CTU separation from Power Grid under cloud

The government’s plan to hive off the central transmission utility (CTU) function of Power Grid Corporation India as a separate entity seems to have fallen through. According to sources in the know, the government is now considering to distribute the work of the CTU among other public sector firms under the power ministry, such as the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).

Sources said it would take at least a year to separate the CTU and create it as an independent body. “Such structural changes need time,” said a senior power ministry official. The official added that the government was keeping in mind both the sensitivity of the task of the CTU and the demands of power sector.

The power ministry decided to separate the CTU function from Power Grid last year after the grid management function was spun off from the state-owned transmission behemoth.

As a CTU, Power Grid’s current responsibilities include transporting electricity generated by power producers. It is also involved in planning transmission systems and operations. It has the additional role of collecting tariffs from power generators and state electricity boards using the transmission infrastructure. The CTU retains its share of electricity and distributes the remaining to other private licencees.

“We have decided to separate CTU from PGCIL. The paperwork is going on. I agree with the point of that the 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 had told Business Standard in an interview last year.

A new company called POSOCO was recently made the grid manager, a function Power Grid used to do earlier.

Now, the task of monitoring the power transmission projects after they are bid out will be entrusted to the subsidiaries of PFC and REC —Power Finance Corporation Consulting and Rural Electrification Corporation Transmission Company Limited (RECTPCL), respectively, which currently tender power transmission projects through tariff-based competitive bidding.

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

While power transmission was opened to the private sector in 2010, Power Grid still holds a 95 per cent share in it. Apart from planning the national grid, Power Grid also participates in tender-based competitive bidding for transmission projects alongside private players.

This conflict of interest has faced repeated criticism that the government is not providing a level-playing field.

“Power Grid can make sensitive information available to it without much difficulty... It is a tariff collection agency. This confers additional powers to the company to potentially arm-twist private players,” said a 2013 FICCI report on power transmission.

 

Power Grid has, however, maintained that the separation of CTU is in its interest because it will be able to expand its business as a pure transmission company.

NEW ENTITY ON THE CARDS

  • The government is said to be considering to distribute the work of the central transmission utility (CTU) among other public sector firms under the power ministry, such as the Power Finance Corporation and Rural Electrification Corporation

     
  • It would take at least a year to separate the CTU and create it as an independent body, said sources

     
  • The power ministry decided to separate the CTU function from Power Grid last year after the grid management function was spun off from the state-owned transmission behemoth

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel