0
By clicking the button, I accept the Terms of Use of the service and its Privacy Policy, as well as consent to the processing of personal data.
Don’t have an account? Signup
Powered by :
India’s state-run transmission giant Power Grid Corporation of India Limited (PGCIL), which leads most renewable energy transmission projects under the interstate transmission system (ISTS), is increasingly coming under pressure as execution challenges begin to mount.
According to a recent report by InGovern Research Services, these challenges are being driven by a rapidly expanding capital expenditure cycle, which is stretching execution capacity.
Companies across the sector are collectively targeting around ₹3 lakh crore in capex through FY32, with a revised outlay of ₹32,000 crore for FY26 alone. PGCIL itself is handling a massive work-in-hand pipeline of about ₹1.48 lakh crore—pushing its organisational bandwidth to the limit.
The strain is already visible on the ground. The report highlights rising renewable energy curtailment, particularly in Rajasthan, where grid constraints have begun to impact project timelines. Curtailment levels in the state surged sharply—from 8.5% to 51.5% between March and August 2025.
Around 4 GW of wind and solar capacity has already been affected, with estimates suggesting this could rise to 6–8 GW as transmission infrastructure struggles to keep pace with rapid generation additions.
At the same time, demand for transmission infrastructure continues to rise, further stretching PGCIL’s execution capacity. Despite its dominance in regulated tariff mechanism (RTM) projects and strong presence alongside tariff-based competitive bidding (TBCB) subsidiaries, the sheer scale of new projects is putting pressure on delivery timelines.
The report also underscores PGCIL’s central role in India’s transmission ecosystem—particularly in RTM projects—where it operates alongside TBCB subsidiaries. However, this dominance also brings concentration risks. The company controls around 84% of India’s inter-regional transmission capacity and secured about 53–57% of competitive project awards in FY25. Such concentration in a single entity raises systemic execution risks for the sector.
To address this, InGovern has recommended a cap of around 50% on annual project allocation to any one developer.
Execution challenges are already translating into delays. The report highlights slippages of 6–12 months across nine major interstate transmission projects, including those linked to renewable energy zones in Rajasthan and the Khavda solar park.
In some cases, projects have achieved only around 3% physical progress despite nearly 28% of their scheduled timelines having already elapsed—pointing to early-stage execution bottlenecks.
Land acquisition hurdles, right-of-way disputes, and forest clearance delays remain key challenges. While these issues are common across the sector, their impact is amplified in PGCIL’s case due to the high concentration of projects under its control.
These execution delays are beginning to show up in financial performance. PGCIL’s return on net worth has declined from 18.5% in FY23 to around 15.3% (annualised) in 9MFY26, reflecting the impact of delayed commissioning and heavy capital deployment before revenue generation begins.
Under the TBCB framework, projects start generating returns only after commissioning, making timelines critical. A delay of 12 months can reduce equity IRR by roughly 200 basis points, as interest during construction continues to accrue without any corresponding revenue.
Meanwhile, a significant portion of capital remains tied up in non-operational assets. Capital work-in-progress stands at around ₹1.2 lakh crore as of April 19, 2026, indicating substantial investments yet to generate returns. Rising leverage, with a debt-to-equity ratio of about 1.45x, is further weighing on capital efficiency.
Despite stable earnings, investor sentiment appears cautious. PGCIL’s stock has delivered a CAGR of about 12% between FY20 and FY26, lagging behind the 18% return of the Nifty 50. This underperformance suggests that markets are factoring in execution risks and concerns around capital deployment.
Dividend payouts have also declined—from ₹14.75 per share in FY22 to ₹9.00 in FY25—as the company retains more capital to fund its capex plans, albeit without a proportional increase in asset capitalisation.
Taken together, these trends point to a broader structural issue: transmission is emerging as the biggest bottleneck in India’s energy transition. While generation capacity—especially renewables—is scaling up rapidly, evacuation infrastructure is struggling to keep pace.
This gap could pose a significant challenge to India’s ambitious target of achieving 500 GW of non-fossil capacity by 2030.
To address these challenges, InGovern has outlined several recommendations. These include capping project awards to any single developer at around 50% annually, improving transparency in project identification and bidding processes—particularly since PGCIL’s subsidiary CTUIL is also involved in project identification—and ensuring regular disclosures on project delays, capitalisation status, and IRR assumptions.
The report also calls for a strategic shift by PGCIL towards a “value over volume” approach—aligning project intake with actual execution capacity rather than maximising bid wins.
We are India’s leading B2B media house, reporting full-time on solar energy, wind, battery storage, solar inverters, and electric vehicle (EV)
Quick Links
© 2025 Saur Energy. All Rights Reserved.

source