The grid paradox

India’s transmission backbone is straining under the weight of its own expansion plans. As renewable energy targets loom large, the concentration of power in a single entity is raising questions about execution capacity, competition and the future of grid infrastructure.

The numbers tell a compelling story. India aims to achieve 650 GW of renewable energy capacity by 2032, requiring an unprecedented build-out of transmission infrastructure estimated at Rs9-15 lakh crore. Yet, beneath the ambitious targets lies a growing concern: the national power grid, spanning nearly 500,000 circuit kilometres of interstate lines, is increasingly dependent on one entity for its expansion.

Power Grid Corporation of India Limited (PGCIL), the state-owned transmission giant, has been the undisputed leader in building India’s electricity highways since its incorporation in 1989. The company operates one of the world’s largest synchronous grids, enabling the integration of diverse regional systems into a unified electricity market. In the fiscal year ending March 2025, PGCIL emerged as the lowest bidder in 26 of 45 interstate transmission projects – accounting for 57.7 per cent by project count and 53.4 per cent by tariff value. While this demonstrates the company’s competitive strength and aggressive bidding strategy, it has also sparked a debate about whether such concentration is sustainable for a sector facing exponential growth demands.

The tariff-based competitive bidding (TBCB) regime was introduced in 2006 to bring efficiency and competition to transmission development. For nearly two decades, it has successfully attracted private investment and reduced transmission costs. However, the recent trend of PGCIL dominating project awards raises questions about whether the regime is functioning as intended – to balance public and private participation – or whether structural advantages have tilted the playing field too far in one direction.

The question is no longer about PGCIL’s capabilities – the company has proven its technical prowess over decades, building complex high-voltage transmission corridors across challenging terrains. Rather, it is about whether any single entity, however competent, should bear such disproportionate responsibility for infrastructure that underpins India’s energy transition. When the margin for error is slim and the stakes are high, putting too many projects in one basket, regardless of whose basket it is, becomes a matter of systemic risk management.

The weight of dominance

PGCIL’s market position stems from genuine advantages. With a balance sheet of approximately Rs2.5 lakh crore as of March 2025, the company dwarfs its private-sector counterparts. Adani Energy Solutions has a balance sheet of around Rs63,000 crore, IndiGrid stands at Rs32,000 crore, and Resonia (Sterlite Power) at Rs10,000 crore.

Add to this PGCIL’s sovereign backing, which translates to a cost of borrowing at 7-7.5 per cent – significantly lower than what private players can access – and the competitive dynamics become clear.

The company currently has works worth Rs1.5 lakh crore under execution and plans an outlay of Rs3 lakh crore by 2032. On paper, these figures should inspire confidence in India’s transmission build-out trajectory. In practice, however, they reveal a potential vulnerability: the concentration of too many eggs in one basket.

“When a single entity dominates to this extent in infrastructure, you create concentration risk that goes beyond just project execution. It affects the entire ecosystem – from innovation to competitive dynamics. We have seen this pattern in other sectors, and the solution invariably involves creating space for multiple capable players,” says Dhanendra Kumar, former CCI Chairperson.

When timelines slip

The real-world implications of this concentration are becoming visible on the ground. Several key transmission projects being executed by PGCIL are running 18 to 30 months behind schedule, creating ripple effects across the renewable energy sector. A scheme designed to evacuate 8.1 GW of solar power from Rajasthan, with parts scheduled for completion as far back as 2022, remains incomplete. Similar delays plague major projects in Khavda, Gujarat – a region identified as a significant renewable energy zone – and Anantapur in Andhra Pradesh, both locations where large-scale solar and wind installations are either operational or nearing completion.

The cumulative impact is stark. In fiscal year 2025, the transmission sector added only 8,830 circuit kilometres against a target of 15,253 ckm – a shortfall of 42 per cent. For perspective, this represents nearly 6,500 circuit kilometres of transmission capacity that should have been operational but was not. PGCIL itself delivered less than half of its targeted 5,281 ckm for the year, raising questions about execution bandwidth and project management capacity when handling multiple large-scale projects simultaneously.

