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

How much time do you spend talking on phone?

How much time do Indians spend talking on phone? It is on average 761 minutes per month, according to a new report from the Telecom Regulatory Authority of India (TRAI). The telecom regulator released its report, titled ‘The Indian Telecom Services Performance Indicators: July-Septemb

“Developing public health infrastructure key to sustainable healthcare for all”

Renowned cardiologist Dr Ramakanta Panda has said that the pandemic has exposed the inadequacy of existing healthcare systems and it is wrong to draw comparisons with Korea, a country with the population equal to that of a single Indian state. While speaking to Kailashnath Adhikari, MD, Gove

SC-appointed panel on farm laws holds first meet

The committee of experts appointed by the supreme court to deliberate with the stakeholders on the new farm laws held its first meeting here Tuesday, with one of its members saying that all stakeholders, including individual farmers, will be heard. Hearing a petition on the farm laws enacted

India’s glitch-free vaccination gathers pace

The nationwide vaccination campaign launched Saturday, the largest such exercise in the world, has started setting new benchmarks, with vaccines administered to 2,24,301 beneficiaries in the first two days. “India has vaccinated the highest number of persons on Day1 under its COVID19 v

Maharashtra to spend Rs 2,500 crore to augment, develop power infrastructure

The Maharashtra government has announced a spending of Rs 2,500 crore annually to develop infrastructure of state-owned distribution company Mahavitaran (MSEDCL).   Out of the total amount, Rs 1,500 crore will be spent on energisation of conventional agriculture pumps and Rs 1,000 crore

Launched: Largest vaccination drive in history

India on Saturday began the massive vaccination drive against Covid-19, as prime minister Narendra Modi paid tributes the ‘corona warriors’. “Such a vaccination drive at such a massive scale was never conducted in history. There are over 100 countries having less than 3 cro

Visionary Talk with Dr Ramakanta Panda, VC & MD Asian Heart Institute





Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter