'Grid bottlenecks, execution risks slow power expansion': Report

Mumbai: India's ambitious push toward renewable energy is facing growing strain from transmission bottlenecks and execution challenges, a report by proxy firm InGovern Research Services said.

The report highlights Power Grid Corporation of India Ltd's (PGCIL) dominant position in the sector, noting that the company controls nearly 84% of India's inter-regional transmission capacity and secured over half of the competitive project awards in FY25.

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"PGCIL's timely execution benefits shareholders, but transmission lags behind RE generation commissioning," the report said, adding that Central Transmission Utility of India Ltd's (CTUIL) September 2025 data shows PGCIL executing the majority of the 50 ongoing ISTS-TBCB schemes (e.g., Khavda-II, Koppal-II-Raichur), many were delayed by 6-24 months.

The report attributes these delays largely to land acquisition challenges, right-of-way disputes, and forest clearance issues. While such hurdles are common across infrastructure projects, the report notes that their impact is magnified by PGCIL's large and concentrated project load.

At the same time, PGCIL is undertaking an aggressive capital expenditure programme of ₹3 lakh crore through FY32, including ₹32,000 crore planned for FY26 alone. With an existing project pipeline worth ₹1.48 lakh crore, the scale is stretching operational capacity and raising concerns about timely delivery.

Execution delays are beginning to weigh on financial performance. PGCIL's return on net worth has declined from 18.5% in FY23 to around 15.3% in the first nine months of FY26.

Under the tariff-based competitive bidding framework, projects generate returns only after commissioning-meaning delays directly erode profitability. A one-year delay, the report estimates, can reduce the equity internal rate of return by about 200 basis points.

Meanwhile, capital tied up in unfinished projects has surged. Capital work-in-progress stands at approximately ₹1.2 lakh crore, while the company's debt-to-equity ratio has risen to around 1.45x, indicating increasing leverage and pressure on capital efficiency.

Transmission delays are also impacting renewable energy output.

Despite stable annual profits of ₹15,000-16,000 crore, PGCIL's stock performance has lagged. The company delivered a roughly 12% CAGR between FY20 and FY26, compared to 18% for the Nifty 50. Analysts suggest markets are factoring in execution risks and concerns over capital deployment.

Dividend payouts have also declined-from ₹14.75 per share in FY22 to ₹9.00 per share in FY25-as the company retains more earnings to fund its capex programme with no corresponding increase in commissioned assets.