The first public-private collaboration in the power transmission sector between the state-owned Power Grid Corporation and Tata Power for setting up a 1,200 km long power transmission line is expected to achieve financial closure by September.

The Rs 1,980 crore (Rs 19.80 billion) project, cleared by the Cabinet on Saturday, would enable evacuation of power from the 1020 mw Tala hydro-electric power project in Bhutan to the eastern region. PGCIL holds 49 per cent equity of the project while 51 per cent is held by Tata Power.

Project investment for the joint venture portion is estimated at Rs 1,100 crore (Rs 11 billion), PGCIL chairman and managing director R P Singh told reporters in New Delhi, adding that PGCIL would provide an equity of Rs 162 crore (Rs 1.62 billion) and Tata Power would contribute Rs 168 crore (Rs 1.68 billion) in the form of equity.

The rest of the money, about Rs 770 crore (Rs 7.70 billion), would be financed by institutions including IFC, ADB and IDFC, Singh said. "Banks and FIs have agreed to extend the loans without any guarantee either from PGCIL or Tata Power," Singh said.

The project is slated to be completed by mid-2006, Singh said, adding that "this beginning of public-private participation in power transmission should be a trend-setter for future investments in the transmission sector." PGCIL has assured the collection of transmission tariff to its private partner to the extent of 51 per cent, Singh said.

The project would facilitate evacuation of power from the 1020 mw Tala hydro-electric power project in Bhutan to the eastern region, Singh said adding that surplus power from the eastern region would be transferred to the northern region through east-north inter-connector and the northern region transmission system.

Talking about the investments to be made in the transmission sector during the current plan period, Singh said: "We have planned to invest Rs 31,080 crore (Rs 310.80 billion) in the Tenth Plan in the power transmission sector, of which PGCIL's outlay stands at Rs 21,370 crore (Rs 213.70 billion) while the rest of Rs 9,710 crore (Rs 97.10 billion) has to come from the private sector."

PGCIL had proposed to involve the private sector in transmission through the joint-venture route and through Independent Power Transmission Companies.

In case of its model Rs 450 crore (Rs 4.50 billion) IPTC proposed for setting up transmission line on the Bina-Nagadha-Digha corridor between Madhya Pradesh and Gujarat, only one private company finally submitted the bid while as many as 18 companies procured the bid document.

Kalpataru of Mumbai in association with a Malaysian company is the sole bidder for the project, Singh said, adding that "we are discussing the matter with the Central Electricity Regulatory Commission."