Weak demand along with higher coal inventory due to the pandemic related lockdown resulted in lower load factors and coal’s import falling by 22% yoy in 2020
New Delhi, August 22: Despite a gradual pick-up in economic activity since pandemic-related lockdowns were relaxed in June, Fitch Ratings predicted India’s electricity demand to drop by 4% during the financial year ending March 2021.
Fitch Ratings said that the fall in demand would likely result in lower load factors, mainly for coal-based power plants, stating that the current prevailing situation has led to India’s coal imports falling by 22% YoY in 2020.
“We expect the credit profiles of state-owned distribution companies (DISCOMs) to worsen further against weak demand from high-paying industrial customers, due to the economic slowdown”, Fitch Ratings said in a statement, adding
“The central government’s recent ₹900 billion liquidity facility for DISCOMs should help them pay the huge outstanding amount owed to generation and transmission companies.”
The pandemic-related supply chain and labour disruption expected to result in slower renewable-energy capacity additions during 2020, it said.
“While solar power continues to lead capacity additions, Hybrid projects – a combination of renewable and storage facilities – are gaining traction in India to address the intermittent nature of renewable power and streamline integration with the grid”, the rating agency said.
However, down from an average of 6 gigawatts over the previous 8 six-monthly periods, only 1.8 gigawatts of renewable capacity were added in India in 1920, since generation companies can delay projects using force majeure clauses under power-purchase agreements because of the pandemic.
“We think the bleak mid-term electricity demand growth outlook and impediments in debt financing in light of weak counterparties will also affect capacity addition over next year”, Fitch added.
