PLI scheme needed to plug transmission supply chain gaps, says Power Secretary

Contact Counsellor

Last Updated16/10/2024

India should consider a Production Linked Incentive (PLI) scheme or a similar incentive to develop the domestic supply chain of transmission equipment, the Ministry of Power secretary Pankaj Agarwal said.

India’s energy sector is at a critical juncture as it seeks to expand its transmission infrastructure to meet the growing demand for renewable energy. Pankaj Agarwal, Secretary of the Ministry of Power, emphasized the need for a Production Linked Incentive (PLI) scheme or similar incentives to bolster domestic supply chains for transmission equipment.
His remarks, made during an event organized by the Central Electricity Authority (CEA), underscored the challenges facing India's power sector as it grapples with rising costs and supply chain constraints.

Agarwal cited internal estimates indicating that the cost of developing transmission infrastructure is expected to grow at a Compounded Annual Growth Rate (CAGR) of 14.5% over the next five years.
This surge in costs demands urgent action to optimize the value chain. “To optimize the cost of electricity supplied to the industry and consumers, we need to optimize the cost of the entire value chain,” he said, highlighting the importance of reducing financial burdens while maintaining the quality and reliability of power transmission.

Globally, transmission bottlenecks have become a significant issue. According to the International Energy Agency (IEA), 1,650 GW of renewable energy capacity is awaiting connection to the transmission grid worldwide. This backlog not only delays the integration of green energy but also underscores the need for investment in grid infrastructure.
India faces similar challenges, as its booming demand for High Voltage Direct Current (HVDC) transmission equipment has led to supply chain constraints. These delays are particularly harmful to renewable energy projects, many of which are now waiting for grid connections. Wood Mackenzie, an energy analytics firm, has reported that transformer lead times have increased drastically, from 50 weeks in 2021 to an average of 120 weeks in 2024.

Multiple industry leaders have echoed Agarwal's concerns. Amit Singh, CEO of Adani Green Energy Ltd, acknowledged the high wait times for critical equipment such as inverters and transformers, highlighting the potential for investment in strengthening the supply chain.
Similarly, RK Tyagi, CMD of Power Grid Corporation of India Ltd, pointed out challenges in the supply of Gas Insulated Switchgears (GIS), transformers, and reactors, which are essential for the seamless functioning of transmission systems.

In addition to supply chain issues, Agarwal flagged concerns about the financial viability of Distribution Companies (DISCOMs). With accumulated losses totaling Rs 6.5 lakh crore and a debt burden of Rs 6.75 lakh crore, DISCOMs face significant financial distress.
As the source of cash flow in India’s energy economy, the health of these entities is crucial for the broader power sector. Without addressing these financial imbalances, the push for greater transmission capacity and renewable energy integration may face additional hurdles.

Agarwal’s suggestion for a PLI scheme aimed at the domestic production of transmission equipment is a potential solution to these challenges. By incentivizing local manufacturing, the government can reduce India's dependence on imported equipment, shorten lead times, and create a more resilient supply chain. This strategy would not only facilitate faster deployment of renewable energy but also bolster India's energy security by promoting self-sufficiency in critical infrastructure components.