The imposition of lockdown to contain the spread of coronavirus pandemic has adversely impacted electricity demand in the country, which is likely to see a degrowth of 1 per cent in this financial year. This would in turn result in an increase in losses to state distribution companies (discoms) by at least Rs 20,000 crore, a note prepared by ratings agency ICRA has said.
The average thermal PLF (plant load factor), which determines the capacity utilisation for power companies is expected to fall from 56 per cent in fiscal 2020 to 54 per cent in 2020-21 against an earlier projection of 60 per cent. ICRA said this is considering full lockdown till May 3, 2020, partial lifting of lockdown in the non-red zones in May and June 2020 and resumption of full operations by industrial and commercial establishments from July 2020 in a base case scenario.
"Any extension in the lockdown period would have further downside risk for the demand growth. This would further delay the resolution of stressed thermal assets, a majority of which are impacted by lack of long-term power purchase agreements (PPAs)," said Sabyasachi Majumdar, Group Head & Senior Vice President - Corporate ratings, ICRA.
The decline in high tariff paying industrial and commercial consumers has adversely impacted the revenues and cash collections for the power distribution utilities (discoms). This is likely to increase book loss level for the discoms at all India level by Rs 20,000 crore in FY21, with further downside risks arising from any extension in the lockdown period and any delay in issuance of tariff orders or inadequate tariffs approved by the state electricity regulatory commissions.
"This would aggravate the payment delays from discoms to power generation companies, which are already reeling under large payment dues of more than Rs. 920 billion as of February 2020," said Girishkumar Kadam, Sector Head & Vice President, ICRA Ratings. "In this context, the timely and adequate liquidity support from the respective state governments, including the payment of regular agriculture subsidy, remains extremely crucial."
Further, the under-construction renewable power projects are also likely to face delays in execution because of disruption in supply chain in India and labour availability.
"Given that lockdown would impact project implementation in Q1 FY2021 and assuming normalcy thereafter, the capacity addition in the wind and solar segments together is likely to lower by about 25 percent to 8 GW against earlier estimates of 11 GW for FY2021," ICRA said.