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

`Bad Bank`: All you wanted to know about NARCL

The cabinet has cleared the formation of ‘National Asset Reconstruction Company Limited’ (NARCL) which will acquire “stressed assets” of about Rs. 2 Lakh crore in phases within RBI regulations in order to address the problem of humongous amounts of bad loans in public sector banks.

Citizens Charter: How this less-known law empowers us

When consumer rights and RTI activist Mohammad Afzal was shifting to a new residence in a different area, he required changes in various documents. He decided to take the help of the Citizens Charter along with other friends who also required similar work with authorities. The Citizens Chart

Minister for Ports, Shipping & Waterways emphasises on setting up of National Transport Facilitation Committees

Union Minister for Ports, Shipping & Waterways and AYUSH, Sarbananda Sonowal has underlined the importance of cross-border connectivity among India and developing nations of South-East Asia. Addressing the ASEAN summit on Future of India-ASEAN Connectivity Partnerships virt

Ministry of Finance organises advance training programme in PPP for states

The Department of Economic Affairs (DEA), Ministry of Finance and the Indian Institute of Management Bangalore has organised a virtual advance level training programme on Public-Private Partnership. Additional Secretary DEA, K Rajaraman, Joint Secretary, DEA, Baldeo Purushartha

Ministry of Agriculture signs MoUs for Digital Agriculture

Modernisation of the Agriculture sector will continue by infusing new technologies so that farmers can increase their income, states Agriculture Minister Narendra Singh Tomar. The Ministry of Agriculture and farmer welfare has signed MOUs for pilot projects with Cisco, Ninjacar

An enabling ecosystem for R&D is a must: Vice President

The Vice President, M. Venkaiah Naidu has stressed the need to create an enabling ecosystem for R&D for India to become a developed nation. He urged educational institutions to have an incr

Visionary Talk: GVL Narasimha Rao, Member of Parliament, Rajya Sabha on Upcoming UP Elections


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter