Power Grid Corporation of India Ltd (PGCIL) has planned capital expenditure of around Rs.7,500 crore during the ongoing fiscal year FY22. This is significantly lower than in recent years.
Addressing an investor conference discussing the company’s performance in Q1 of FY22, K. Sreekant, Chairman & Managing Director, PGCIL, said that while capex would be around Rs.7,500 crore in FY22, the company hopes to capitalize assets worth Rs.15,000 crore during the ongoing fiscal year.
Capital expenditure refers to expenditure made on assets under construction, while capitalization refers to value of projects that have been made operational. In other words, capitalization means that projects that were once under construction have been converted into productive (revenue-generating) assets.
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Performance in Q1 of FY22
In the first quarter (April to June, Q1) of FY22, PGCIL undertook capital expenditure of Rs.1,110 crore while the capitalization stood at a much higher Rs.5,642 crore. This surge in capitalization stemmed from commissioning of the second and final monopole (referred to as “Monopole-1”) of the 320kV Pugalur-Trichur HVDC line. With this, the entire project, with a total transfer capacity of 2,000 mw, now stands commissioned. (Read more)
In Q1 of FY22, PGCIL commissioned a total of 1,716 ckm of transmission lines and 9,400 MVA of transformation capacity. Two projects that got commissioned in Q1 of FY22 are worth mentioning – the 765kV double-circuit Ajmer-Phagi line in Rajasthan and the 400kV double-circuit Wardha-Aurangabad line in Maharashtra.
First 1,200kV line
The Wardha-Aurangabad line is indeed India’s first commercial 1,200kV line that has been developed through indigenous technology. It may be mentioned that 1,200kV is the highest voltage for AC power transmission anywhere in the world. Though the Wardha-Aurangabad line is 1,200kV-rated, it will be charged at 400kV. Ramping up of voltage may be done as demand increases.
Capex vs Capitalization: Recent trends
As can be seen from the table alongside, PGCIL’s capex for FY22, at Rs.7,500 crore, is the lowest in recent history. However, this reflects the significant slowdown in finalization of interstate/interregional projects, which is PGCIL’s principal domain. As pointed by a study by T&D India, not a single TBCB project was awarded in 2020. Some recovery is evident in TBCB activity in 2021, nevertheless.
Despite capital expenditure showing a declining trend in recent years, PGCIL has consistently been able to maintain high rate of capitalization. In the past five years at least, capitalization has exceeded capital expenditure.
Even in FY22, the projected capitalization of around Rs.15,000 crore would be twice the capital expenditure planned. In FY22, the entire Raigarh-Pugalur HVDC line would be commissioned. The minor balance portion, involving a transmission line, will be completed in Q2 of FY22. PGCIL also expects to commission some elements in the various under-construction transmission schemes in Rajasthan, such as Bhadla-Fatehgarh, Khetri, etc.
Projections for FY23
According to K. Sreekant, PGCIL is expected to incur capital expenditure in the region of Rs.7,500 crore to Rs.10,000 crore, in FY23. Capitalization during that year is projected to be around Rs.12,000 crore to Rs.15,000 crore.
