Ind-Ra maintains negative outlook for power sector in FY22

With a further weakening in the financial position of distribution companies (discoms) due to Covid-led business disruptions, analysts at India Ratings and Research has maintained a negative outlook on the power sector for FY22. The agency expects power demand to grow at 9%-10% year-on-year (y-o-y) in FY22, which will help the recovery of utilisation levels of thermal power plants.

Overdues — outstanding of 45 days or more — owed to generators by discoms across the country stood at Rs 1.27 lakh crore at January end, 27% higher than the same period in last year. Dues have increased despite PFC-REC disbursing Rs 46,074 crore to all the discoms by January-end under the first tranche of the Centre’s liquidity infusion scheme to clear dues to generators.

“The inability of the states to avail tranche-2 of the package may keep the outstanding dues high for a long period,” India Ratings noted. Funding to discoms under the liquidity infusion scheme are designed to be done in two tranches. As FE recently reported, the second tranche of disbursals will be released soon for Andhra Pradesh, Telangana, Rajasthan, Bihar and Manipur.

The second tranche of disbursements are dependent on the implementation of measures such as smart meters installation in government departments, liquidation plan for clearing of dues by state governments towards unpaid electricity dues and subsidy amount to discoms.

In the first ten months of FY21, power generation growth declined 2.9% y-o-y. However, requirement has been increasing gradually and February marked the sixth straight month to record an annual rise in electricity demand.

Utilisation levels of coal-based power plants went up to 61.2% in January from 53% in December. Plant load factor of coal-based power plants fell to 50% in H1FY21 from 58% a year ago. “The recovery to above 60% would be beyond FY23, given the continued thermal capacity additions of 6-8 GW,” analysts noted.