india grid trust Management discussions

Global Economy

As the COVID-19 led pent-up demand of 2021 subsided, the global economy faced various challenges at the onset of 2022.

However, it showed resilience in the third quarter of 2022 with strong labour markets, robust household consumption, business investments, and better-than-expected strategy in response to the energy crisis.

Commodity prices saw a significant rise between February and August 2022, with energy leading the way as natural gas prices rose by 120-130% due to supply scarcity in Europe caused by the reduction in gas supplies from Russia. Frequent lockdowns in China under the zero-COVID policy resulted in their economic weakening and considering their position as a major cog in the global supply chain, Chinas weakening is expected to reflect negatively on global trade and supply activity. As nations across the globe grappled with inflationary pressure, preventive measures adopted by fiduciary machinery led to some respite at the exit of 2022.

With the looming inflationary worries, global growth is projected to fall from 3.4% in 2022 to 2.8% in 2023, then rise to 3.0% in 2024, still much lower than the historical (200019) average of 3.8%. Global inflation, on the other hand, is expected to fall from 8.7% in 2022 to 7.0% in 2023 and further increasing the possibility of inflation returning to target by 2025, still much above the pre-pandemic (2017-19) levels of about 3.5%.

The major challenge to the health of the global economy, going forward, is the increasing price pressures, which are squeezing real incomes and undermining macroeconomic stability. Central banks around the world are persistently working on restoring price stability, resulting in accelerated tightening. While the Bank of England has raised its policy rate by 25 bps to 4.25% during March 2023, whereas the Federal Reserve has increased the federal funds expecting the interest rates to range between 5-5.25% in 2023. Similarly, all the central banks have worked on tightening monetary policy, leading to higher interest rates and spreads and induced volatility in the financial markets.

Consequently, the currencies of emerging market economies (EMEs) and some advanced economies (AEs) are losing value compared to the US dollar. This is leading to an increase in infiationary pressures and making it harder for these economies to obtain external funding, leading to financial stability challenges.

Indian economy

Despite the global economic challenges, Indian economy has demonstrated resilience and grew by 7% in 2023-24 Although inflation remains high, it has demonstrated signs of respite due to tighter monetary policies. Moreover, the RBI after increasing key benchmark policy rate for six consecutive times, finally paused in April 2023, effectively bringing the interest rate to 6.5% as the benchmark, helped the country stabilise the inflation.

In mid-2022, Consumer Price Inflation (CPI) in India increased to 7%, mainly due to food inflation. With efforts, RBI has been able to bring down the CPI to 6.44% and retail inflation to 6.52%; although, still above RBIs 6% upper tolerance band for the second straight month in February 2023. During the same period, Gross Value Added (GVA) rose by 12.7%, primarily driven by growth in the services sector. By harnessing the growth of the MSME sector, India has the potential to achieve a USD 5 Trillion economy by 2025-26 and even reach USD 7 Trillion by 2030. MSME sector has been a critical driver of Indias rise as the worlds fifth-largest economy. Currently, the Indian economy is expected to reach the USD 3.5 Trillion benchmark by March 2023.

Moreover, GDP per capita in India is predicted to increase to USD 2,690 in 2023 and USD 3,150 in 2025, indicating a significant improvement in business conditions. All of these factors are expected to have a positive impact on the Indian economy. Looking ahead, the outlook for aggregate supply appears promising, with agriculture and allied activities, as well as a rebound in services, boosting prospects. Rural demand is picking up, and urban demand is projected to strengthen further. The governments continued emphasis on capital expenditure, improved capacity utilisation in manufacturing, and an upswing in non-food credit should sustain the expansion in industrial activity, which stalled in July. The outlook for aggregate demand is positive, with consumer outlook remaining steady, and firms in manufacturing, services, and infrastructure sectors optimistic about demand conditions and sales prospects. However, downside risks to net exports and Indias GDP outlook arise from geopolitical tensions, tightening global financial conditions, and slowing external demand.

OUTLOOK

Amid a gloomy outlook for the global economy battered by the Russian invasion of Ukraine just as it was emerging from the COVID pandemic, India will remain the fastest-growing major economy, according to two important international financial institutions. Indias Gross Domestic Product is projected to grow by 6.8% this fiscal year and keep the top spot.

