The Power Grid Corporation (POWERGRID) remains undeterred by proposed alterations in Operation & Maintenance (O&M) charges norms by the Central Electricity Regulatory Commission (CERC), assuring stakeholders of minimal impact on its operations and financial outlook.
According to a top official of the company, discussions are underway with the regulator regarding the proposed changes, with POWERGRID expressing confidence that the adjustments will not significantly affect its revenue or profitability.
The draft regulations put forward by the CERC suggest modifying the distribution of O&M costs from the existing 75:25 ratio (sub-station vs. transmission line) to a 65:35 ratio. This change entails an increase in transmission line charges while decreasing substation charges.
However, Ravindra Kumar Tyagi, Chairman and Managing Director of POWERGRID, emphasized that the overall O&M charges would remain largely unchanged. He explained that while the inclusion of “reactor” charges per Mega Volt-Ampere Reactive (MVAR) capacity adds a new element to the equation, the net impact on O&M charges is negligible.
Tyagi further elaborated during an analyst call, stating, “The net impact is almost zero, we are going to receive the same O&M charges as before.”
Regarding Return on Equity (ROE), the proposed norms indicate maintaining the existing assets at 15.5 percent and setting it at 15 percent for new projects post-April 1, 2024. Tyagi highlighted ongoing discussions with the CERC on this matter, expressing optimism that the final norms would not adversely affect the company’s financial performance.
POWERGRID is steadfast in its commitment to advancing its infrastructure, aiming to surpass a capital expenditure (capex) of Rs 10,000 crore in the current fiscal year. Tyagi shared that the company’s capex in the third quarter amounted to Rs 3,444 crore on a consolidated basis, reaching Rs 7,690 crore for the nine-month period. He expressed hope that the capex would exceed Rs 10,000 crore, reflecting the company’s dedication to enhancing its operational capabilities.
During the December 2023 quarter, POWERGRID reported consolidated income of Rs 11,820 crore, with a notable 10 percent year-on-year increase in net profit to Rs 4,028 crore.
Despite regulatory adjustments, POWERGRID remains resilient in its pursuit of operational excellence and continued growth, demonstrating its ability to navigate evolving industry dynamics while delivering value to stakeholders.
