India’s power sector stuck in the doldrums
India’s power supply deficit figures might be looking better but ratings agencies and analysts have begun to point out that the Indian energy machine might not be able to fulfill overall needs.
CHENNAI: India’s power supply deficit figures might be looking better than ever, but ratings agencies and analysts have begun to point out that the Indian energy machine might not be able to fulfill overall needs during the current financial year.
Fitch Ratings, for example, pointed out in a research note that while the numbers look rosy and India recorded an energy deficit of just 0.6 percent in the first three months of the year, the reality is that power outages continue to plague the country.
“In reality, sporadic outages continue to plague the country. At the same time, about 24 percent of households are yet to be electrified in India,” Fitch said. The primary issue continues to be a low pick-up in demand due to the inability of financially stressed power-distribution companies (discoms) to purchase power in tandem with inadequate infrastructure. “This puts a downward pressure on India’s thermal power utilization,” said the agency.
Thermal power units with plant load factors (PLF) hit by low demand are set to be affected the worst. According to analysts, overall thermal PLF fell by 1.9 percentage points in FY17 compared to the previous year, while the state of private companies was worse -- with PLF falling 3.7 per cent. At the same time, electricity rates have also fallen 11 per cent year-on-year.
Industry bodies have also repeatedly raised the issue, with Assocham pointing out last week that low capacity utilisation will continue to be an issue until 2018-19. “... operational performance of discoms remains a concern. Besides, intensive rural electrification in Uttar Pradesh, Bihar and north-eastern states also remained low,” the association said.
The government, for its part, is reportedly formulating a scheme to revive stressed power assets through a process of competitive bidding, which will allow distressed and stranded companies to kick start operations and begin repaying debt.