovative, and capable of guaranteeing the country’s energy security. The time to correct the balance is now, before project delays become a permanent bottleneck to our ambitions. As India moves toward its 2030 and 2047 energy milestones, restoring competitive intensity in the transmission sector will be essential for maintaining affordability, reliability, and investor confidence.
This article has been republished from The Financial Express.