Power generation in the country increased by 8 per cent year on year (YoY) in the month of June 2021, primarily led by a revival in economic activity due to easing of intermittent lockdowns and heatwaves across many states, which led to soaring temperatures.
It has been observed that power generation increased significantly in the coal and renewables segments, while it declined for the gas and hydroelectric segments. During the month of June, the plant load factor (PLF) also improved for the coal and the renewables segments, while it fell for the gas and the hydroelectric segments. As per a report by HDFC Securities, due to a rise in demand for power, the outstanding dues status of discoms also improved significantly year on year and also on month-on-month basis due to higher power offtake.
It is also expected that the proposed reforms like the Draft Electricity Amendment Bill could act as the silver lining and can lead to the revival of the power sector in the country. However, the key would be the successful implementation of these reforms. The HDFC Securities report points out that the power generation in the country rose by 16.6 per cent in Q1 FY22. Among power companies, the generation for NTPC was up by 8.9 per cent YoY. However, it fell significantly across Tata Power stations by 40.1 per cent YoY in June 21 and 35.1 per cent in the Q1 FY22 due to lower generation across its Mundra plant on rising coal prices. There was also an improvement in power generation for JSW Energy, while it declined for NHPC by 10.8 per cent YoY in Q1FY22 due to low water levels.
It was also observed that the PLF increased for coal-based plants and the renewable energy segment, but fell for hydroelectricity and gas segments in June 21. Furthermore, both base and peak power deficits remained low at 0.2 per cent and 0.1 per cent, respectively. The HDFC report points out that coal production and dispatches to power stations increased in June 21. On the other hand, international coal prices too skyrocketed to $111.4 per MT as imports from China increased due to increased industrial activity and a subdued monsoon in large parts of the country.
“We expect power demand to post a 12 per cent rise in FY22, led by improved economic activity in the country. The Central government’s liquidity package under the Atmanirbhar scheme has significantly improved liquidity for discoms (power-distribution companies). Furthermore, with CCEA (Cabinet Committee on Economic Affairs) approving the Rs 3.03 trillion reform-linked package, we can expect improved infrastructure capital expenditure by discoms over the next 3-4 years. This would, in our will, promote private participation in the discom space. Funds under the scheme would be released in proportion to the discoms’ achievements against mutually agreed targets in the action plan. These reforms could turn the sector around if executed successfully and enable sub-sectors like gencos (power-generation companies), transcos (power-transmission companies) and discoms to improve their operational efficiencies and become self-sufficient,” remarked Anuj Upadhyay, Institutional research analyst, HDFC Securities.
In a report in THE WEEK in April 2021, it was observed that the power-generating companies had been struggling with mounting receivables from discoms. However, this had gradually remained under check in the last few months due to a rise in the demand for power and disbursal of money through the PFC-REC liquidity package. It is also expected that going forward now the renewable energy segment will dominate capacity addition and growth in the power segment on the pretext that normalcy returns in the economy and there is no third wave of the pandemic.
