Why do power firms incur losses despite tariff hikes?

The opening up of the sector by the Government of India during the last decade has transformed the power landscape significantly. This is reflected by the pace of capacity addition. Till 2007, the first 60 years of the post-independence era, India added ~132 GW (1GW = 1000 MW) of capacity, and within the next 10 years an additional ~190 GW was added.

By 2022 we would be ~3x of 2007 capacity at ~400GW.

With electricity demand continuing to grow at an annual average growth of 4-5%, this robust capacity addition spree has helped in reducing the deficit (both base and peak) significantly.

The fallout of this has been a sharp dip in capacity utilization (PLF%), especially of the thermal (read coal-based) power plants. So while all the non-fossil-fuel-based power capacities are running close to their optimal utilization level, coal-based plants are being run at their most inefficient levels.

Hence, while technically the nation is having a deficit but practically there is a surplus. This surplus is also across the country and not confined to any particular region.

Yahoo News India
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