NEW DELHI: India's power sector demand is expected to rise by around 7 per cent in the financial year ending March 2024 amid robust industrial activity, according to Fitch Ratings.
The rating agency said it expects that strong power demand would keep thermal power plant load factors high. However, coal import volume is expected to remain modest, with higher local supply meeting a large part of the increased demand.
Coal inventory at power plants has been declining since August 2023, when monthly power demand reached a record high, it said. The government aims to boost local coal production and allow power plants to blend a higher proportion of imported coal in the fuel mix to ensure adequate coal stock.
The Union Ministry of Coal said it has plans to produce 1,404 million tonnes (MT) of coal by the year 2027 and 1,577 MT by the year 2030, at the current level of production of about 1,000 MT per annum.
"We expect cost-effective storage capacity and new technology to help India meet its ambitious long-term energy transition goals. The country has implemented various schemes to boost renewable energy capacity addition. We expect recent changes to wind capacity auctions to limit aggressive bidding and lead to better project execution," Fitch said.
Solar power, it said, continues to lead renewable capacity addition, contributing 5.0GW of new capacity out of the 6.6GW of total renewable capacity additions in the first half of the current fiscal.
"We forecast the receivable position of generation companies to continue improving in the near term, as distribution companies are promptly clearing dues, encouraged by the central government's late payment surcharge rule," it noted.
Regular payments under the central government's late payment surcharge (LPS) rules have lowered total dues from distribution companies (discoms) to power generation companies (gencos) to around Rs 700 billion, from Rs 1.3 trillion in June 2022.
It said India's renewable energy targets are ambitious but the development of cost-effective storage capacity, including new technologies, will be key in achieving the long-term targets.
At the COP26 summit in Glasgow in 2021, Prime Minister Narendra Modi had committed to an ambitious five-part "Panchamrit" pledge, including reaching 500 GW of non-fossil electricity capacity, to generate half of all energy requirements from renewables, to reduce emissions by 1 billion tons by 2030.
India also aims to reduce the emissions intensity of GDP by 45 per cent. Finally, India commits to net-zero emissions by 2070.