India’s transmission sector – cable networks that connect electricity generating units to the rest of the country - is staring at challenging times ahead with steep inflation hitting key components like transformers, switchgears, breakers and insulators, according to PowerGrid chairman and managing director (CMD) RK Tyagi.
“Supply chain is going to be a very big challenge going forward. This is because contrary to normal inflation (in other sectors) which could be between 5-8%, inflation in transmission components is as high as 15-20%. The prices are so high because the demand has increased and the hands of all suppliers and manufacturers are full,” Tyagi said in an interaction with investors and analysts on August 1 after the company reported a standalone net profit rose 7% YoY to Rs 3,653 crore in the first quarter of FY26.
As a result, at least 50% cost of every transmission project currently goes on component procurement, civil and transmission erection cost is about 30-35%, while 15-20% of the cost goes on getting the right of way (RoW) for laying the lines, he added.
PowerGrid, a Central Public Sector Enterprise (CPSE), is India’s largest power transmission company. It transmits more than 50% of the total electricity generated in the country through its networks.
Tyagi said for every project tender, PowerGrid is only getting about two bids from suppliers and manufacturers, leaving the CPSE with little option but to accept the high rates quoted by them. With the increase in the demand for transmission projects in India, the issue of limited manufacturers and suppliers of components and equipment is coming to the fore. The Union government has been mulling some form of incentive to boost local production in the transmission sector, but no announcement has been made yet.
“It is risky, but we are navigating our way through the supply chain crunch by procuring components in advance. For example, we are floating tenders for procuring 30 transformers in a single package, even when our current order at hand need just 6-9 transformers. This helps us bid for future projects and ensure timely execution,” the CMD said.
In the past seven years, the cost of a transformer alone has increased from Rs 14 crore to nearly Rs 30 crore now. Similarly, a Gas-Insulated Switchgear (GIS) bay now costs Rs 14-15 crore per bay compared to Rs 6 crore earlier.
India needs to award Rs 9 lakh crore worth of transmission projects by 2030 according to targets set by the Central government. Until now, bids worth Rs 3 lakh crore have been awarded. This means electricity transmission projects will need to be accelerated in the next five years, or else most of the renewable energy projects shall remain non-operational due to lack of connectivity.
“Nearly Rs 6 lakh crore worth of transmission projects are yet to be awarded. This means that India will have target awarding at least Rs 1 lakh crore worth of projects every year until the next five years. PowerGrid aims to grab 50-60% of all such projects,” Tyagi said.
The company has projects worth Rs 1.48 lakh crore in hand, including Rs 99,000 crore under tariff-based competitive bidding. With Rs 41,000 crore in work-in-progress assets, the effective executable book is near Rs 1.9 lakh crore. An additional Rs 67,000 crore worth of projects are expected to be bid out within FY26.
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