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Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has maintained a negative outlook on the power sector for FY22, on account of a further weakening in the financial position of distribution companies (discoms) due to COVID-19 led business disruptions.

As per the report, the power demand however has started improving post opening-up of the economy from September 2020 which is expected to lower the build-up of current dues by discoms in FY22. The rating agency expects the power demand to grow at 9%-10% yoy in FY22, and hence the thermal plant load factors would recover. However, the recovery to above 60% would be beyond FY23, given the continued thermal capacity additions of 6-8GW.

The report further noted that the share of renewable and nuclear power in the overall generation is expected to increase with planned capacity additions, further impacting the thermal plant load factors. The renewable capacity additions are also driven by growing priority of ESG (environmental, social and governance) investments among global investors.