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Power sector faces heavy losses, liquidity crunch

NEW DELHI: The sharp fall in electricity demand during the lockdown is likely to deliver a major blow to India’s power sector, especially its large thermal power plants. Industry representatives have warned that the deep decline in demand will result in net revenue losses of up to Rs 40,000 crore for distribution companies (discoms), and in the entire sector facing liquidity crunch to the tune of Rs 50,000 crore.

According to data from government entities, peak power demand has tanked by over 25 per cent since the beginning of the lockdown. Power ministry data showed that total power consumption in the country had slipped to a little over 125 GW in the beginning of April compared to over 163 GW before the nationwide lockdown. Data from the Power System Operation Corporation Limited (POSOCO) corresponds to this trend, falling to 18 billion units during the week from March 23-April 12, from 18 billion units from March 9-15.

The Confederation of Indian Industry’s (CII) white paper released earlier this week notes that this fall in consumption would be exacerbated by an extended lockdown and could lead to net revenue losses of Rs 25,000- 30,000 crore for discoms. The heavily indebted sector, where discoms already owe over Rs 90,000 crore to power gencos, would also be faced with liquidity crunch worth an additional Rs 45,000-50,000 crore.

“The liquidity gap may also transmit to other players in the value chain, namely conventional and renewable generators, transmission licensees and vendors/service providers in our sector. This could impact their ability to buy fuel, meet debt service obligations and ensure seamless operations,” the CII said. Thermal power generators, in particular, are likely to be badly affected since competing segments such as hydro and wind need to be operated continuously. The CII says the segment could be faced with a further liquidity shortage of up to Rs 25,000 crore.

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