Stress in Indian Power Sector


February 26, 2022


Panel Discussion Host asks Dr Arun Sharma to present his views on how power industry is changing in India. This is a conversation between Power Sector experts. This part deals with stress in Indian Power Sector


Dr Arun: The thermal power sector including generation as well as distribution has been under a lot of stress lately. Various factors such as growing focus on renewables, the non-availability of long-term power purchase agreements from utilities, low plant load factor due to low demand and excessive capacity, fuel supply concerns are some of the challenges facing the segment. Power Generators as well as Distribution utilities have accumulated large debts and unable to pay timely interests.

The utilisation rates (PLF) of Coal based power plants has been declining due to overbuilding of coal capacity, hence further reducing the economic competitiveness of coal plants as compared to low cost renewables. Coal plants also face fluctuations in coal and water supply during the year hampering their operations.

Non-performing assets (NPAs) in the power sector has increased significantly due to the stress in the sector. The power sector accounts for 19 percent of the 4.1 trillion NPA accounts according to a report “Bolstering ARCs”, by CRISIL and ASSOCHAM. Many such plants are on the verge of being referred for insolvency proceedings under the Insolvency and Bankruptcy Code ‘2016 (IBC). However, thermal power projects aggregating 3950 MW were resolved outside IBC during 2018 and these plants changed management. Some of the thermal power generators are looking to expand their generation capacity by hoping to acquire and revive the stressed power plants


Ms Asha: The capital equipment industry is facing all-time low in ordering activity resulting in aggressive bidding and hence low bidding prices. Order volume is much below the manufacturing capacity in India, so, the smaller players are finding it very hard to secure orders at a profit.

In the last couple of years, there were orders only from central and state utilities and the private sector did not announce any new project. There were some high value orders like 4,000 MW Yadadri supercritical thermal power plant (STPP), 3×800 MW Patratu STPP Phase 1 from Patratu Vidyut Utpadan Nigam Limited, the 1,320 MW Udangudi STPP from Tamil Nadu Generation and Distribution Corporation Limited (TANGDCL); the 660 MW Panki STPP from Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL) and the 660 MW Bhusawal STPP from Maharashtra State Power Generation Company Limited and all these orders were won by BHEL


Mr Deepak: It will be tough for the thermal power sector to get back to the high levels of ordering witnessed in 2008-10, with low demand growth and the increasing thrust on renewable energy. Power generation equipment manufacturers should look at new opportunities in areas such as emission control equipment, thermal power plant replacement and international markets.

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