India Unlikely To Meet Its Overall Power Needs In FY18, Says Fitch Ratings
Fitch expects Indian power sector to see surplus production due to capacity addition in FY18.
Though India’s power supply exceeds demand as of now, the country is unlikely to meet its overall power needs, Fitch Ratings observed in its latest report.
India could produce a power surplus in the financial year 2017-18, with an energy deficit of just 0.6 percent in the first three months of the year – a period of usually high seasonal electricity demand, the report said.
“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,” the report added.
Fitch attributes the low pick-up in demand to the inability of financially stressed power-distribution companies to purchase power, along with an absence of adequate network coverage. This puts downward pressure on India’s thermal power utilisation, the ratings agency said.
This impacts thermal power units whose plant load factors or operational ratios are hit by sluggish demand. Overall thermal PLF in India fell by 1.9 percentage points year-on-year to 55 percent, with privately owned generation companies’ PLFs declining 3.7 percentage points to 50 percent, central gencos’ to 66 percent, and state gencos’ PLF largely remaining stable at 51 percent in the first half of 2017. At the same time, electricity prices at exchanges in India dropped by another 11 percent year-on-year to Rs 2.4 a unit in FY17.
Tariffs are taking a hit mainly from the prevailing electricity demand-supply dynamics, lower coal costs and a decline in renewable tariffs. Distribution utilities are shying away from signing new long-term power purchase agreements for both thermal and wind capacity – while awaiting clarity on the auction route for wind power, supported by the availability of cheaper spot electricity.Fitch Ratings