Indian Government expects the demand for electricity to rise in the coming years which would be crucial for the revival of power sector having stressed assets. As the revival of power sector is not feasible by transferring the assets from one developer to another, until the demand for the electricity does pick up.
The reason behind below par performance of power companies is not lean demand but over supply of power, according to the government officials.
The demand for power has increased over the years. As evident from power ministry statistics which shows, the demand has grown by a robust 6.4% in the last three years against 6.2% in 2004-2014. Also, the total power generation increased by 4.72% Y-o-Y to 1160.14 BU in FY17 compared with 1107.82 BU in FY16.
However, the steadily addition in installed capacity of power plant, has caused oversupply of power in comparison to demand. The country has added 42% of the total installed capacity in 2014, in the last three years.
Many of these newly commissioned plants have not performed up to their full potential; as a result the utilization factor is declining continuously. In FY17, PLF (Plant Load Factor) of Coal and Lignite based plants fell by 3.86% Y-o-Y to 59.88 compared with 62.29 in FY16.
Source: Power Ministry
PLF for Coal and Lignite based Plants
The government, however, look forward to soon resolve the position of stressed power projects where developers are not wilful defaulters or there are no significant irregularities.
In this regard, the government is planning to set up a special purpose vehicle to hold stressed power assets and revive them by debt-equity swaps, offering last mile equity or even asking public sector companies like NTPC to operate them on a contractual basis.
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