India’s Power Demand To Grow 5–5.5% In FY27 After Weak FY26: ICRA

New Delhi, May 7 (KNN) Rating agency ICRA has projected India’s power demand to grow by 5–5.5 per cent in 2026–27, recovering from a subdued growth of around 1 per cent in 2025–26, which was impacted by weather-related disruptions.

The expected rebound will be driven by higher demand from agriculture and households amid forecasts of below-normal rainfall linked to a potential El Niño, along with rising consumption from industries and emerging segments such as electric vehicles and data centres.

Thermal PLF to Remain Stable

The all-India thermal plant load factor (PLF) declined to 65–66 per cent in 2025–26 due to weaker demand and is expected to remain around 65 per cent in 2026–27. This is despite improving demand, as renewable energy additions and an estimated 6 GW increase in thermal capacity moderate utilisation levels.

Ankit Jain, Vice President and Co-Group Head – Corporate Ratings at ICRA, said, “The thermal power sector in India is witnessing a revived investment emphasis, even as the renewable capacity continues to expand at a rapid pace. Thermal power acts as a reliable base-load supply, aiding grid stability, amid expectations of power demand growth.”

Renewables to Drive Capacity Addition

Jain emphasised, “ICRA expects the overall addition of generation capacity to be around 50 GW in 2026-27, within which the thermal segment is likely to add around 6 GW and the balance largely to be contributed by the RE segment.” 

He noted, “While RE would remain the key driver of power generation capacity addition going forward, the thermal segment has seen an increase in under-construction capacity over the past few quarters, which currently stands at over 45 GW.”

“Nonetheless, timely commissioning of the thermal projects under execution also remains key, given the long gestation period associated and risk of delays from the domestic boiler, turbine and generator (BTG) equipment manufacturers with their elevated order book position,” Jain added.

Tariffs Ease Amid Supply Growth

Average spot power tariffs in the day-ahead market (DAM) of the Indian Energy Exchange declined to Rs 3.8 per unit in 2025–26 from Rs 4.4 per unit in the previous year, reflecting slower demand growth and increased supply from renewable sources.

Coal stock levels at domestic power plants remained comfortable at around 19 days as of April 2026, supported by improved local availability.

Discom Finances Under Pressure

While losses of power distribution companies (discoms) narrowed in 2024–25, their overall financial position remains weak. Outstanding debt of state-owned discoms declined to Rs 7.1 trillion as of March 2025 from Rs 7.4 trillion a year earlier, but remains elevated.

Tariff hikes for 2026–27 have been modest across most states, with orders issued in 17 out of 28 states so far. ICRA estimates that the cash gap for discoms could remain high at 30–33 paise per unit due to limited tariff increases and rising power procurement costs.

Negative Outlook on Distribution Segment

ICRA has maintained a negative outlook on the power distribution segment, citing continued losses and inadequate tariff revisions. It noted that improvements in operational efficiency, rollout of smart metering, and effective implementation of cost adjustment mechanisms will be critical to strengthening discom finances going forward.

(KNN Bureau)