Indias underlying economic fundamentals are strong and despite the short-term turbulence, the impact on the long-term outlook are expected to be marginal. Several spillover effects of geopolitical conflicts could enhance Indias status as a preferred alternate investment destination. Global in-house centres and multinationals, for instance, may prefer India over Eastern European markets (especially those that border Ukraine) to shift their current operations or open new facilities. Moreover, a matured and resilient domestic demand is expected to drive the growth for India in the coming fiscals.

The world has recognised the Indian economy as a bright star. This was further supported by a budget contained several provisions aiming at capitalising on the buoyant state of affairs and unlocking the tremendous potential of enterprises and talent in India. The governments commitment to building a technology- and knowledge- focused economy, will be a key driver in the countrys growth story in the years ahead. In this pursuit the government has focused on strengthening our digital and technology space, supporting job growth and entrepreneurship, and bringing us closer to that goal. These can be seen through the provisions made in Artificial Intelligence, Investments in 5G, Focus on upskilling, Data governance, Support for startups and Relaxations in personal income tax.

Power Generation

World electricity demand showed remarkable resilience in 2022 despite the global energy crisis triggered by Russias invasion of Ukraine. The demand grew by nearly 2%, primarily driven by continued electrification of the transport sector and higher demand from the heating sector. This trend was demonstrated by the record numbers of electric vehicles and heat pumps sold globally. However, the growth was hampered by record-high energy prices that resulted from the surge in natural gas and coal prices. These high costs led to a rapid rise in inflation, causing economic slowdowns in most regions worldwide and stifling the electricity demand growth.

Closer home, in India the robust post-pandemic recovery continued to support strong electricity demand of over 8.4% in 2022, which was substantially higher than the average annual growth rate of 5.3% seen in the 2015-2019 period.

India is the worlds third-largest energy-consuming country and by 2030, Indias energy demand is expected to reach 405 GW, primarily driven by rapid industrialisation and urbanisation. Consequently, Indias power sector is undergoing significant changes aimed at reducing the emissions intensity of its GDP by 33%. Additionally, to also address the nations energy security and affordability challenges, efforts are being made to improve domestic coal production, mandate coal imports, increase renewable energy sources (RES) and promote focus on Battery Energy Storage Solutions to improve reliability of RES. With an installed power capacity of 416.59 GW as of March 31, 2023, India is aiming to increase its installed capacity to 500 MW by 2030 with a target of 50% contribution from RES.

All India Installed Capacity (as on April 30,2023)

Category	Installed Generation Capacity (Mw)
Thermal	2,37,268.91
Nuclear	6,780.00
Hydro	46,850.17
RES*	1,25,692.30
Total	4,16,591.38

Driving Forces for the growth of India Power Sector

Improved attractiveness of the sector for Foreign Direct investment

Indias liberal foreign direct investment (FDI) policy, along with an improving business environment and vast potential, has piqued the interest of foreign investors in the energy sector. Non-conventional energy sources have become highly attractive, with the cumulative FDI inflow in the renewable sector at USD 11.75 Billion from April 2010 to June 2022.

Going forward, India is looking to implement energy transition strategies which include building local supply chains, securing domestic fuel resources, and deepening power sector reforms to address structural issues. The country also plans to continue adopting new and clean technologies, creating demand and infrastructure to support this transition.

National Infrastructure Pipeline

The National Infrastructure Pipeline (NIP) is a long-term plan launched by the Government of India in 2019 to develop and improve Indias infrastructure across various sectors, including energy, transportation, housing, water, and health. The plan targets an investment of ~INR 111 Lakhs Crores between 2019-20 and 2024-25 with share of Centre, State and Private players pegged at 39%, 40% and 21% respectively.

NIP Sectoral Allocation

Under the NIP, the energy sector has been allocated the highest share (24%) of the total expected capital expenditure. The focus is on renewable energy projects, with a planned outlay of INR 9.3 Lakhs Crores across 250+ opportunities.

The government aims to increase Indias renewable energy capacity to 450 GW by 2030, requiring significant investments in generation, transmission, and distribution infrastructure. To facilitate the integration of renewable energy into the existing transmission network, the government plans to establish Green Energy Corridors and Renewable Energy Management Centres. This initiative is aimed at improving network efficiency and address the intermittent nature of RES.

Under NIP, the generation, transmission and distribution sectors have a planned outlay of ~INR 14 Lakhs Crores.

