Power demand is expected to decline by about 8 per cent in current fiscal terms due to a sharp drop in demand from the commercial and industrial segments on the back of the pandemic-induced COVID-19 national lockdown, Emkay Global Financial Services said in a study. According to the Department, the decline in demand is likely to result in a 13.1 per cent year-on-year (YoY) drop in revenue from discom (distribution companies) to Rs 6.8 lakh crore in FY2021.
The nationwide lockdown to curb the spread of the deadly coronavirus during the first three months of the fiscal year has had a major effect on economic activity , leading to a 17 per cent fall in Q1FY21 power demand.
“Our analysis reveals that power demand will decline 8 per cent year on year in FY21 on a steep fall in commercial and industrial (C&I) demand,” the agency said.
In addition, the difference between the average supply cost and the average revenue realized in FY21 is projected to rise to Rs 0.95 per unit from Rs 0.50 per unit in FY2020, which translates into an under-recovery of Rs 1.12 lakh crore.
According to Emkay, the late discoms have crossed Rs 1.17 lakh crore, which is near to the pre-UDAY record.
“Discoms’ financial stress has been aggravated in this period due to the fall in power demand from the commercial and industrial segments and waiver of fixed charges by many discoms to the industrial segment.
“The overdue level is likely to remain high in FY21 due to the expected rise in under-recovery and slow progress in the Aatmanirbhar scheme toward loan disbursement,” it said.
The Government has announced a Rs 90,000 Crore Discom Credit Line to clear outstanding debts to generation and transmission companies.
Discoms’ unpaid fees rose to Rs 1.26 lakh crore in May 2020 compared to Rs 95,000 crore in March 2020.
“We expect demand from C&I to decline 26.9 percent in FY2021, leading to a cross-subsidy charge loss of Rs 32,200 crore to the discoms,” it said.
Emkay further noted that power capacity addition will witness postponement in FY2021.
“We expect net capacity addition of 61 GW in FY20-FY24E. Key reforms such as ADITYA (Atal Distribution System Improvement Yojana) and Amended Electricity Act should improve discoms’ operational and financial efficiencies, if executed well,” it said.
However, it expects power demand to revive in FY2022, with improvement in economic activity.
“In addition, the Power Ministry is working on a series of measures and reforms such as the Aatmanirbhar scheme, ADITYA, Electricity Amendment Act 2003 and the National Tariff Policy, which if implemented successfully, will improve discoms’ operational and financial efficiency,” it added.
