CTU separation from Power Grid under cloud

The separation of the role of Central Transmission Utility (CTU) from state-owned Power Grid Corporation India Limited (PGCIL) is facing considerable delay and hence its work would be distributed among other subsidiaries of Ministry of Power.

Senior government officials said it would at least take a year for CTU to be separated and created as an independent body. “The task is on track and such structural changes need time,” said a senior power ministry official in the know. The official added that the government is keeping in mind both the sensitivity of the task of CTU and the demands of the industry in mind.

The Ministry of Power last year decided to hive off the Central Transmission Utility function of PGCIL. This follows the spinning off of grid management function from the government-owned transmission behemoth. Power Grid as CTU is responsible for wheeling of power generated by power producers and involved in planning transmission systems and operations. It also has additional role of collecting tariffs from power generators, state electricity boards etc using the transmission infrastructure. The CTU retains its share and then distributes the remaining to other private licensees.

“We have decided to separate CTU from PGCIL. All the study and paperwork is going on. I agree with point of view that CTU should be a separate entity. Power Grid acted like a support to these institutions till they become strong and centralised,” union Power Minister Piyush Goyal told Business Standard in an interview last year. A new company called POSOCO was recently made the grid manager- separating it from Power Grid.

However, after that there has just been a report submission on the feasibility of the idea by Central Electricity Authority (CEA). A separate independent body on the lines with POSOCO has been suggested under the aegis of the power ministry.

Now, the task of monitoring the power transmission projects after they are bid out will be entrusted to Power Finance Corporation Consulting Limited (PFCCL) and Rural Electrification Corporation Transmission Company Limited (RECTPCL). The two are subsidiaries of lending arms of power ministry – PFC and REC. They currently tender power transmission projects through tariff-based competitive bidding.

Senior executives at RECTPCL said the company would now also monitor the projects after they are tendered. “As the role of CTU has been contested repeatedly and its creation is taking time, so some tasks have been assigned to us. The final organisation would be independent,” said the executive.

As regards the planning of projects, senior power ministry officials said more dialogue would be initiated with the industry.

Power transmission was opened for private competition in 2010. PGCIL currently holds the lion’s share with 95% projects. Apart from planning the national grid, Power Grid as a transmission company also participates in tender based competitive bidding for transmission projects along side private players.

This conflict of interest has faced repeated criticism from the industry. Private sector executives requesting anonymity said the government is failing in its commitment to provide a level playing field.

A FICCI report in 2013 on power transmission said as it is also CTU, “Power Grid can make sensitive information available to it without much difficulty…. it is tariff collection agency – this confers additional powers to the company to potentially arm-twist private players.”

PGCIL has however maintained that the separation of CTU is in their interest as then it would be able to expand its business as a pure transmission company.

“CTU needs to be one company to take care of bidding, monitoring and planning. Currently, it is done by three different agencies,” said a senior PGCIL official.