Energy Demand In India To Grow 6-7% In Next Financial Year: Report

The electricity demand in the country is expected to witness a growth of 6.0 – 7.0 per cent in the next financial year,  as compared to an estimated decline of 2.0 – 2.5 per cent in the current financial year, driven by a favorable base effect and likely recovery in demand from the commercial and industrial (C&I) segments. According to a recent report released by ICRA Ratings, the all-India thermal plant load factor is likely to improve to 57.0 - 58.0 per cent in the next financial year from the estimated level of 53.0 - 54.0 per cent in the current financial year, though it still remains subdued. The credit outlook also remains negative for the distribution segment, due to the continued weakness in the financial position of most state distribution utilities.

In May 2020, the central government announced the liquidity support scheme of Rs. 1200 billion amid the COVID-19 impact, in the form of loans from the power finance corporation (PFC) as well as rural electrification corporation (REC) to clear the dues to power generating companies from discoms. However, the scheme is the fourth such bailout being provided to the discoms in the last 15 years, without an appropriate improvement in the discoms' operating efficiencies. 

According to the report, the credit outlook for renewable energy is stable due to factors such as continued policy support from the government, the presence of creditworthy central nodal agencies as the intermediary procurers in addition to improving the tariff competitiveness. These factors may result in strong investment prospects. 

“The renewable segment would remain the main driver of capacity addition in the power sector, with a share of 65 - 70 per cent over the next five-year period,' said Mr. Girishkumar Kadam, Sector Head and Vice President, ICRA Ratings.