Investments to be focused on the T&D segment

CRISIL Research projects investments of Rs 9.5-10 trillion in the power sector over the next five years (fiscal
2021-2025). The share of generation, transmission, and distributions segments over the forecast period is expected
to remain largely unchanged, with similar investments across the segments.

Investments in the generation segment are expected to remain stable in the 35-37% range, despite lower capacity
additions, majorly due to higher nuclear capacities likely to be commissioned over the next five years, which are
costlier on a per MW basis. Investments in distribution are likely to be subdued in the short-to-medium term
because of ongoing financial stress among state utilities.

Segment-wise break-up of total investments

FY16-FY20 E FY21-FY25 F
‘Distnbutian,
Distntubon
es mh
Rs~8.4 Rs95-10
trillion trillion

Source: CRISIL Research

In the 13" Five-Year Plan (fiscals 2018 to 2022), the Ministry of Power has increased its focus on the T&D
segments through higher budgetary allocations, coupled with targets set under the UDAY scheme (ended March
2019). Though UDAY has ended in March 2019, state utilities were able to bring down aggregate AT&C losses
from ~21% as of March 2016 to ~18-19% as on March 2020 (estimated). However, post-UDAY, it is estimated
that AT&C losses have again started to rise (~27% as of June 2020), though the government is looking at longer-
term structural measures to mitigate the same. As a result, investments in the T&D segments are expected to
witness healthy growth over the next five years.

Transmission segment investments to rise to Rs ~3.3 trillion over the next five years

To service a large generation installed base, the estimated investment in the transmission sector is expected to be
~Rs 3.3 trillion over the next five years. Investments in the sector are expected to be driven by the need for a
robust and reliable transmission system to support continued generation additions and the strong push to the
renewable energy sector as well as rural electrification. Also, strong execution capability, coupled with healthy
financials of PGCIL, will drive investments. Moreover, rising private sector participation with favourable risk-
return profile of transmission projects will also support growth in investments. Transmission investments could
slow down in fiscal 2021 due to Covid-19 pandemic, but are expected to rebound strongly in the subsequent years.

Expected investments in transmission sector (2016-20 to 2021-25P)

3.1 3.32

 

FY16-20 FY21-25

Source: CEA, Planning Commission, CRISIL Research

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