Given the addition of newer generation capacities across both - non-renewable and renewable energy sources - the focus for transmission and distribution sectors will be development of high voltage transmission corridors, substations and last-mile connectivity to ensure smooth and uninterrupted power supplies.

Source:https://indiainvestmentgrid.gov.in/opportunities/nip-projects/ electricity-generation ?subSector=115&all=1

Capital expenditure over FY20 to FY25Sector	Total Investment Projected (INR Lakhs Crores)
Generation	3.3
Transmission	3.2
Distribution	3.0
Total	9.5
States*	4.6
Overall Total	14.1

* States include Uttar Pradesh, Maharashtra, Gujarat, Telangana, Jharkhand, Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Karnataka, Haryana, Punjab, Delhi, Kerala, Odisha, Chhattisgarh, West Bengal Sikkim, Mizoram, Andaman & Nicobar, Chandigarh and Puducherry

Source: Report of the Task Force NIP - Volume 2

24/7 Power for All

The Indian government has implemented several initiatives and schemes to address issues related to power infrastructure, distribution, and efficiency. These include the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Integrated Power Development Scheme (IPDS), Ujwal DISCOM Assurance Yojana (UDAY), and Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya). The government has allocated [] Billion for funding to various state governments to strengthen their power infrastructure. Notably, India has achieved 100% electrification of all households as of April 2021, demonstrating significant progress towards universal access to electricity. In addition, the government is encouraging the use of smart grid

ENERGY REQUIREMENT GROWTH (IN BILLION)

technologies, energy-efficient appliances, and demand-side management strategies to improve the efficiency of the power sector.

Infrastructure Development to drive Power Demand

The T&D system in India operates at several voltage levels:

In response to the growing need for transmitting large amounts of power over extended distances, the transmission system has undergone significant expansion in recent years, particularly in terms of higher voltage levels and substation capacities. The goal of this expansion has been to optimise the utilisation of land, minimise transmission losses, and enhance the overall reliability of the power grid.

Voltage-wise Growth in AC Transformer Capacity

Source: CEA

To achieve the Indian Governments objectives for renewable energy and ensure consistent power supply, it is essential to augment the transformation capacity in the system for every megawatt of new generation capacity. However, the MVA:MW ratio for transformation at 220 kV and above levels has not shown a significant improvement over the years. increasing from 1.1 times in March 1985 to just 2.8 times by March 2023.

To resolve this issue and ease congestion, Indian Government has emphasised on expanding transmission and transformation capacities of the system. The transmission sector has seen consistent growth due to an enabling policy framework. As per the CTU ISTS Rolling plan 2027-28, the government plans to invest INR 1,40,962 Crores to add 33,019 cKms of transmission lines, along with a transformation capacity of 2,42,940 MVA to the grid.

Key drivers for development of transmission infrastructure

a. Renewable energy integration

The government is actively pursuing the green energy corridor initiative to enable the integration of large-scale RES into the power grid. To achieve this, two schemes - green energy corridor I and II - have been implemented to create highways for transmitting renewable power. Advanced technologies are being utilised to ensure grid stability, while energy balancing and scheduling mechanisms are being implemented at Renewable Energy Monitoring Centres (REMC) to enhance stability and facilitate energy transmission. Across the country, 11 renewable energy monitoring centres are being planned, in addition to state load dispatch centres and a national-level REMC, to enable smooth grid operations. These monitoring centres will operate in conjunction with their respective state or national load dispatch centres to ensure seamless grid operations.

b. Cross-border links

There have been several efforts in recent times aimed at strengthening the exchange of electricity across borders. One noteworthy example is the inauguration of two new transmission lines between India and Nepal in August 2017.

