Indian Economy News

Power demand in India to increase by 7% in FY24 due to robust industrial activity: Fitch

  • IBEF
  • November 20, 2023

Fitch Ratings stated in its "India Power Monitor–H1 FY24" that India's power demand is anticipated to increase by approximately 7% in FY24 due to the country's strong industrial activity. The first half of the year saw a 7.1% increase in the demand for power. Demand in FY24 will, however, be less than the 9.5% seen in FY23.

According to Fitch, high power demand should maintain high load factors for thermal power plants. It was 68.7% in the first seven months of FY24. "However, we expect coal import volume to remain modest, with higher local supply meeting a large part of the increased demand," said the report.

The report's statistics demonstrated that since August 2023, when the monthly power consumption hit a record high, the coal inventory at power plants has been decreasing.

In September 2023, the thermal coal inventories dropped to approximately 8.4 days from the typical of approximately 18 days.

In order to guarantee a sufficient supply of coal, the Centre wants to increase domestic coal output and permit power plants to include a larger percentage of imported coal in the fuel mix.

The report also predicted that generation companies' (gencos') accounts receivable status will continue to improve in the foreseeable future. This is mostly because the Center's late payment premium law encourages distribution businesses, or discoms, to quickly settle accounts. The new rule states that after the due date, outstanding payments will be subject to a late payment surcharge at the base rate in effect for the first month of default. The surcharge will rise by 0.5% per month in the successive months.

Furthermore, the Revamped Distribution Sector Scheme (RDSS) implemented by the Centre is anticipated to increase the income collections of discoms. By FY26, the programme will have funded the installation of 250 million smart metres.

Regarding renewable energy, Fitch stated that it anticipates new technology and reasonably priced storage capacity to assist India in achieving its ambitious long-term energy transition objectives. "The country has put in place a number of schemes to encourage the expansion of renewable energy capacity. We anticipate that recent modifications to wind capacity auctions would restrain aggressive bidding and improve project performance,” it said.

In the first half of FY24, India increased the amount of renewable power generation capacity by around 6.6 gigawatts (GW). 5.0 GW of solar capacity was in the lead. The addition of wind power stayed constant at 1.6 GW.

By 2030, India hopes to have half of its installed generation capacity come from non-fossil sources, up from 41% in September 2023. Between FY24 and FY28, the government intends to auction off 50 GW of renewable energy capacity yearly, at least 10 GW of which will come from wind energy.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.