All-India electricity demand likely to contract by 5-6% in FY2021: ICRA

With the re-imposition of lockdown restrictions in many parts of the country, all-India electricity demand is likely to decline by 5 per cent to 6 per cent in FY21 over FY20, against ICRA’s April 2020 estimate of 1 per cent de-growth.

The revised energy demand de-growth estimate assumes decline of 3.5–4 per cent in Q2 and Q3 FY21 and a marginal recovery of about 1 per cent in Q4 FY21, given the slower pace of recovery expected in industrial and commercial activity in the country.

This, in turn, is expected to suppress the thermal PLF on an all-India level to 50-51 per cent in FY21 against the rating agency’s earlier estimate of 54 per cent and from 56 per cent in FY20.

The all-India electricity demand declined by 16.2 per cent in Q1 FY21 on a year-on-year (Y-o-Y) basis, because of the lockdown imposed to control the Covid-19 pandemic. While demand recovered from a Y-o-Y decline of 23.1 per cent in April 2020 to 10.9 per cent in June 2020 and further to 3.9 per cent in the first 15 days of July 2020, the recovery was slower than earlier expectations of reaching the pre-Covid-19 level in July 2020.

Sabyasachi Majumdar, Group Head & Senior Vice President, Corporate ratings, ICRA, says, “The decline in energy demand has thus, adversely impacted the revenues and cash collections of power distribution utilities (discoms), especially given that the bulk of the consumption decline has come from the high-tariff-paying industrial and commercial consumers; and given the delays in cash collections from other consumer segments. The consequent revenue gap for the discoms at the all-India level is estimated to increase further to about ₹4.2-4.5-lakh crore in FY2021 against our earlier estimate of ₹2-lakh crore.”

Given the adverse impact of Covid-19 on discom finances, the government has announced a liquidity support of ₹9-lakh crore for the state power discoms. However, there has been slow progress in off-taking these loans so far. Timely implementation of this scheme remains important to clear the outstanding dues to power generating companies, which stand at ₹1.17-lakh crore as of May 2020.

“The overall debt on the books of state-owned discoms at an all-India level as of March 2019 has crossed the pre-UDAY level and is now expected to further rise with implementation of the liquidity relief scheme being availed through long-tenure debt funding from PFC and REC, mainly to meet the overdues as on March 2020, as well as the possibility of availing incremental debt to fund the revenue gap estimated in FY21, adds Girishkumar Kadam, Sector Head & Vice President, ICRA Ratings.

The audited book losses for discoms at the all-India level for FY19 have also been revised upwards to ₹4.96-lakh crore against the provisional estimate of ₹2.8-lakh crore reported earlier. The losses have reached closer to the pre-UDAY level, because of the inability of the discoms to reduce distribution loss levels in line with the regulator-approved trajectory, and delays in pass-through of cost variations to customers through tariff revisions.

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