These transmission lines have increased the electricity transfer capacity by an additional 100 MW, on top of the 350 MW that India was already supplying to Nepal. India has also undertaken several interconnections with Bangladesh, including the second Baharampur-Bheramara interconnection. Additionally, there is a memorandum of understanding signed between India and Bangladesh for the supply of 1,600 MW through high voltage direct current transmission lines. India is also working on various interconnections with Bhutan. All of this is slated to contribute to the growth of transmission infrastructure within India.

c. Rail electrification

The electrification of railways is anticipated to be a significant catalyst for growth in the transmission segment. To achieve its goal of saving INR 41,000 Crores over the next ten years through an Integrated Rail Energy Management System (I-REMS), Indian Railways launched the Railways Mission 41k initiative in January 2017. This program involves electrifying 38,000 route km of rail track between FY 2018 and FY 2022, which will result in complete electrification of broad-gauge rail routes. To accomplish this objective, transmission lines, sub-stations, and transformers must be established, with around 8,000 km of transmission lines needed in the initial phase to provide dependable and secure power to the Golden Quadrilateral. This effort is predicted to drive growth in the transmission sector and provide ample opportunities for transmission equipment manufacturers in India. The Central Organisation for Railway Electrification (CORE) has been instrumental in electrifying Indian Railways, with 52,247 route kilometers (RKM), equivalent to about 80.2% of the total Broad-Gauge network of Indian Railways (65,141 RKM) having been electrified by March 31, 2022. CORE aims to electrify all BG routes of Indian Railways by December 2023 and has nine operational project units located in Ahmedabad, Ambala, Bangalore, Chennai,

Kolkata, Jaipur, Lucknow, Guwahati, and Secunderabad, targeting important railway routes with high traffic potential.

d. Smart grid and electric vehicles

The PowerGrid Corporation is working on the Unified Real Time Dynamic State Measurement project to upgrade the transmission grids intelligence. However, the Indian governments ambitious plan to shift towards an all-electric fleet will result in a surge of electric vehicles into the grid, which will pose significant charging challenges. To prevent grid overloading, there is a pressing need for investments in grid enhancement, automation, and reactive power compensation capabilities. To encourage electric vehicle usage, the government is planning to offer incentives and create regulatory frameworks.

e. Private sector participation

The promotion of competition in the electricity sector is a fundamental goal of the Electricity Act, 2003. To encourage competition, the Central and State Governments have implemented various reform measures. The Ministry of Power has introduced competitive bidding guidelines to facilitate private sector investment in power transmission, enabling price discovery through market-based mechanisms. These guidelines ensure that private transmission companies have equal opportunities to access the market alongside public companies, fostering healthy competition. The most significant advantage of these guidelines is the availability of competitive prices, which benefits both consumers and the market.

India has opened up its transmission sector for private participation, setting it apart from other countries. Private players have shown a keen interest in this sector due to various initiatives taken by the Government and state governments to promote competition in power transmission. However, private participation and competition in the Indian electricity transmission sector are still in their nascent stages. As Indias generation capacity continues to grow, there is a growing need to increase transmission capacity to ensure that the power generated reaches the end-consumer. Private investment will play a crucial role in meeting the significant investment and capacity enhancement target in transmission. Therefore, the success of public-private partnerships in transmission will be crucial in achieving these goals.

Outlook for power transmission

The power sector in India is a constantly evolving and diverse industry, with an expected shift from fossil fuel-based energy sources to renewable energy sources. This shift is expected to decrease fossil fuel-based energy sources installed capacity from 58% to 43% by 2027-28, while renewable energy capacity additions will present new challenges in integrating renewable generation centres with the grid.

To support the integration of renewable energy sources, transmission schemes comprising of 33,019 ckm of transmission lines and transformation capacity of 2,42,940 MVA, at an estimated cost of INR 1,40,962 Crores, will be added to the grid. The National Infrastructure Pipeline (NIP) has estimated a USD 54.2 Billion investment outlay across

National Electricity Plan, 2016

During the 13th plan period, the National Electricity Plan 2016-Transmission has envisioned the addition of 105,580 circuit km of transmission lines and 292,000 MVA of substation capacity. The cost of tower erection is a major part of the investment required for transmission line construction, with towers and their foundations comprising nearly half of the total cost. With the increasing generation of renewable energy, there will be significant market opportunities for technology providers and transmission tower players. Rapid development of transmission lines and towers will be crucial to facilitate the evacuation of energy from renewable energy projects, and this can be achieved through the adoption of advanced technologies such as surveying drones and helicopters for tower erection and stringing.

221 opportunities in the transmission sector. The need for a robust and reliable transmission system to support continued generation additions, as well as the push for renewable energy and rural electrification, will drive investment in the sector.

The transmission sectors growth will also be supported by increased private sector participation, with transmission projects having favourable risk-return profiles. By 2027-28, large renewable energy complexes are expected to be established in the Northern, Western, and Southern regions of India, which will further increase the complexity of the power sector.

