Covid-19 lockdown to impact electricity demand, cash flows for discoms: ICRA

Our Bureau Hyderabad | Updated on March 30, 2020 Published on March 30, 2020

The lockdown announced to control the Covid-19 pandemic has effected an adverse impact on electricity demand and cash flows of Distribution companies (Discoms).

The shutdown has impacted the industrial and commercial establishments and stoppage of passenger railway services. This has hit the electricity demand, given that these segments constitute about 40 per cent of the all-India electricity demand, according to rating agency ICRA.

These segments account for a greater percentage of the discoms’ sales revenues given that they are the subsidising segments.

Sabyasachi Majumdar, Group Head & Senior Vice President-Corporate ratings, ICRA, says, “The lockdown is likely to adversely impact the all-India electricity demand, with demand expected to decline by about 20-25 per cent on a year-on-year basis during the period of lockdown.”

“This would in turn adversely impact the liquidity profile of the discoms, increase their subsidy requirement and lead to delays in payments to the power generation and transmission companies.”

The Union Ministry of Power has issued directions to the Central Electricity Regulatory Commission to provide a moratorium of three months to discoms. The power generation companies are already suffering delays in payments by discoms across most of the States, with a payment due of more than ₹85,000 crore as of November 2019 at all-India level.

However, the timely approval of the moratorium by the boards of the banks and financial institutions remains crucial.

The average monthly thermal PLF would further dip to 50-52 per cent against 63 per cent in the corresponding period of previous year, due to a considerable drop in demand.

Renewables too hit

This apart, the under-construction renewable power projects as well as EPC/OEM companies in solar segment are likely to face execution delays because of disruption in supply chain in India and labour availability, following the lockdown.

Given the import dependency on China for sourcing of PV modules, the execution timelines for the ongoing solar projects is likely to be affected with delays in the delivery of PV modules following the outbreak of Covid-19 in China.

This delay will increase the pre-operative expenses and the overall project cost, which, in turn, would affect the expected returns. In this context, the MNRE has notified that time extension can be provided for all renewable energy projects, which are impacted by the supply chain disruption, under the force majeure clause.

“Given the execution headwinds amid Covid-19 affecting Q1 of FY2020-21 and assuming the normalcy thereafter, the capacity addition in the wind and solar segments together is likely to degrow by about 25 per cent, thus estimated at about 8 GW against earlier estimates of 11 GW in FY2020-21,” says Girishkumar Kadam, Sector Head & Vice-President, ICRA Ratings.

Published on March 30, 2020

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.