[Ferro-Alloys.com] The fresh Covid-19 restrictions in several Indian states are set to weigh further on India's electricity demand, putting more pressure on the national coal burn, a unit of rating, ratings agency Moody's said.

 

The country's overall electricity demand is likely to decline by 5-6pc in the 2020-21 financial year that would end in March, from a year earlier, according to rating agency Icra — Moody's Indian subsidiary. In April, it had estimated that demand would contract by 1pc in 2020-21 over 2019-20.

 

India in June partially lifted its nationwide curbs aimed at containing the spread of the pandemic. But with the number of confirmed cases of Covid-19 growing rapidly, several Indian states have tightened the curbs and imposed further lockdowns.

 

These restrictions are expected to weigh on industrial activity and curtail power demand and generation further, Icra said.

 

In January-June, India posted a 11.7GW drop in power demand from a year ago, following a sluggish global trend.

 

Indian coal-fired output fell to 102GW in January-June, down from 119GW, Central Electricity Authority data show.

 

The fresh lockdowns in some states are expected to erode the recent recovery in power demand, further hurting the outlook for coal imports.

 

India's imports are likely to fall this year — even if coal demand fully recovers or grows — as inventories remain at historic highs. Indian thermal coal receipts shrank in the first half of this year with imports falling sharply in June.

 

Distribution companies struggle

 

Weak power consumption is likely to further strain the finances of ailing electricity distribution companies, which are largely state owned. The distribution companies' total outstanding dues to be paid to power generating firms stand at 1.17 trillion rupees ($15.6bn) as of May 2020, Icra said. The dues have accumulated over the years partially because of the inability of distribution companies to get power tariffs raised sufficiently to cover their costs.

 

The economic slowdown has further accentuated the financial problems of the distributors as the bulk of the fall in power consumption is attributable to the high tariff paying industrial and commercial consumers, Icra said.

 

India is taking steps to aid the distributors, but a turnaround is bound to take years. The country's power ministry earlier this year sought a temporary moratorium on payments owed to power producers, which predominantly include coal-fired stations, and payments owed to transmission firms to help the cash-strapped distributors.

 

Delhi recently announced support of 900bn rupees for the state-owned distributors, in the form of loans linked to parameters for operational turnarounds. The government has also proposed amending the prevailing national electricity law, Electricity Act, 2003, which is partly aimed at reviving the distributors amid the government's broader goal of providing round the clock electricity in the country. The amendment seeks the installation of smart meters, and also includes setting up an authority to ensure power purchase contracts with generating companies are honored by distribution companies, the conducting of regular tariff revisions and steps to trim transmission and distribution losses.

 

Source: CHINA DAILY