Discoms losses at the all-India level witnessed a decline in FY24 compared to FY23, led by higher tariffs and subsidy grants from state governments, according to a report by ICRA.
The report also noted that the gap between the cost of supply and tariff realisation persists across most states. Moreover, the gross debt for state-owned Discoms witnessed a sharp increase to Rs 7.4 trillion as of March 2024 from Rs 6.6 trillion in March 2023, driven by debt availed to clear past dues to generators and to fund working capital and capex amid continued losses.
"The tariff orders for FY2026 have been issued in 19 out of the 28 states as of May 25, reflecting moderate progress in the issuance of tariff orders," said Vikram V. “Despite the loss-making operations of the Discoms, the tariff hikes approved for FY26 remain muted across most states, similar to FY2025.”
The report also noted that India’s power demand growth for FY26 is expected to be 5.0-5.5%, lower than the expectation for GDP growth for this fiscal (6.5%) due to the early onset of monsoon. The above-average rainfall will dampen demand for cooling as well as demand from the agriculture segment. According to the rating agency, the demand growth in FY2026 is expected to be higher than the 4.2% reported in FY25, but it is expected to trail the over 8.0% growth seen during FY2022-24.
“Over the next five years, ICRA expects electricity demand to achieve a healthy compound annual growth rate (CAGR) of 6.0-6.5%, higher than the 5% CAGR achieved over the past decade, driven by demand from the rising adoption of electric vehicles (EVs), green hydrogen (GH), and the increase in data centre capacity," said Vikram V, vice-President and co-group head - corporate ratings, ICRA.
The growth in demand for grid capacity is expected to be offset to some extent by the rising adoption of rooftop solar and off-grid projects, driven by schemes such as the Pradhan Mantri Surya Ghar Yojana. Additionally, ICRA expects the generation capacity addition to reach an all-time high of ~44 GW in FY2026, a sharp increase from the previous high of 34 GW in FY2025. With this addition, the overall installed power generation capacity will reach close to 520 GW by March 2026. The thermal segment is expected to add 9-10 GW capacity in FY2026, with the balance largely contributed by the renewable energy segment.