New Delhi: ICRA projects power demand to rise by 5.0-5.5 percent in 2026-27, sharply higher than the tepid growth of about 1 percent in 2025-26, which the rating agency said had been compressed by weather-related disruptions. The growth in 2026-27 is likely to be supported by the agricultural and household sectors amid expectations of sub-par rainfall and a potential El Nino, along with demand from industries and emerging sources such as electric vehicles and data centres.
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The all-India thermal plant load factor, or PLF, fell to 65-66 percent in 2025-26 because of softer demand and is likely to remain around that level in 2026-27 as renewable generation continues to expand and another 6 GW of thermal capacity is added.
Commenting on the outlook, Ankit Jain, Vice President & Group Head - Corporate Ratings, 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.”
He added that “thermal power acts as a reliable base-load supply, aiding grid stability, amid expectations of power demand growth.” ICRA expects overall generation capacity addition to be around 50 GW in 2026-27, with around 6 GW likely to come from the thermal segment and the rest largely from renewable energy.
Jain said the increase in under-construction thermal capacity, which “currently stands at over 45 GW,” is being reflected in new project announcements by public sector undertakings and private power producers, along with long-term power purchase bids by state distribution utilities after a long period of limited activity.
ICRA said average spot power tariffs in the day-ahead market of the Indian Energy Exchange (IEX) eased to Rs 3.8 per unit in 2025-26 from Rs 4.4 per unit in 2024-25, as demand growth slowed and supply rose sharply with healthy renewable additions.
The agency also said coal stock levels at domestic power plants were comfortable at about 19 days as of April 8, 2026, helped by improved local supply.
The book losses of power distribution companies (DISCOMs) improved in 2024-25 over 2023-24 as the gap between cost of supply and tariff realisation moderated. Gross debt for state-owned discoms fell to Rs 7.1 trillion as of March 2025 from Rs 7.4 trillion a year earlier, but ICRA said the debt remains unsustainable given current revenues and profitability.
Tariff orders for 2026-27 have been issued in 17 of 28 states as of April 2026, but hikes approved so far remain muted. ICRA expects the cash gap for discoms to stay elevated at 30-33 paise per unit in 2026-27 if tariff increases remain limited and power purchase costs rise. The agency said its outlook for the distribution segment remains negative.
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Jain added that long-term bids for thermal projects have been discovered in the range of Rs 5.0-6.5 per unit over the last 12-15 months, making project viability sensitive to capital outlay and debt cost. He said timely commissioning will be important, given long gestation periods and the risk of delays from domestic boiler, turbine and generator equipment manufacturers with elevated order books.
