Coronavirus hits India’s electricity demand, capacity addition: Fitch

Regulated utilities: Steady operations; higher receivables, rebate affect cash flows

GN Bureau | August 19, 2020


#industry   #automobiles   #power   #electricity   #energy   #economy   #lockdown   #Covid-19   #Coronavirus   #Fitch Ratings  
(Illustration: Ashish Asthana)
(Illustration: Ashish Asthana)

As the lockdown and movement restrictions in the aftermath of the Covid-19 pandemic come to hurt economic activities, India’s electricity demand is set to drop by 4% during the financial year ending March 2021, Fitch Ratings said in a statement.
 
The fall in demand is likely to result in lower load factors, mainly for coal-based power plants. The weak demand, along with higher coal inventory, led to India’s coal imports falling by 22% y-o-y 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. 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, the statement said.
 
Fitch 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.
 
For more, read Fitch’s Special Report, ‘India Power Watch 1H20’, which is available at www.fitchratings.com.

Regulated utilities: Steady operations; higher receivables, rebate affect cash flows
Indian regulated power utilities – NTPC Limited and Power Grid Corporation of India Ltd – maintained largely stable operating profits amid the lockdown, supported by availability-based payments under a favourable regulatory framework, says Fitch Ratings. However, cash flows were affected by higher receivables and a one-time rebate to state-owned power-distribution utilities.
 
Both utilities reported an increase in EBITDA in the first quarter of the financial year ending March 2021, supported by new assets commencing commercial operations. This highlighted their cost-plus tariff framework based on system availability, which is not exposed to volume risk.
 
These regulated utilities, however, face higher receivables risks as most of their customers are state-owned power-distribution utilities (discoms), whose operational and financial profiles have weakened from the pandemic-related drop in electricity demand and payment concessions to end customers, Fitch Ratings said in a statement.
 
“However, we believe the receivable days for these utilities have already peaked, barring any second wave of large-scale lockdowns in the country. Our expectation is driven by improved collections in July, post the removal of lockdowns, largely assisted by payment settlements from discoms under the central government's Atmanirbhar scheme, whereby discoms are being provided with liquidity support to clear outstanding dues.”
 
Automakers’ demand outlook cloudy despite some respite in July
Demand for automobiles in India continues to be uncertain even though the sharp slide in sales in April-June 2020 slowed in July, which could reflect the release of pent-up demand following the gradual easing of restrictions to contain the coronavirus pandemic, Fitch Ratings has said.
 
India’s auto demand continues to face several challenges and Fitch forecasts overall industry volume to decline by more than 20% in the financial year to June 2021 (FY21). This forecast could be revised down if the extent and magnitude of the pandemic are worse than we expect.
 
The economic fallout from the pandemic exacerbated the weak consumer sentiment that was dampened by the higher cost of ownership under BS6 – a more stringent emission framework adopted from April 2020. This is likely to constrain demand from first-time car buyers as well as upgraders, despite their preference for private transportation due to hygiene reasons.
 
Likely curtailment in private and public investments will weigh on demand for commercial vehicles (CVs), particularly medium and heavy commercial vehicles (MHCV), which are used in more cyclical end-markets. The pandemic has also reduced the availability of financing as lenders exercise caution, particularly to weaker borrowers that form a significant customer base for CVs.
 
 

 

Comments

 

Other News

Bank loan recovery in recent years has mirrored Hindu rate of growth

At the outset, for those who are not familiar with the nomenclature ‘Hindu Rate of Growth’, it refers to the low economic growth in post-independent India till the 1990s, when several economic liberalisation measures were undertaken. Till the 1990s, the growth rate was around 4%, which accelera

“Indian Navy needs more capabilities to build ships”

As India faces increasing threats from China and Pakistan on sea, Vice Admiral Ajendra Bahadur Singh, Flag Officer Commanding-in-chief (FOC-in-C), Western Naval Command, has said that the Indian Navy needs to scale up its capabilities and have more budgets allocated. Speaking to members of t

Mumbai issues strict guidelines for home quarantine of all international passengers

In view of the emerging threat of the new coronavirus variant, Omicron, the BrihanMumbai municipal corporation (BMC) Saturday issued strict guidelines for surveillance of all international travellers arriving in the metro and especially those from ‘at risk’ nations. Outlining SO

Omicron: Maharashtra revises travel guidelines

A day after the union health secretary wrote to it that its order on SOPs for air travellers was in divergence with guidelines issued by the MoHFW, GoI in view of the Omicron threat, the Maharashtra government on Thursday revised its guidelines for passengers arriving in the state. Issuing

Omicron: Centre asks Maharashtra to follow uniform guidelines

With the threat of Omicron, the new variant of the coronavirus, looming large, the union health ministry has written to the Maharashtra government to align orders issued by the state with the ministry’s guidelines for uniform implementation. The state government in its order dated Nove

Central Railways runs over 800 Kisan Railway trips

To ensure bigger access to farm produce and provide new markets with quick transportation and subsidy at 50%, the Kisan Rail has been bringing prosperity, joy, and hope to farmers of Maharashtra. On November 28, the Central Railway ran its 800th  trip of Kisan Rail from Sangola to Muzaffarpur.

Visionary Talks: Dr. Naresh Trehan, CMD Medanta Heart Institute with Kailashnath Adhikari



Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter