India’s electricity demand is expected to drop by 4 percent during the financial year ending March 2021 despite a gradual pick-up in economic activity since pandemic-related lockdowns were relaxed in June, Fitch Ratings said on Tuesday.
The fall in demand is likely to result in lower load factors, mainly for coal-based power plants, it said.
According to Fitch, weak demand, along with higher coal inventory, led to India’s coal imports falling by 22 percent YoY in 1H20.
“We expect the credit profiles of state-owned distribution companies (discoms) to worsen further against weak demand from high-paying industrial customers, due to the economic slowdown,” it said in a statement.
“The central government’s recent Rs 900 billion liquidity facility for discoms should help them pay the huge outstanding amount owed to generation and transmission companies.”
Fitch also expects the pandemic-related supply chain and labour disruption to result in slower renewable-energy capacity additions during 2020.
“Hybrid projects – a combination of renewable and storage facilities – are gaining traction in India to address the intermittent nature of renewable power and streamline integration with the grid, while solar continues to lead capacity additions,” the ratings agency said.
Also Read: World Bank foresees steeper contraction for India
