The agreements, signed by two special-purpose vehicles set up by Reliance Power, pertain to the development of two interstate power transmission projects, Project B and Project C.
The projects fall under the Western Region System Strengthening Scheme II (WRSSS-II), which was approved in July 2006 by the Cabinet Committee on Economic Affairs at an estimated cost of $1.01 billion. State-owned Power Grid Corporation of India Limited is responsible for projects under WRSSS-II.
In 2005, based on the directive of the Central Electricity Regulatory Commission, PGCIL invited tariff-based competitive bids to lay 1,500 kilometers (km) of 400-kilovolt double-circuit transmission lines. Reliance Power won the bid and entered into the recent agreements with power utilities and regional departments after prolonged discussions with the parties.
The projects will entail an estimated investment of about $349 million. Financial closure for the projects is expected soon. Funding for the project will be raised in a debt-to-equity ratio of 3:1. Under the projects, 1,000 km of transmission lines will be laid in Maharashtra, and the remaining 500 km will be laid in Gujarat. The projects are scheduled for completion by December 2010.
Realizing the need to strengthen the country's power transmission network to support the growth in power generation capacity, the Indian government decided to open up the transmission sector to private participation. The Ministry of Power has finalized 14 ultra-mega transmission projects that will involve participation from players in the private sector. Estimated to cost more than $4.8 billion, the projects are to be implemented within India's Eleventh Five-Year Plan period, 2007-12.
The Reliance Power project is India's first ever privately owned interstate transmission project. The completion of the project would ensure smooth flow of surplus power from the eastern and northern regions to the western region of the country.
The main beneficiaries of the project include the Chhattisgarh State Power Distribution Company Limited, Gujarat Urja Vikas Nigam Limited, Madhya Pradesh Audyogik Kendra Vikas Nigam Limited, Madhya Pradesh Power Trading Company Limited, Maharashtra State Electricity Distribution Company Limited, and the electricity departments of Dadra & Nagar Haveli, Daman & Diu, and Goa. PGCIL will also set up another transmission network from Madhya Pradesh to connect the Reliance Power network to the eastern grid.