New Delhi, The Covid-19 pandemic will have a wider impact on the country's power sector in the current financial year with the acute slowdown witnessed in the first quarter period continuing well into the year affecting both demand and supply.

The nationwide lockdown to contain the Covid-19 outbreak has already significantly impacted economic activity, leading to a 17% yoy fall in the Q1FY20 power demand. As per analysts, though demand may pick up after some degree of normalcy in economic activity gets restored, still power demand will decline 8.0% yoy in FY21 on a steep fall in revenue generating commercial and industrial demand.

According to an analysis done by Emkay Global Financial Services, the situation in the power sector demand would further increase the gap between the average cost of supply (ACS) and average revenue realised (ARR) to Rs 0.95/unit in FY21E from Rs0.50/unit in FY20 due to lower offtake from commercial and industrial segments, decline in payment collection and lower cross-subsidisation. This would lead to an under-recovery of Rs 1,12,700 crore in FY21E for discoms.

"Discoms' overdue has reached Rs 1.17 lakh crore, which is close to the peak level witnessed pre-UDAY. The overdue level is likely to remain high in FY21 due to the expected rise in under-recovery and slow progress in the 'Atmanirbhar' scheme toward loan disbursement," the brokerage said in its analysis report.

What is worse, the poor conditions in the power sector would bring new generation projects to a standstill affecting key infrastructure development. The report said that Gencos' capacity addition should witness postponement in FY21 with net capacity addition of just 61GW in the FY20-FY24 period.

"Key reforms such as ADITYA and Amended Electricity Act should improve discoms' operational and financial efficiencies, if executed well ," Emkay said in its report.