New Delhi [India], May 13 : India's power sector is facing a risk of oversupply because of sustained low electricity demand says a report by Fitch Ratings.
"Sustained lower electricity demand growth would increase the risk of oversupply, given rapid ongoing capacity additions," Fitch Ratings said in its report.
The report adds, that India is facing a low electricity demand growth of around 4 per cent for last two years amid rapid capacity additions by power companies.
India's power demand will grow modestly by 4-5 per cent over the medium term, similar to the 4 per cent growth in the fiscal year ended March 2025 (FY25).
The power demand in FY25 has witnessed a drastic sluggishness, declining to almost half than the about 8 per cent growth over FY22-FY24.
The official data of the Power Ministry reveals that India successfully met an all-time maximum power demand of 250 GW during FY 2024-25.
Due to significant additions in generation and transmission capacities, energy shortages at the national level have reduced to a mere 0.1 per cent in FY 2024-25, a major improvement from 4.2 per cent in FY 2013-14.
The Power Ministry data reveals that the average availability of electricity in rural areas has increased from 12.5 hours in 2014 to 21.9 hours, while urban areas now enjoy up to 23.4 hours of power supply, reflecting substantial improvements in the reliability and reach of electricity services.
Meanwhile, total installed power generation capacity has surged by 83.8 per cent, increasing from 249 GW as of March 31, 2014, to 457 GW as of November 30, 2024.
The global rating agency added in its report power demand in FY25 witnessed a slowdown sharply than the anticipated, partly reflecting slower GDP growth.
"We project economic growth at 6.4 per cent in FY26 and 6.3 per cent in FY27, which will support steady increases in power demand," the Fitch rating added.
However, the rating agency said that risks to the economic outlook are significant, given uncertainties around India-Pakistan relations, global trade and US tariffs.
It further added that weaker-than-expected economic growth would weigh on power demand.
Fitch expects capex among Indian power utilities to remain high in the medium term, particularly for renewable generators, as the government is aiming to expand power storage and transmission capability, and raise renewable capacity to 500GW by 2030, from around 220GW currently.
The rating agency said that the renewable capacity addition will remain high in FY26 after an increase to 30GW in FY25, from 18GW in FY24.
Strong renewable capacity addition will weigh on coal demand growth, which slowed to 3.4 per cent yoy in 11 months of FY25, from 9.4 per cent in FY24, the rating agency anticipated.
The report adds that slower demand growth and improving domestic supply are likely to lead to lower coal imports in the next few years.
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