New Delhi, Feb 27
The inter-state transmission system sector will see a capital expenditure (capex) of around Rs 1 lakh crore over financial years 2026 and 2027, primarily to support renewable energy evacuation, which is twice the capex of Rs 50,000 crore incurred between financial years 2024 and 2025, according to a Crisil report released on Thursday.
During the construction phase, transmission projects face multiple execution risks, including right of way (ROW), forest clearances, and supply chain issues. Nevertheless, credit profiles of developers remain supported by healthy cash flows and strong funding visibility, the report stated.
An analysis of three developers, estimated to account for 80-85 per cent of the expected capex, indicates as much.
Strengthening the transmission infrastructure is critical given the momentum in renewable capacity addition. Crisil Ratings expects addition of 65-75 GW of solar and wind capacities over fiscals 2026 and 2027. Timely planning and commissioning of transmission capacities remains critical as the execution period of a transmission project is typically 2-4 years — twice that of a renewable energy project.
“Considering the need for transmission capacity augmentation, project awarding ramped up to Rs 1.6 lakh crore in fiscals 2024 and 2025,” said Manish Gupta of Crisil Ratings.
“We have seen these projects incurring an average delay of about 10 months in commissioning, with few projects even seeing delays of over 18 months. Factoring these delays, we estimate transmission connectivity to be enabled for up to 60 GW of potential renewable capacity by fiscal 2027,” he explained.
To support faster execution, the Ministry of Power has amended the land compensation guidelines for ROW for transmission projects. For instance, in June 2024, land compensation for tower base area for high-voltage transmission lines was increased to 200 per cent from 85 per cent of land value, increasing the compensation for landowners and, thereby, reduce ROW-induced delays.
Moreover, considering the urgent ramp-up required in the transmission sector, maintaining an uninterrupted supply chain, especially for sub-station equipment like transformers as well as high-voltage direct current (HVDC) components will remain critical for timely execution.
Anand Kulkarni, Director, Crisil Ratings, said that "we expect these projects to generate return on equity of 11-14 per cent".
Notwithstanding the sensitivity of returns to project delays, developers are well placed to absorb the rising capex intensity.
“Equity requirements are well supported by recent fund raises aggregating to around Rs. 12,500 crore through equity capital markets and players’ estimated free cash flows of around Rs. 30,000 crore over the next two fiscals from their existing operational portfolio, Kulkarni explained.