Transmission – India’s Power Grid Set for Gradual Recovery by FY27

Transmission – India’s power transmission sector is expected to regain momentum by the financial year 2027 after experiencing a prolonged period of slow growth over the past five years, according to a recent analysis by SBI Caps.

Delays and Constraints Weighed on Sector Growth

Between FY22 and FY26, expansion in transmission lines and substations repeatedly fell below planned targets. Several structural challenges contributed to this slowdown, including delays in securing right-of-way permissions, complications in land valuation processes, and the impact of the Great Indian Bustard (GIB) conservation ruling. In addition, supply chain disruptions—particularly limited imports of key equipment from China—further hindered project execution.

Despite these setbacks, FY26 has shown early signs of recovery. Transmission line additions recorded a 37 percent year-on-year increase, while substation expansion came close to meeting projected goals. Even with this progress, the National Electricity Plan’s target set for March 2027 is unlikely to be fully achieved, leaving a significant portion of planned investments yet to be executed. SBI Caps estimates that the sector could see investment opportunities worth approximately Rs 7.6 trillion over the next six years.

Policy Changes May Influence Investment Patterns

While the improvement in infrastructure additions appears sustainable, regulatory adjustments in the near term could affect growth trajectories. One key change is the phased withdrawal of Inter-State Transmission System fee waivers for renewable energy projects. These concessions previously made it economical to transport renewable power across long distances, even when local generation options were competitive.

With the gradual removal of these benefits, states may shift focus toward developing renewable capacity within their own regions. This is expected to drive higher investments in intra-state transmission systems. States rich in renewable resources could benefit more from this transition, while others may need to rethink their energy strategies. Over time, this shift is likely to result in more efficient allocation of capital across the sector.

Energy Storage Emerging as a Key Solution

The report highlights energy storage as an important tool for addressing transmission bottlenecks. By integrating storage systems alongside renewable generation, power supply can be balanced more effectively throughout the day. This reduces the need for building high-capacity transmission lines designed to handle peak loads, particularly during evening demand surges linked to wind energy.

Improved load management through storage can enhance the utilisation of existing transmission infrastructure. It also helps distribute fixed costs more evenly, potentially leading to lower tariffs for consumers.

Financing Models and Monetisation Gains Importance

Meeting the sector’s large capital requirements will depend heavily on innovative financing approaches. The National Monetisation Pipeline 2.0 has outlined a target of Rs 2.3 trillion for transmission assets between FY26 and FY30. A major portion of this is expected to come from Build-Own-Operate-Transfer projects, while the remainder will be raised through securitisation of assets held by Power Grid Corporation of India Limited.

Infrastructure Investment Trusts are also likely to play a growing role. These instruments are well-suited to transmission assets due to their long operational life, predictable revenue streams, and relatively low operating costs. Although challenges such as limited asset availability and borrowing constraints remain, efforts are underway to expand investment opportunities by including related infrastructure assets and developing a steady pipeline for investors.

State-Level Assets Offer Significant Potential

Looking ahead, state-owned transmission networks could represent the next major opportunity for sector growth. These assets account for nearly 90 percent of intra-state transmission lines and are estimated to hold monetisation potential of around Rs 2.9 trillion. This figure is substantial enough to cover the projected costs of intra-state transmission expansion under the National Electricity Plan through March 2032.

However, unlocking this potential will require policy stability and structural reforms at the state level. Avoiding sudden tariff revisions, ensuring clarity in taxation, and accelerating the implementation of the Acquire, Operate, Maintain, and Transfer framework will be crucial. Efficient restructuring of special purpose vehicles will also play a key role.

Even partial monetisation of these assets could significantly improve state finances while supporting broader sectoral development.