Inter-State Transmission Capex to Double to INR 1 Lakh Crore in FY26-27

India is set to witness a significant surge in capital expenditure (capex) for its inter-state transmission system, with investments projected to double to INR 1 lakh crore over FY26 and FY27, according to a Crisil report.

This sharp rise from INR 50,000 crore spent between FY24 and FY25 reflects the country's commitment to strengthening its transmission infrastructure, ensuring efficient evacuation of power generated from renewable energy sources. The investment push comes as India targets adding 65-75 GW of solar and wind power capacity over the next two fiscal years.

Transmission networks play a crucial role in integrating this growing renewable capacity into the national grid. However, transmission projects typically take 2-4 years to complete, twice the duration of a renewable energy project, making timely implementation a key challenge.

Despite execution risks, developers are well-equipped to handle the rising capex intensity. Anand Kulkarni, Director, Crisil Ratings, stated, "We expect these projects to generate a return on equity of 11-14 percent. While project delays could impact returns, developers are financially strong, supported by recent fund raises of INR 12,500 crore through equity capital markets and estimated free cash flows of INR 30,000 crore from their operational portfolios over the next two fiscals."

The report highlights right of way (ROW) challenges, forest clearances, and supply chain constraints as major hurdles affecting project timelines. On average, transmission projects face delays of about 10 months, with some exceeding 18 months, causing disruptions in renewable energy integration.

To address these challenges, the Ministry of Power has revised its land compensation guidelines to accelerate transmission project execution. In June 2024, the government increased land compensation for tower base areas in high-voltage transmission lines from 85 percent to 200 percent of land value, ensuring fair compensation for landowners. This measure is expected to reduce ROW-related delays and speed up project completion.

Maintaining an uninterrupted supply of critical components such as sub-station equipment, transformers, and high-voltage direct current (HVDC) components will be essential for meeting project timelines. Industry experts emphasize the need for a stable supply chain to minimise delays and ensure timely execution.

With project awarding ramping up to INR 1.6 lakh crore in FY24 and FY25, India is laying the groundwork for an accelerated expansion of transmission infrastructure. This move is vital for meeting renewable energy targets, ensuring grid stability, and supporting the country’s long-term energy transition goals.