Plant load factors (PLFs) of companies in the power sector are unlikely to improve in the next fiscal in spite of improved fuel supply as demand growth of electricity is likely to stay muted, India Ratings & Research (Ind-Ra) on Thursday said. "Plant load factors of power companies are unlikely to improve in 2016-17 from 61.7 percent in the first nine months of 2015-16," it said in a report. PLF is the ratio of the actual output of a power plant over a period of time and its output in case it operates at full capacity.
All-India thermal plant PLFs have been consistently declining and have fallen 21.5 percent since the peak of 78.6 percent in 2007-08, it said. Ind-Ra expects electricity demand to grow by 4-5 percent and power generation growth of 5-6 percent in 2016-17, with deficit remaining low at 3-4 percent. India has added 80 GW of coal-based generation capacity over FY11-FY15, which creates room for higher generation, given the improvement in domestic coal supply and low international coal prices.
However, industrial demand, which accounts for 40 percent of the total pie, has so far witnessed a sluggish growth. Moreover, the current focus on use of efficient devices (LEDs and agricultural pumps) is also leading to lower demand. "In the Corporate Outlook FY17... Ind-Ra has maintained a stable-to-negative outlook on the power sector for 2016-17," it said. Ind-Ra has also kept stable outlook on most of its rated power sector entities for 2016-17 as the agency expects that its rated entities will continue to manage fuel and state power utilities risks due to a favourable tariff mechanism, their comfortable liquidity and support from the central and state governments, it said. A significant chunk of electricity sales goes to commercial or industrial consumers, and a pick-up in demand in industrial activity is necessary for higher electricity demand.
Ind-Ra expects industrial demand growth to stay muted at 4-5 percent in 2016-17. The residential segment is likely to see a healthy demand clip of 7-8 percent. Agricultural demand is likely to grow 2-3 percent since it would depend more closely on the monsoon and the switchover to energy-efficient pumps.
The government's initiative for rural electrification would serve a social objective, but the real demand pick-up is unlikely in the short term as these would be low-consumption centres, it said. "However, given the installed capacities, increased coal output and the low imported coal prices, there is a potential for higher generation growth , but given that demand is unlikely to increase significantly, the generation growth will be in the range of 5-6 percent in 2016-17," it said.
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