India's power transmission sector is poised for a recovery in FY27 after five subdued fiscals, with regulatory shifts and new investment models expected to reshape capital flows and asset utilisation, according to a research report by SBI Caps.

Transmission line and substation additions consistently fell short of targets between FY22 and FY26 due to multiple bottlenecks -- right-of-way delays, complex land valuation, the GIB ruling, and equipment shortages caused by limited imports from China.

However, FY26 showed early signs of improvement, with transmission line additions rising 37 per cent year-on-year and substation augmentation nearly meeting targets. Even so, the National Electricity Plan goal for March 2027 is likely to be missed, leaving a substantial portion of the sector's capex still in the pipeline. SBI Caps estimates a ₹7.6 trillion investment opportunity in transmission over the next six years.

The report noted that while the recovery in network additions appears durable, near-term regulatory changes could act as a speed bump. The gradual withdrawal of Inter-State Transmission System (ISTS) fee concessions for renewable projects is expected to alter project economics.

The earlier waiver had encouraged long-distance wheeling of cheap renewable power, even when local generation was cost-competitive. With the fee structure changing, states may now find it more viable to develop renewables locally, giving a boost to intra-state transmission (InSTS) additions.

This shift is likely to benefit renewable-rich states at the expense of renewable-poor ones, leading to better capital allocation in the long run. Energy storage is emerging as a potential solution to transmission congestion. Co-located storage can smooth out power flows across the day, reduce the need for high-capacity lines to ferry wind power during evening peaks, and improve overall utilisation of transmission assets. This would help distribute fixed costs more efficiently and lower tariffs for all users.

On financing, SBI Caps highlighted asset monetisation as critical for meeting the sector's massive capital needs. National Monetisation Pipeline 2.0 has set a ₹2.3 trillion target for transmission between FY26 and FY30, including ₹2 trillion through Build-Own-Operate-Transfer-based line development and the rest through securitisation of PGCIL assets. Infrastructure Investment Trusts (InvITs) are also expected to play a larger role, given the long life, stable cashflows and low opex of operational transmission assets.

While challenges such as limited asset availability and leverage caps persist, these are being addressed by expanding into related asset classes and building a pipeline of right-of-first-refusal assets. SBI Caps said in its report that the next frontier could be state transmission assets, which account for nearly 90 per cent of InSTS lines and represent a ₹2.9 trillion monetisation opportunity -- enough to cover the entire InSTS cost envisaged by NEP till March 2032.

But for this to materialise, states must avoid arbitrary tariff changes and accelerate the implementation of the Acquire, Operate, Maintain, and Transfer framework with clear taxation clarity and efficient SPV unbundling. Even partial monetisation, SBI Caps says, could significantly strengthen state finances while supporting the sector's growth.

Published on April 24, 2026