All-India demand for power continues on its recovery path post unlocking of the economy in July 2020, notes ICICI Securities in a report.
As on August 1, 2020, daily demand reached 3,710 MU. On YoY basis, all-India daily demand is higher by 0.1 per cent as at August 1, 2020, while peak daily demand is lower by only 1 per cent YoY at 163 GW (averaging over 16 0GW and just 3.6 per cent lower YoY in July 20).
In fact, since July 27, 2020, all-India daily demand has averaged 5.3 per cent YoY higher, buoyed by good growth in states with higher retail demand proportion (up over 9 per cent on an average). Daily demand in states with higher commercial & industrial (C&I) proportion, though still modest, is on an average over 1 per cent higher, year-on-year.
Renewable generation pie continues to expand at a slower pace, but thermal PLFs improved to 51.5 per cent in July 2020, buoyed by 12 per cent month-on-month higher generation at NTPC coal plants. This resulted in improved coal offtake as well, which was evident with only a 3 per cent decline in production and 6.9 per cent decline in offtake in July 2020 for Coal India.
Further improvement expected
ICICI Securities believes that liquidity infusion through PFC/REC loans along with other AT&C loss reduction measures will further improve demand from states. As part of these loans, Rs.112.2 billion has already been disbursed to three states – Andhra Pradesh (Rs.32.9 billion), Maharashtra (Rs.25 billion) and Telangana (Rs.54.4 billion). The total loans sanctioned, as of July 17, 2020, stood at Rs.501.5 billion.
This now-latent demand will contribute towards overall demand growth. Of the total end-June 2020 discom overdues of Rs.1.2 trillion, the top five states (Rajasthan, Tamil Nadu, Uttar Pradesh, Maharashtra and Telangana) account for over 71 per cent. ICICI Securities expects the balance amount to be disbursed in the next 30-45 days as and when state government approvals are received.
ICICI Securities continues to maintain that the immediate requirement in the sector is to take actions to resurrect the lost/latent demand. PFC/REC schemes will provide the much needed short-term relief to the whole sector.
However, the MoP imposing conditionality on release of Central funds to states based on structural reforms and loss reduction will be the key to structural improvement. With 24×7 power availability still not a reality in many states, and many discoms continuing to incur losses at EBITDA level, distribution reforms cannot be more timely and impactful, and help activate the latent demand, notes ICICI Securities.
Higher generation by NTPC: In an independent announcement, Central PSU power generator NTPC said that its group’s monthly power generation rose by 13.3 per cent to 26.73 BU in July 2020 compared to 23.59 BU in June 2020. NTPC’s coal-fired power stations registered a growth of 5.6 per cent with generation of 21.89 BU compared to 20.74 BU in July 2019. NTPC Korba plant in Chhattisgarh (installed capacity: 2,600 mw) achieved over 100 per cent PLF during the month of July 2020. NTPC Group stands for plants fully owned by NTPC as well as those owned by NTPC’s subsidiaries and joint ventures.
(Note: MU = million units = million kwh; BU = billion units = 1000 MU)
Featured photograph shows NTPC’s Vindhyachal coal-fired power plant in Madhya Pradesh. With installed capacity of 4,760 mw, NTPC-Vindhyachal, located in Singrauli district, is India’s largest coal-fired power generating station.