These are not just statistics on government dashboards. Between March and August 2025, approximately 4 GW of renewable energy capacity was curtailed in Rajasthan due to transmission infrastructure not being ready. To understand the scale: 4 GW is equivalent to the entire installed renewable capacity of several smaller states. In August 2025, curtailment rates hit 51.5 per cent, meaning that more than half of the potential solar energy generated during peak production hours could not be evacuated to the grid. Renewable energy developers, who had invested hundreds of crores based on assured timelines and transmission availability certificates, found themselves unable to sell the power they were producing.

The financial implications for developers are severe. Solar and wind projects operate on tight margins, and any period of forced curtailment directly impacts their revenue and ability to service debt. For projects backed by international investors and lenders, repeated curtailments raise red flags about project viability and the reliability of India’s transmission planning.

The frustration has led to legal action. The Central Electricity Regulatory Commission (CERC) has admitted petitions for compensation from renewable energy developers who argue that transmission delays constitute a breach of contractual obligations. One claim by Acme alone seeks Rs21 crore in damages, representing months of lost revenue opportunity. 

Several other players, including Ampin and Juniper Green, are also seeking relief through regulatory channels. The common thread across these petitions: delayed transmission schemes directly impacted their ability to sell power, despite their generation facilities being commissioned on time.

Industry sources suggest that the total compensation claims currently being pursued or contemplated could run into several hundred crores, potentially creating a precedent that could strain PGCIL’s balance sheet and impact future project costs if such compensation becomes a regular occurrence.

The financial squeeze

There is another dimension to PGCIL’s market dominance that deserves attention: the financial sustainability of ultra-aggressive bidding. While competitive bidding has successfully brought down transmission tariffs, benefiting consumers, there are concerns about whether the tariffs being quoted are sustainable over the long term.

Since 2022, as tariff-based competitive bidding (TBCB) projects have become operational, PGCIL’s return on net worth (RONW) has declined from approximately 23 per cent to 17 per cent in FY25. Under the Regulated Tariff Mechanism (RTM), PGCIL gets around 15-16 per cent return on equity. In contrast, TBCB projects are being bid at 12-13 per cent or lower ROE by PGCIL, suggesting that RTM has been cross-subsidising returns and helping it bid aggressively in TBCB.

This trend suggests that aggressive bidding, while winning projects, is compressing margins. For a public-sector undertaking with government ownership, this may seem acceptable in the short term. However, if margins continue to shrink, it raises questions about long-term financial health and the ability to maintain service quality.

For private players, the equation is even more challenging. When forced to match ultra-low tariffs to remain competitive, they face a choice: compromise on quality standards or accept financial strain that could eventually lead to insolvency. Neither outcome serves the sector’s long-term interests.

“Infrastructure projects need to be financially sustainable. When tariffs are quoted below economically viable levels, it creates a race to the bottom. Eventually, either quality suffers or players exit the market. Both outcomes are detrimental to long-term sectoral health,” explains Shriram Subramanian, Founder, InGovern Research.

A tale of two performers

Interestingly, when comparing execution performance between the public and private sectors, the data reveal nuances that challenge conventional wisdom. In the first half of fiscal year 2026, the transmission sector achieved 44,645 MVA of transformation capacity, representing 66 per cent of the target. PGCIL achieved only 49 per cent of its allocated target, while private players achieved 92 per cent of theirs.

This performance differential is not about capability – PGCIL has demonstrated its technical excellence repeatedly. Rather, it points to bandwidth constraints. When a single entity is managing a disproportionate share of concurrent projects, execution pressures mount. Private developers, operating with different financing structures, global partnerships and more nimble decision-making processes, have often delivered projects faster.

The private sector’s role in bringing innovation and advanced technologies should not be underestimated. Different players bring different strengths – whether it is expertise in specific geographies, mastery of particular technologies, or innovative approaches to project management. A healthy transmission ecosystem needs this diversity.

