PGCIL’s ₹1.48 Lakh Crore Renewable Pipeline Stretches Execution Capacity: Report

India’s transmission backbone, Power Grid Corporation of India Limited (PGCIL), is facing mounting execution pressure as it manages an unprecedented renewable energy transmission pipeline worth ₹1.48 lakh crore, according to a report by InGovern Research Services.

The report highlights that the rapid expansion in capital expenditure across the power transmission sector is pushing organisational bandwidth to its limits, raising concerns over timely execution and financial efficiency.

Massive Capex Cycle Intensifies Pressure

The sector is collectively targeting nearly ₹3 lakh crore in capital expenditure through FY32, with a revised outlay of ₹32,000 crore for FY26 alone. Within this, PGCIL is handling one of the largest pipelines, significantly stretching its execution capabilities.

The company continues to dominate India’s interstate transmission system (ISTS), particularly under the regulated tariff mechanism (RTM), while also maintaining a strong presence in tariff-based competitive bidding (TBCB) projects.

However, this dominance comes with risks. PGCIL currently controls nearly 84% of inter-regional transmission capacity and secured over half of competitive project awards in FY25, raising concerns about sectoral concentration.

Rising Curtailment Highlights Infrastructure Gaps

Execution challenges are already visible on the ground. Renewable energy curtailment has surged sharply, especially in Rajasthan, pointing to transmission bottlenecks.

Curtailment levels in Rajasthan jumped from 8.5% to 51.5% between March and August 2025, impacting around 4 GW of wind and solar capacity, which could rise to 6–8 GW if transmission expansion lags generation growth.

Project Delays Across Renewable Corridors

The report flags 6–12 month delays across nine key ISTS projects, including transmission systems linked to renewable energy zones in Rajasthan and the Khavda solar park.

Alarmingly, some projects have achieved only ~3% physical progress despite nearly 28% of scheduled timelines being exhausted, indicating early-stage bottlenecks.

Key challenges include:

• Land acquisition hurdles
• Right-of-way (RoW) disputes
• Forest clearance delays

These issues, while sector-wide, are amplified in PGCIL’s case due to the sheer volume of projects under execution.

Financial Stress Begins to Show

Execution delays are now reflecting in financial metrics.

• Return on net worth declined from 18.5% (FY23) to ~15.3% (9MFY26)
• Capital work-in-progress stands at ₹1.2 lakh crore
• Debt-to-equity ratio has risen to ~1.45x

Under the TBCB framework, returns begin only after commissioning. A delay of 12 months can reduce equity IRR by approximately 200 basis points, as interest during construction continues to accumulate.

Dividend payouts have also declined—from ₹14.75 per share in FY22 to ₹9.00 in FY25—as the company retains capital to fund its aggressive expansion.

Market Signals Growing Investor Caution

Despite stable earnings, PGCIL’s stock performance reflects investor caution.

The company delivered a CAGR of ~12% between FY20 and FY26, underperforming the Nifty 50, which returned around 18% during the same period.

This gap indicates growing concerns around execution risks, capital deployment efficiency, and delayed asset monetisation.

Transmission Emerges as Key Energy Transition Bottleneck

The findings underscore a broader structural issue: India’s energy transition is increasingly constrained by transmission infrastructure.

While renewable generation capacity is scaling rapidly, evacuation infrastructure is lagging—posing a risk to India’s ambitious target of 500 GW of non-fossil fuel capacity by 2030.

InGovern’s Key Recommendations

To mitigate risks and improve execution efficiency, InGovern has recommended:

• Capping project allocation to any single developer at ~50% annually
• Enhancing transparency in project identification and bidding
• Ensuring regular disclosures on project delays, capitalisation, and IRR assumptions
• Adopting a “value over volume” strategy—aligning project intake with execution capacity