Power sector to get a new PSU; PowerGrid is carving out CTU

  • Ministry of Power has asked PowerGrid to set up a subsidiary with separate accounting and Board structure, which would be responsible for carrying out statutory functions of CTU

  • The new company which will be carved out of PowerGrid will be hived off as a separate entity owned completely by the Central government within six months

New Delhi: State-run PowerGrid Corporation of India Limited (PGCIL), a Maharatna PSU under the Ministry of Power, is now set to establish a 100 percent subsidiary company which will take on the functions of the CTU (Central Transmission Utility). In a regulatory filing to the stock exchanges on Thursday, PowerGrid said that it has been directed by the Ministry of Power to set up a subsidiary with separate accounting and Board structure, which would be responsible for carrying out statutory functions, as identified for Central Transmission Utility (CTU) under the Electricity Act, 2003, and also other functions assigned to the CTU by CERC. 

"This is to inform that POWERGRID has received a letter dated 17.06.2020 from Ministry of Power advising to set up a 100% Subsidiary with separate accounting and
Board structure, which would be responsible for carrying out statutory functions, as identified for Central Transmission Utility (CTU) under the Electricity Act, 2003, and also other functions assigned to CTU by CERC," said the document. The regulatory filing comes a day after the Ministry of Power wrote a letter to PowerGrid CMD K Sreekant, asking him to move forward with the creation of the subsidiary company.

PowerGrid subsidiary will be hived off as a separate PSU under Centre within 6 months

The new company which will be carved out of PowerGrid will be hived off as a separate entity owned completely by the Central government within six months. "The aforementioned 100% subsidiary company (CTU) would be separated as a wholly-owned Government of India company within 6 months or till the completion of formalities for creation of the aforementioned company," said the regulatory filing.

The creation of a revenue stream for the CTU will be taken care of by PowerGrid until it is separated, after which the CERC (Central Electricity Regulatory Commission) will take a call on the matter.

The rationale behind the decision

The bifurcation of PowerGrid's business has been a long-standing demand from the power sector since 2015. Critics have pointed out the conflict of interest involved when PowerGrid, which is also an electricity transmission construction company, takes part in competitive bidding process alongside private players. As CTU, PowerGrid is responsible for the transmission of electricity generated by producers and for planning transmission systems and operations. It also collects tariffs from power producers and state electricity boards in the form of ISTS (Inter-State Transmission System) charges for using the transmission infrastructure. The conflict of interest arises because PowerGrid acts as both a planner and as a participant in bids for transmission projects.