The challenge of managing market concentration in infrastructure is not new to India. The country has dealt with similar issues in other sectors, and the solutions implemented offer valuable lessons for transmission.

Take the recent example of IndiGo, the country’s largest domestic aviation carrier with more than 60 per cent of the market, which faced a crew-rostering and compliance shock. The immediate results were visible: flight cancellations multiplied across metros and smaller cities, and delays spread through airport networks. This clearly shows that when one firm carries such a large share of a network, its internal disruptions do not stay confined to the firm. They become a nationwide disruption because there are too few credible alternatives that can absorb the load at short notice. That is the essence of concentration risk in networked sectors. The immediate impact of this incident has been that the Ministry of Civil Aviation has fast-tracked approvals for two new airlines to enter the market.

The telecommunications sector is another example. When concerns arose about excessive concentration in spectrum holdings, the government introduced spectrum caps through successive policy interventions. These caps limited the amount of spectrum any single operator could hold in a service area, ensuring that multiple players could compete effectively. The objective was not to penalise any particular operator but to create structural safeguards that prevented market dominance from translating into monopolistic control.

The renewable energy sector offers another instructive example. The Ministry of New and Renewable Energy has periodically imposed capacity caps in solar auctions – restricting the share of total auctioned capacity that any individual developer can win in a given tender. For instance, in large-scale solar parks, bidding guidelines often specify that a single developer cannot secure more than a certain percentage of the total capacity being auctioned. The measure aims to balance the benefits of scale with the need to prevent monopolistic tendencies, maintaining competitive intensity in the sector.

These Indian experiences share a common thread: market share or capacity caps, when thoughtfully designed, do not penalise incumbents or restrict legitimate business opportunities. Rather, they serve as risk mitigation tools that prevent excessive concentration while allowing dominant players to continue contributing substantially.

What makes these precedents particularly relevant for transmission is that they have been implemented in sectors with similar characteristics – capital-intensive infrastructure requiring long-term planning, regulatory oversight and a balance between public interest and commercial viability. The mechanisms have proven workable without disrupting sectoral growth or penalising efficiency.

“The precedents from aviation, telecom and renewable energy are directly applicable to transmission. Market share caps are not about restricting any player’s legitimate business opportunities. They are about risk management and ensuring sectoral resilience. India has successfully implemented such mechanisms before – there is no reason the same approach cannot work for transmission infrastructure,” notes Subhash Sharma, Director at the Centre for Economic Policy & Research.

Caps make sense

The argument for market share caps in transmission rests on several pillars, each grounded in both economic theory and India’s practical experience with infrastructure management. First, they serve as risk mitigation tools. When one entity handles too many concurrent projects, any operational or financial distress can cascade across the entire transmission network. The Rajasthan curtailment example demonstrates how delays in a single entity’s portfolio can impact multiple renewable energy zones simultaneously. If PGCIL faces execution challenges on several projects at once – whether due to supply-chain disruptions, funding constraints or simply bandwidth limitations – the consequences are not limited to those specific projects but ripple through the entire power ecosystem.

Second, caps protect the dominant player itself. By preventing overextension, they ensure that PGCIL does not take on more than it can efficiently execute. The company’s current execution challenges – with several projects running significantly behind schedule – suggest that bandwidth constraints are real. Even the most capable organisation has limits to how many complex projects it can simultaneously manage while maintaining quality standards and timeline commitments. A market share cap acts as a circuit breaker, preventing any entity from becoming overwhelmed by its own success in winning bids.

Third, caps enable other capable developers to contribute meaningfully to national grid expansion. India’s transmission sector has attracted competent private players with proven track records. Private companies have demonstrated technical capability and financial strength. Their participation brings not just additional execution capacity but also innovation, diverse financing sources and competitive pressure that drives efficiency. When these players consistently lose out in competitive bids to ultra-aggressive tariffs, their interest in participating diminishes. Already, industry sources indicate that some private players are becoming selective about which bids to participate in, calculating that the likelihood of winning against PGCIL’s pricing is too low to justify the effort of preparing detailed technical and financial proposals.

