India’s power sector is expected to experience robust growth in the fiscal year 2025, with a healthy demand surge of approximately 6.0 per cent, slightly lower than the previous fiscal year. The first two months of FY25 saw demand growth exceeding 10 per cent, with a record maximum power demand of 250 GW on May 30, as reported by the Ministry of Power. This can be attributed to a resilient economic activity and an increase in the nationwide average thermal plant load factor (PLF) to 69.1 per cent in FY2024.
In FY24, the electricity demand saw a significant increase of 7.6 per cent year-on-year, driven by robust economic activity and weather-related loads. The total power generation capacity addition also improved to 25.4 GW, up from 16.9 GW in FY23, with an increase in renewable energy and thermal segments. The thermal generation segment played a crucial role in meeting the rising demand, reaching a new high of 176 GW during non-solar hours. The renewable energy sector is expected to witness further growth in installed capacity, contributing to the overall power generation landscape.
The government has approved relatively modest tariff hikes of 2.5 per cent for FY25, lower than the 3.9 per cent approved for FY24. However, the subsidy dependence of distribution companies (Discoms) on state governments is projected to increase significantly, reaching Rs 1.9 trillion in FY25. This rise is due to the escalating cost of supply and the introduction of additional subsidy schemes in certain states. Challenges persist in the distribution segment, with delays in issuing tariff orders for state Discoms, attributed in part to ongoing elections and relatively muted tariff hikes.
Coal import dynamics have seen a shift, with imports by power utilities increasing by 18.1 per cent year-on-year in FY24. This change is influenced by governmental directives to blend imported coal for domestic projects, reflecting policy interventions aimed at resource optimization. However, addressing structural inefficiencies in high-loss states like Bihar, Jharkhand, Madhya Pradesh, Odisha, and Uttar Pradesh, where aggregate technical and commercial losses (AT&C) exceed 20 per cent, remains crucial for sustainability in the sector.
The power sector’s ability to navigate challenges and capitalize on growth opportunities underscores the coordinated efforts of stakeholders, including government agencies, power generation companies, and grid operators. Enhancing generation capacity and implementing policy reforms are essential for meeting the nation’s energy demands. The Ministry of Power emphasized the importance of renewable energy sources, particularly solar and wind, in bolstering power supply during peak hours and transitioning towards a sustainable and diversified energy ecosystem.
