India's power demand growth to slow down in FY23: Fitch Ratings

 

In its India Power Watch 1HFY23, Fitch Ratings said it expects demand growth to moderate slightly in the second half of 2022-23

Fitch Ratings expects India's electricity demand to grow by around 8 per cent in the fiscal year ending March 2023 (FY23) as against 8.2 per cent in FY22.

In a report - India Power Watch 1HFY23, Fitch said demand is expected to pick up in the second half of 2022-23 (H2FY23), as the first quarter of FY 2022-23 will see a robust 18.5 per cent year-on-year growth. (Q1FY23) from a low base a year ago when demand declined due to resurgence of Covid-19 infections.

Fitch said it expects average thermal power plant load factor (PLF) to remain above 60 per cent (H1FY23: 64.5 per cent), supported by strong electricity demand and improved local coal supply.

The thermal PLF in the first quarter of FY23 was 69.5 per cent, but according to Fitch, the quarter also saw high power outages due to insufficient domestic coal supplies despite increased domestic production with higher seabed coal prices limiting imports. Was.

Fitch said distribution companies (discoms) have started paying overdue amounts to generation companies (gencos) after late payment surcharge (LPS) was imposed by the government, Fitch said the total dues of discoms since September 2020 The amount exceeds Rs 1 trillion.

As per the report, the government expects the discoms to clear all dues by 2026. Fitch expects ReNew Power Pvt Ltd (BB-/Stable) and Greenko Energy Holdings (BB/negative) receivable days to fall to 280 and 160 days in FY23. from 339 and 256 days respectively in FY22. Both are in touch with Andhra Pradesh discoms, which have significantly delayed payments to renewable gencos. Receivable days represents the number of days (credit period) that customers take to settle their dues to the company.

Both the companies said that the discoms have started making payments under the LPS norms. According to the Fitch report, under the LPS rule, the government gives a one-time exception to all discoms in which the surcharge will not apply after the notification date, which limits the increase in dues.

The dues can be repaid in instalments, and any delay in payment will lead to LPS on all dues and restriction on access to power exchanges. According to Fitch, in August 2022, 27 discoms in 13 states were barred from accessing power exchanges for non-payment of LPS.

Fitch expects renewable capacity addition to moderate in H2FY23 (8.2 MW in H1FY23), with some capacity being shelved due to current high commodity prices, high import duties and supply chain issues. Solar led the way in capacity addition in the first half of FY2023 with 6.8 MW.

This could be partly due to advance purchase of solar equipment by some developers ahead of the imposition of basic customs duty (BCD) of 40 per cent and 25 per cent, respectively, on solar modules and cells from April 2022, which replaces the safeguard duty. of 15 percent. Fitch has said in the report that the government does not intend to exempt BCD.

According to the report, the central government aims to generate 50 percent of India's electricity from renewable sources (including hydropower) by 2030 (7MFY23: 29 percent, FY22: 24 percent). The government plans to achieve its target through Green OY, the success of which depends on the timely and effective implementation of regulations by the state electricity regulators.