The Central Transmission Utility (CTU) is an important facet of the electricity transmission sector. The Electricity Act, 2003, the legislation which determines the governance of the electricity sector in India, has allocated various important functions to the CTU. Among others, these functions include: (a) undertaking transmission of electricity through the inter-state transmission network, (b) planning the inter-state transmission network and coordination with other key stakeholders, (c) development of inter-state transmission lines for smooth flow of electricity to the load centers and d) provide open access connectivity. Importantly, the CTU collects tariffs from utilities in the form of inter-state transmission charges on account of usage of the transmission infrastructure.
Hitherto, POWERGRID functioned as the CTU in India. However, vide its Order dated March 11, 2021, the Ministry of Power notified a new company, Central Transmission Utility of India Limited (CTUIL) as the CTU. The new company has been carved out as 100% subsidiary of POWEGRID; with POWERGRID now declared as a deemed licensee. To review, deemed licensee under Section 14 the Electricity Act, 2003 is an entity deemed to be a licensee for inter-state transmission of electricity. As this is an important development in the transmission sector, in this blog we will discuss the features of the reform and what it means for the transmission sector going forward.
Post the promulgation of the Electricity Act 2003, a significant sea change occurred in the power sector. State Electricity Boards were unbundled into separate generation, transmission and distribution companies. While generation was delicensed and private participation was allowed in the distribution sector, transmission was seen as a natural monopoly. Therefore, the inter-state transmission network was planned, developed and managed by POWERGRID while the intra-state transmission network was planned, developed and managed by the respective State Transmission Utility. Transmission projects were developed on a regulated cost-plus basis. Over a period of time, the principle of tariff based competitive bidding came to be in the transmission sector where competitive bidding was undertaken in order to develop inter-state transmission networks. This resulted in a conflict, wherein the POWERGRID, as CTU, was responsible for planning transmission projects and was participating in bids for transmission projects. It is reported that separating electricity transmission planning from the purview of POWERGRID has long been an industry demand for fair bidding of transmission lines.
Features of the Reform
Effective from April 01, 2021, the Central Transmission Utility of India Limited (CTUIL) is responsible for all functions of a CTU as envisaged under the Electricity Act, 2003. Therefore, the CTU India Limited now responsible for planning and development of the inter-state transmission network, levy of inter-state transmission charges and providing open access connectivity.
In order to execute this reform, the Ministry of Power notified a transfer scheme, called “The Division and Demerger of the Central Transmission Utility and Power Grid Corporation of India Limited Transfer Scheme, 2021”. Under this scheme:
- All undertakings of POWERGRID have been divided into Part A Undertakings and Part B Undertakings. Part A Undertakings have been vested with the CTU India Ltd, while Part B Undertakings have been defined as all undertakings other than those specified under Part A Undertakings.
- Part A Undertakings include: (a) assets, liabilities and proceedings of POWERGRID as they relate to the functions of the CTU previously discharged by POWERGRID, (b) all data, records and documents related to functions, assets and liabilities and proceedings of CTU India Ltd and (c) all taxes, duties, cess, levies and penalties chargeable on the activities, assets and properties related to the functions of the CTU India Ltd.
- CTU India Ltd have been vested only with assets, interest, proprieties, liabilities, assets, personnel, etc., as provided under this scheme.
- Personnel of POWERGRID who have been undertaking the functions of CTU continue to serve the CTU India Ltd till the full transfer and absorption of personnel in the CTU India Ltd under this scheme. CTU India Ltd is liable to meet all obligations pertaining to these personnel
- The Transfer Scheme provides for a detailed mechanism of transfer of personnel from POWERGRID to CTU India Ltd.
- All proceedings against POWERGRID are not affected by this scheme. These proceedings are to continue against POWERGRID or CTU India Ltd, as the case may be.
- Financials of the CTU India Ltd and financial adjustments to be affected in the accounts and balance sheet of POWERGRID are to be provided by POWERGRID at an appropriate time
What does this mean for the Transmission Sector?
An immediate consequence of this reform is a level playing field between POWERGRID and other bidders during competitive bidding for transmission projects. Therefore, there would be increased transparency in the competitive bidding process with increased scope of business for major private sector transmission utilities. There are advantages to POWERGRID from this reform as well, as the utility presently owns an estimated 85% of the inter-state transmission network. POWERGRID can focus on its activities as a transmission utility as all functions vested to the CTU under the Electricity Act, 2003 will now fall under the purview of the CTU India Ltd.
As a market leader in the Indian electrical test and measurement market, SCOPE welcomes this measure. SMEs can benefit from increased participation in a transparent electricity transmission network.