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11:19 AM

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India’s Coal-Fired Power Sector Takes a Hit With the COVID-19 Pandemic

The Cornoavirus pandemic has affected every aspect of the global economy. With markets crashing around the world, no sector or industry has been left untouched. The Indian coal-fired power sector is no exception.

Experts suggest that the coronavirus outbreak could potentially put more pressure on the Indian economy that grew at its slowest pace in more than six years in the October-December quarter. Ratings agency Moody's has cut its growth forecast for India to 5.3pc for 2020 from an earlier projection of 5.4pc. The slowdown is likely to weigh on electricity consumption by factories, as manufacturing falters amid disruptions in exports and supply chain logistics amid the global coronavirus outbreak.

It is also important to note that a large part of India's electricity generation capacity, both non-renewable and renewable, are reliant on Chinese technology. Several projects currently under construction are based on equipment sourced from Chinese suppliers and vendors. India sources about 80pc of its solar modules from China.

Nearly 3GW of under-construction solar power projects, worth 160bn rupees ($2.16bn), could be at risk of penalties if they miss their respective scheduled commercial operation dates amid the outbreak, according to Indian ratings agency Crisil.

India's commerce and industry minister Piyush Goyal underscored the looming impact of Chinese factory closures on Indian industries that import components, intermediaries and raw materials from China. Goyal asked Indian firms to look for alternative sources and assured government assistance, speaking in India's parliament yesterday.

Delays could dent India's push for more renewable energy, which is designed to help the country cut its heavy dependence on coal. India aims to raise its renewable energy capacity to 175GW from about 87GW at present by 2022, with the bulk coming from solar projects. But the government has allowed project developers to invoke force majeure clauses, if needed, citing the coronavirus outbreak to avoid potential penalties.

Around 45-53pc of India's coal-based generation capacity of 198GW has been developed sourcing main components from China, according to consultancyPwC India. About 30pc of 62GW of under construction coal-based power projects are also reliant on equipment from China.

"In the short run, the impact will not be too acute but if the situation doesn't turn around, it will impact the availability of power plants," said PwC India partner, power and utilities Sambitosh Mohapatra. The utilities rely on Chinese equipment suppliers for major overhauls, and the supply of critical spares, although utilities have done well in operations and maintenance and keep ample stocks of critical spares, he said.

The coronavirus outbreak will likely put pressure on electricity demand in the short term that could have a bearing on national coal consumption, as more than half of India's installed generation capacity is coal-fired.

Weaker coal-fired power generation, along with an increase in domestic production and supplies from state-controlled mining firm Coal India (CIL) has also pushed coal stocks at power stations higher in recent weeks, which could also weigh on demand for imported coal. The coronavirus outbreak is forecast to affect seaborne trade, at least in the first half of 2020.

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