The country’s power sector outlook remains stable to negative despite improving fuel supply situation, according to studies shared by India Ratings & Research in Mumbai on Monday.
India Ratings forecast negative outlook for real estate, steel and synthetics textiles sectors for financial year ending March 2017. It retained stable outlook on most other sectors though it also mentioned slowing industrial demand affecting some sectors.
On the power sector it said improving fuel supply situation has not resulted in improvement in plant load factor (PLF) as demand has remained muted. More critically, distribution companies are yet to see a financial turnaround though the announcement of mission UDAY that’s designed to bring operational efficiencies and financial turnaround, India Ratings & Research said in a briefing.
India Ratings expects electricity demand to grow by 4-5 percent and power generation to increase by 5-6 percent in the financial year to March 2017.
Demand from industrial sector constitutes 40 per cent of the total demand. Muted pick-up in industrial growth has resulted in slack demand from this major sector. Also, reducing demand is emphasis on use of efficient devices such as LED bulbs and agricultural pumps.
The rating agency expects coal output to increase by 10 per cent during FY17 to reach 594 million tons. The government plans to increase its output to one billion tons by 2020.
Also, given the more than average increases in tariffs during 2012-15 and emergence of solar power as an alternative source of cheap and decentralised generation, the headroom for distribution companies to increase tariff remains limited.
Among other sector outlooks, India Ratings also forecast a negative outlook for real estate, steel, and synthetics textile sectors and stable outlook for construction, cement, auto and auto ancillaries, fertilisers, banks, non-bank finance companies, cotton textiles, pharmaceuticals and oil and gas.
