As per an article in Business Standard, 3.1 bn units of electricity were lost on power trading platforms due to transmission congestion. The government has come with a proposal to curb the transmission and distribution (T&D) losses. Accordingly, it has decided to tender out transmission projects worth Rs 1,000 bn, offering expansion in the transmission network to deal with transmission congestion and to limit transmission losses.
This offers huge potential to the engineering, procurement and construction (EPC) companies who supply transmission towers to the discoms. The EPC companies have reported a flat topline growth on account of weak demand from the power generation sector. Their annual reports made due mention of the depressed state of affairs in the power generation sector.
The subdued demand from the power generation companies shifted the focus of EPC companies to the transmission and distribution network whereby the state government has promised a huge investment. Companies such as Skipper Limited is gearing up to expand the production of power transmission tower. The company has planned to expand its manufacturing capacity by 25,000 tonnes. Alstom India, one of the largest EPC players in the sector is hopeful of more orders from Power Grid and other state transmission companies.
Most of the states in their annual budget have provided for more investments in the power distribution and sub-transmission sector. Large states such as Uttar Pradesh, Rajasthan and Madhya Pradesh have made separate provisions for strengthening last mile connectivity for power supply. This provides a huge opportunity for the EPC companies to boost their bottomline and topline.
However, the distribution companies are facing huge losses. They have accumulated losses of Rs 2,500 bn and lose Rs 700 bn every year as per the first year report card of National Democratic Alliance (NDA) government. The financial instability of the entire sector raises doubts on whether they would be able to invest in the expansion of the transmission lines. If they are not able to, it imposes a simultaneous threat to the EPC companies as they won't get the orders for setting up power transmission towers.