NEP 2022 - Provision for Power Transmission and Grid operators

The National Electricity Plan (NEP) has laid out a comprehensive roadmap for electricity demand and supply planning until the fiscal year 2026/27. One of the primary objectives of the NEP is to achieve a cumulative target of 175 GW renewable energy capacity by 2022, while also anticipating the addition of 46 GW of coal-fired power capacity between 2022 and 2027.

However, to ensure the safety and security of power supply, it is crucial that system operators have access to modern technologies. This can be achieved through a range of measures, including expanding balancing areas, integrating renewable energy sources with conventional generation and storage systems, developing ancillary services, and evaluating transfer capability.

Furthermore, it is imperative to streamline the approval process for transmission projects. Currently, at the central level, the National Committee on Transmission approves plans formulated by the Central Transmission Utility (CTU), and a similar mechanism is recommended at the state level to expedite the approval process.

Key Objectives of NEP 2022

1. Ensure reliable and affordable electricity supply.

2. Promote the use of renewable energy sources.

3. Reduce greenhouse gas emissions from the electricity sector.

4. Improve energy efficiency and conservation.

5. Develop and modernise the electricity grid.

6. Encourage private sector investment in the electricity sector.

7. Ensure equitable access to electricity across all regions and communities.

8. Support economic growth and development through a stable and efficient electricity sector.

Renewable Energy in India

India is at the forefront of a global push towards renewable energy, driven by the need to combat climate change. With 17% of the worlds population, India contributes only 3.5% to global emissions. However, the country is making significant strides towards a clean energy transition, with an ambitious target to achieve 500 GW of non-fossil fuel capacity by 2030.

India currently has around 171 GW of renewable energy, with another 80 GW under construction. The share of renewable energy in Indias total installed capacity has increased from 18% to 29%, with solar energy installation picking up pace in the last half a decade. The government has provided fiscal and regulatory incentives, viability gap funding, and execution support to renewable energy projects to achieve this growth.

The governments target of 500 GW of non-fossil fuel capacity by 2030 translates to 35-40 GW of annual incremental renewable capacity over the next 8-9 years. To achieve this target, the government is working on policy support for energy storage systems, green hydrogen, and offshore wind. Green Energy Open Access is now allowed to any consumer with a load limit reduced from 1,000 kW to 100 kW, which will increase the weightage of green power.

The transition to renewable energy has also been driven by the availability of low-cost finance through various instruments and sources, which has supported renewable energy capacity additions. The next leg of the accelerated renewable energy transition will require further policy support and execution, as well as a focus on energy storage systems, green hydrogen, and offshore wind.

Globally, some countries are investing in fossil fuels to secure and diversify their sources of supply. However, the lasting

solutions to the climate crisis lie in speeding up clean energy transitions through greater investment in efficiency, clean electricity, and a range of clean fuels. Indias Ministry of Power has taken several initiatives towards a clean energy transition, and the countrys focus on renewable energy will continue to drive growth in the sector.

Increase in share of renewable energy sources

	FY2015		FY2020	FY2022	FY2025
Coal	58%	54%	51%	46%
Lignite	2%	2%	2%	2%
Gas	8%	7%	6%	5%
Diesel	1%	1%	1%	1%
Nuclear	2%	2%	2%	1%
Hydro	15%	12%	12%	10%
Solar	1%	9%	14%	20%
Wind	9%	10%	10%	11%
Other RES	4%	3%	3%	4%

Evolution of Solar Power in India

India has experienced impressive growth in its solar energy capacity, ranking fourth globally in solar PV deployment with a capacity of 61.97 GW as of November 30, 2022. This growth has been driven by a rising demand for renewable energy, as traditional electricity generation methods like thermal power plants become less viable. The National Institute of Solar Energy estimates that Indias solar potential is around 748 GW, with 3% of waste land area covered by Solar PV modules. In 2010, the National Solar Mission was launched to install 100 GW grid-connected solar power plants by 2022, aligning with Indias Intended Nationally Determined Contributions to achieve 40% cumulative electric power installed capacity from non-fossil fuel-based energy resources and reduce GDP emission intensity by 33-35% from 2005 levels by 2030.

