Growth in India’s power demand is likely to decelerate in the second half of the financial year ending March 2023 (2HFY23), after robust 11.3% y-o-y growth in 1HFY23, Fitch Ratings says.

Power demand in 1HFY23 benefited from a post-pandemic rebound in demand and a low base during 1HFY22. Fitch expects India’s power demand to grow by around 8% in FY23 (FY22: 8.2%), it said in a release Tuesday.

Fitch expects thermal power plants' average plant load factor to remain above 60% in FY23 (1HFY23: 64.5%), benefiting from continuing power demand growth. Fitch expects improved domestic coal supply will support coal inventory at power plants and should moderate coal import growth from current high levels, although imports are expected to remain robust.

Fitch estimates generation companies' (gencos’) receivable position to improve as distribution companies have started clearing their dues to gencos following imposition of the late payment surcharge rule by the central government.

Renewable capacity addition is likely to soften in 2HFY23 (8.2MW: 1HFY23, 15.5MW: FY22) and there may be deferment in capacity additions due to high commodity prices, supply chain issues and higher import duties on solar modules and cells from April 2022.

Capacity Addition to Slow Down

Fitch expects renewable capacity addition to soften in 2HFY23 (8.2MW: 1HFY23) with some capacity deferred due to current high commodity prices, higher import duties and supply chain issues. Solar continued to lead the capacity additions with 6.8MW in 1HFY23. This could partly be due to advance procurement of solar equipment  by a few  developers ahead  of  imposition  of the basic custom  duty  (BCD)  of  40%  and  25%  on  solar  modules and  cells, respectively, from April 2022, replacing the safeguard duty of 15%.The government does not intend to provide exemptions to the BCD.

Support to Increase Renewable Capacity

The central government aims to generate 50% of India's electricity from renewable sources (including    hydro power) by 2030 (7MFY23:  29%, FY22: 24%). The government plans to achieve its target through Green Open Access (OA), the success of which depends on timely and effective implementation of rules by state power regulators.

Read the full Fitch Ratings reports here: https://www.fitchratings.com/research/corporate-finance/india-power-watch-1hfy23-20-12-2022