How India’s power sector will rebound from COVID-19 crisis: Praxis Global Alliance study

How India’s power sector will rebound from COVID-19 crisis: Praxis Global Alliance study | Motiverge
How India’s power sector will rebound from COVID-19 crisis: Praxis Global Alliance study | Motiverge

New Delhi, India: India has been chasing ambitious power and energy generation and transmission targets. While energy companies have been powering through the COVID-19 pandemic somewhat unscathed – the aftereffects will be wide and large. To ensure the country is on track to achieve its targets and reduce coal dependencies, there is a need for unlocking operational efficiencies and following through on the renewal energy trajectory.  

A recent study by Praxis Global Alliance, a leading management consulting and advisory firm, and Zetwerk, an Indian B2B marketplace for manufacturing products and services, highlights the impact of COVID-19 on the overall power sector including key segments – Generation, Transmission, and Distribution. The report also shares key trends arising from COVID-19 impact and the future outlook of the sector in India. 

Some key insights from the report include: 

Power Generation  

  • India is chasing ambitious RE targets and enhancing its T&D infrastructure. Increasing RE use is decreasing dependence on coal 
  • Contribution of the thermal sector to reduce to ~50% by FY22 and ~43% by FY27 
  • The installed power generation capacity has increased at 8.6% CAGR over the period FY12 – FY19; renewable energy is growing at the fastest pace 
  • New private investment in the generation sector is expected to be largely in the renewable sector 
  • COVID is expected to impact RM, labor and CAPEX availability for construction in the short-term 
  • Owing to past bad experiences, long term PPAs in thermal are unlikely to pick-up in the future. Renewables sector is likely to continue with long term PPAs 

Power transmission 

  • 92% of transmission lines are owned by government companies; moderate CAGR of 6.5% in line with GDP growth of India 
  • Private sector is a recent entrant in the sector and caters to <8% of the transmission network 
  • Substation capacity has increased at 11% CAGR over FY12 – FY20, which is slower than growth during FY07 – FY12 
  • COVID-19 is expected to impact the RM and labor supply in short-term, along with a medium to long term impact on cash flow for CAPEX 
  • Asset owners might face high receivables dues to stress in DISCOMs; poor DISCOM health might drive privatization 

Aryaman Tandon, Director, Praxis Global Alliance commenting on the report findings said, “India is chasing ambitious renewable energy targets and enhancing its transmission and distribution infrastructure which currently accounts for 22% of India’s total installed capacity. With the Indian Government’s focus on reducing dependency on thermal power to ~50% by FY22 and ~43% by FY27 – the sector needs to factor in the COVID-19 impact and device a plan to re-accelerate as the economy recovers.” 

He added, “Government can play an instrumental role inensuring the good financial health of DISCOMs to ensure cash flow along the supply chain and aggressively chasing the capacity addition targets for renewable energy generation”. 

Commenting on the report launch, Amrit, Co-Founder and CEO, Zetwerk said, “India’s power sector has a great potential to grow post-COVID as demand and power prices have started to recover now. We have partnered with EPC firms and suppliers, utilizing our tech-enabled platform, to quickly lap up the rising demand post-lockdown period thereby cementing our position as a key marketplace in the construction industry.” 

Madhur Singhal, Managing Director, Praxis Global Alliance added, “The demand for power slumped due to slow industrial activity during the lockdowns. Drop in sales further led to a delay in vendor payments and therefore an impact on the sector. Within the next six months, we expect the demand to recover to pre-COVID levels. With renewable and green energy as a priority, it’ll be crucial to see how price play defines the future trajectory for the sector.”

In the combined study by Praxis and Zetwerk, the team assessed the impact of COVID-19 on key parameters like raw material and equipment supply, manpower availability, payment terms and costing, availability of finance, payment terms and pricing, and consumer demand, which gives the report a broader view of the sector and trends at play in the current scenario. 

The report suggests that in the short term, the Government should act as a stimulus for DISCOMs to ensure they do not default on their scheduled payments, inject liquidity by reducing lending rates and ensure Capex supply to asset owners and provide an appropriate extension of timelines of projects stuck due to COVID-related restrictions.  

To read the full report, please visit – 

About Post Author