To attain these goals, the Indian government has initiated several schemes to promote solar power generation, such as the Solar Park Scheme, VGF Schemes, CPSU Scheme, Defence Scheme, Canal bank & Canal top Scheme, Bundling Scheme, and Grid Connected Solar Rooftop Scheme. In addition, solar tariffs in India have become highly competitive, resulting in grid parity.

Growth drivers for solar sector in India

1. Government Support: The Indian government has been very supportive of the solar sector and has launched several schemes to promote solar energy generation. These schemes include the Solar Park Scheme, VGF Schemes, CPSU Scheme, Defence Scheme, Canal bank & Canal top Scheme, Bundling Scheme, and Grid Connected Solar Rooftop Scheme. The governments goal of installing 100 GW of grid-connected solar power plants by 2022 has been a significant driver of growth in the sector.

2. Increasing Awareness and Demand: As people become more aware of the benefits of renewable energy and the negative impact of conventional energy sources on the environment, there has been a significant increase in demand for solar energy in India. This demand is expected to continue to grow in the coming years.

3. Technological Advancements: Advancements in solar technology have made it more efficient and cost-effective. This has made it more attractive to consumers and has further contributed to the growth of the solar sector in India.

4. Favourable Policy Environment: The Indian government has created a favourable policy environment for the solar sector, including offering tax incentives and subsidies to encourage investment in the sector. This has helped attract both domestic and foreign investment, further driving growth in the sector.

5. Improving availability of finance at low cost: Developers in Indias solar sector are adopting innovative approaches to secure low-cost financing, including the issuance of green bonds, funding from the Asian Infrastructure Investment Bank (AIIB), and the creation of investment trusts. These alternative channels have helped to widen the pool of available investments, bringing down the cost of financing and enabling more renewable energy projects to be funded.

6. Foray of large established players in the Indian solar industry: After the Government of India announced its plan to establish 500 GW of renewable energy generation capacity by 2030, numerous established players have entered the solar power generation market. Several large Indian conglomerates and global companies have announced their intentions to develop significant solar power generation capacities.

Factors to boost growth in solar capacity additions

• Government subsidies and incentives for solar power projects

• Increase in public awareness and demand for renewable energy

• Development of new and innovative solar technology

• Expansion of solar power infrastructure, including grid integration and storage systems

• Partnerships and collaborations between government, private sector, and international organisations

• Favourable policy environment and regulatory frameworks

• Improvement in ease of doing business, including streamlined processes for project approvals and permits

• Investment in research and development for improving solar efficiency and reducing costs

• Increased focus on sustainability and reducing carbon emissions by corporations and industries, leading to adoption of renewable energy solutions

Opportunities and Challenges

Operational power transmission projects

Operational power transmission projects offer a low-risk investment opportunity, as they are not dependent on asset utilisation and have reliable payment security. During the construction phase, transmission assets may face risks such as right of way, forest and environment clearances, and an increase in raw material prices. However, post-commissioning, with the implementation of POC mechanism, the risks are limited, and the cash hows from operational transmission projects resemble that of an annuity, providing steady returns to investors.

The tariffs payable to the Inter-State Transmission System (ISTS) have a fixed escalable component, which ensures stability in cash hows, while the variable component is linked to the inflation index in India, making it a smaller component of the tariff. These factors make operational transmission projects an attractive investment option for those seeking reliable and steady project returns.

Some of the key reasons for low risks are:

1. Revenue recovery irrespective of asset utilisation limits offtake risk

2. Diversified counter-party risk

3. Collection risk offset owing to presence of CTU

4. Payment security mechanism in place

5. Relatively low probability of default due to lack of alternatives

Power transmission infrastructure has better risk- return profile as compared to most other infrastructure projects

Infrastructure projects such as roads, ports, and power generation rely heavily on the operational performance of the assets to generate returns. However, the success of these projects often depends on factors that are beyond the control of the developers. For example, the profitability of toll-based road projects depends on the collection of toll revenues, while port projects are at risk of fluctuations in cargo traffic. Similarly, power generation projects are dependent on the availability of fuel and off-take by distribution companies.

In the case of annuity-based road projects, counterparty risk is higher as the sole revenue counterparty for annuity-based payments is the National Highway Authority of India (NHAI). This limits the diversification of revenue sources and increases the risk associated with the project.

On the other hand, ISTS transmission projects have a pool of distribution and generation companies as revenue counterparties, which reduces counterparty risk based on diversification. The revenue stream from power transmission infrastructure projects is generally more stable and predictable compared to other infrastructure projects, which may provide a more favourable risk-return profile for investors.

