Budget allocation has been increasing over the years for the power sector. This Budget is expected to increase the allocation towards schemes such as Deen Dayal Upadhyaya Gram Jyoti Yojana (electrification of villages) and Saubhagya Scheme (rural household electrification). Power-generating companies like NTPC, Tata Power and Adani Power stand to benefit through the increased demand, as these schemes expand the reach of electrification in the country.
DDUGJY is targeted to be completed by May 2018 and Saubhagya scheme by December 2018. Demand for power is likely to increase with implementation of these schemes. Since the completion target is close, speedier execution could see the order books of transmission companies like Power Grid Corporation and Adani Transmission increase.
- Allocation towards schemes announced
- Focus on renewables
- Increase in import duty of coal to increase operating costs
Even though there is increase in installed capacity, the plant load factor remains low. The new schemes are also expected to increase the plant load factors (PLFs) of power generating companies like NTPC, Tata Power and Adani Power, which are unable to utilise their installed capacities due to lower demand. Overall plant load factor of our country has reduced to 59.7 per cent as of November 2017, from 70 per cent in FY13.
As per the Paris agreement to reduce the CO2 emissions, India has targeted to install 175GW of renewable capacity by 2022, for which fund allocation is expected from the Budget. Power-generating companies like NTPC have started increasing their renewable power capacity in moving towards green energy by adding around 510 MW of renewable energy in FY17 to the existing 110MW capacity. Transmission lines also need to be strengthened and upgraded to receive the renewable power.
In a move towards reducing the coal imports to zero by 2020, import duty on coal is expected to increase. Increase in import duty on coal will increase the operating cost of thermal power generating companies like Adani Power, NTPC, Tata Power. Adani Power is the major coal importer in India whose operating cost can be increase if import duty on coal is increased. Imported coal used for power generation between April and December 2017 is 43.6 million tonnes, which is around 27 per cent of total coal imports.