Growth in power supply exceeds demand, not requirement: Fitch

The coal-based power generation capacity has increased by 2.1 points, but in a latest report Fitch Ratings observed the supply exceeds demand as of now and would not meet the overall power needs.

“Fitch Ratings believes India could actually produce a power surplus in the financial year ending March 2018 (FY18), with an energy deficit of just 0.6 per cent in the first three months of FY18 — a period of usually high seasonal electricity demand. However, in reality, sporadic outages continue to plague the country. At the same time, about 24 per cent of households are yet to be electrified in India,” it said.

Fitch attributes the low pickup in demand to the inability of financially stressed powerdistribution companies to purchase power, along with the absence of adequate network coverage. This exerts significant downward pressure on India’s thermal power utilisation.

The ripple effect is felt by the thermal power units whose plant load factors (PLF) or operational ratios are hit by a sluggish demand. Overall thermal PLF fell by 1.9 pp year-on-year to 55 per cent, with privately owned generation companies’ (gencos’) PLF declining 3.7 pp to 50 per cent, central gencos’ to 66 per cent, and state gencos’ PLF largely remaining stable at 51 per cent in the first half of 2017. At the same time, electricity prices at exchanges in India dropped by 11 per cent year-onyear to ~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 longterm power purchase agreements (PPAs) 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 said.