Fourth, market share caps reduce the risk of any entity becoming ‘too big to fail’. When systemic risks are concentrated in a single organisation, government bailouts become inevitable in case of serious difficulties, creating moral hazard and exposing taxpayers to risk. While PGCIL’s government ownership provides implicit support, the principle of avoiding excessive concentration applies even to public sector entities. The goal is to ensure that no single entity’s challenges can destabilise an entire sector.

Fifth, from an economic efficiency standpoint, caps prevent predatory pricing. When an entity with a sovereign balance sheet and access to low-cost funding competes with private players who must borrow at commercial rates, the bidding process can become less about genuine efficiency and more about who can afford to quote the lowest tariff, even if it is below an economically sustainable level. Over time, this drives out private competition, reducing the sector to a monopoly – the very situation that competitive bidding was designed to prevent.

The goal is not to diminish PGCIL’s role but to rebalance it. The company would still execute a significant share of projects – potentially half of all annual awards under a 50 per cent cap – while creating space for others to participate. This is not punishment for success; it is calibrated market design to ensure long-term sectoral health. India’s experience with spectrum caps in telecom and capacity caps in renewable energy demonstrates that well-designed market share limitations can coexist with strong dominant players, ensuring both healthy competition and reliable service delivery.

Implementation would require careful design. Caps could be applied on an annual basis to new project awards, measured either by project count, total tariff value or transmission capacity (circuit kilometres). A transition period might be needed to allow existing committed projects to be completed. The cap threshold – whether set at 50 per cent or some other level – would need periodic review based on market dynamics and the entry of new capable players. The regulatory framework already exists through CERC, which has consistently emphasised the importance of maintaining competition in the power sector.

The path forward

Addressing transmission sector concentration requires a calibrated approach that combines several elements. Market share caps form one component, but they must be implemented thoughtfully to avoid disrupting ongoing projects or creating artificial constraints.

Complementary reforms are equally important. Strengthening the bidding framework to prevent predatory pricing would ensure financial sustainability. This could involve minimum tariff floors based on reasonable cost assumptions, or quality-linked bidding mechanisms where technical capability and past performance carry weight alongside tariff quotes. Such approaches would prevent a race to the bottom on pricing while ensuring that only capable developers win projects.

Improving project execution monitoring would help identify delays early and enable corrective action. The Central Electricity Authority could play a stronger role in real-time tracking of transmission project milestones, with regular public reporting on progress against timelines. This transparency would create accountability and allow for early intervention when projects begin to slip.

The government’s plans call for Rs9-15 lakh crore of investment in transmission infrastructure over the coming years to support renewable energy integration. Meeting this requirement demands not just resources but also diversified execution capacity. No single entity, regardless of its size or capabilities, should be expected to shoulder this burden alone.

PGCIL has been, and will continue to be, integral to India’s transmission story. The company’s technical expertise, institutional knowledge and execution track record are national assets. But even the most capable entity has limits. Recognising these limits and creating a more balanced market structure is not a criticism of PGCIL – it is prudent risk management for a sector that underpins India’s energy future.

The question facing policymakers is straightforward: can India afford to have its grid expansion overly dependent on any single entity, no matter how competent? The delays, curtailments and financial pressures suggest that the answer is no. Market share caps, combined with institutional reforms, offer a path to preserve PGCIL’s strengths while building a more resilient transmission ecosystem.

As India races towards its renewable energy targets, the grid must grow not just in size but in robustness. That requires multiple players, healthy competition and distributed execution risk. The alternative – continued concentration with mounting delays – risks becoming the bottleneck that slows down the entire energy transition.

The grid paradox is clear: PGCIL’s very success has created a situation where its dominance could constrain the sector’s growth. Resolving this paradox requires bold policy choices that rebalance the market without undermining the public sector’s legitimate role. India’s transmission future depends on getting this balance right. The tools to achieve this balance – market share caps chief among them – are already proven in other Indian sectors. What is needed now is the policy will to apply them.