The key challenges faced in terms of Indias power transmission sector

• Inadequate infrastructure: Indias power transmission infrastructure is insufficient to handle the increasing demand for electricity. The infrastructure needs to be modernised and upgraded to accommodate the growing renewable energy capacity.

• Inefficient power transmission: The transmission and distribution losses in India are among the highest in the world, resulting in significant energy wastage. This is primarily due to outdated equipment and inadequate maintenance practices.

• Delayed and inadequate approvals: The approval process for transmission projects in India can be time-consuming and complex, leading to project delays and cost overruns.

• Land acquisition issues: Acquiring land for transmission projects can be challenging in India due to a variety of reasons, such as land disputes, environmental concerns, and lack of proper compensation for landowners.

• Insufficient investment: Despite the high demand for electricity in India, investment in the power transmission sector has been insufficient. This has resulted in a funding gap that needs to be bridged to meet the growing demand for electricity.

• Regulatory challenges: The regulatory environment in India can be challenging for transmission companies, with frequent changes in policies and regulations affecting their operations.

• Cybersecurity risks: As power transmission becomes more digitised, there is a growing risk of cyber-attacks that can disrupt the power supply and cause significant damage. The transmission sector needs to prioritise cybersecurity measures to prevent such incidents.

IndiGrid is engaged in the business of owning and operating power transmission and solar energy assets. The interstate power transmission projects receive tariffs based on availability, irrespective of the quantum of power transmitted through the line. These availability-based tariffs incentivise transmission system operators to provide the highest possible system reliability as the operator is entitled to get an incentive amount in excess of 98%. Hence, to maximise revenue, a robust asset management framework is in place at IndiGrid to ensure robust and prudent asset management programme, devise strategies and plan prudently to meet IndiGrid vision. This framework duly considers the sectorspecihc conventional practices being followed and the global best practices from closely-related sectors like power generation, renewable and other sectors which leads to risk adjusted asset management of power transmission assets, enabling to unlock maximum value to our stakeholders Below is graphical representation of the asset management framework.

Over the last six years, IndiGrid has gradually moved from a planned/corrective practice to a reliability centric approach. Not only is this necessitated due to a larger asset base at IndiGrid - where assured performance is key, it is also critical due to the strategic nature of assets in the national grid. The movement to a reliability centric approach also underpins the steadfast pursuit of operational excellence and erecting a positive ecosystem around IndiGrids portfolio

We strongly believe that the above framework will help to achieve our aspiration to deliver assured performance to our stakeholders with unmatched Operational excellence. The framework is built into three core strategic pillars as outlined:

a. Deliver Assured Performance

Assured Performance is key to achieve IndiGrid Vision to meet our investor and other stakeholder expectations. Robust risk mitigation plan execution enabled by digital technologies will be key driver for success of this pillar. Digital technologies will enable transition from conventional planned and corrective practices to advanced reliability centered predictive maintenance. Thus, strong rigor to minimise the downtime and improve mean time between failures and restoration, would certainly result in optimising total life cycle cost of ownership and unlocking the value of assets for our stakeholders.

b. Sustain with Operational Excellence

Simplified processes, methodologies, its compliances and skill developments are the most important element of developing continuous improvement culture across the value chain of asset management functions and will play critical role for the success of this pillar. Implementing globally benchmarked processes, standard operating procedures on EHS standards and Quality Assurance systems and with strong compliance rigor shall enable unmatched operational excellence to deliver assured performance.

c. enable with winning Culture

This pillar becomes a strong enabler for delivering assured performance and to sustain with unmatched operational excellence. Working as One Team till the last-mile person involved at the project sites, developing core competencies and building self-motivating teams would be key priorities to achieve objectives for this pillar. This is especially of great importance because there are several stakeholders involved including IndiGrid, the Project Manager, O&M Contractors etc. Asset Management offers huge opportunity to create a social impact by supporting communities and environment located nearby our assets and will be important aspect of this strategic pillar.

Key Performance FY 2022-23

The following charts illustrates the demonstrated performance of IndiGrid assets which has consistently set benchmarks in the power transmission industry, beating pre-contracted availability-based tariffs - either under the transmission services contract or the CERC tariff guidelines