In a recent interview with Power Line, Parminder Chopra, Chairman and Managing Director, Power Finance Corporation Limited (PFC), shared her views on the current state of the sector and the future outlook. She also spoke about the company’s key achievements and future plans. Excerpts….
What is your assessment of the current status of the power sector?
The power sector is currently at a pivotal juncture where the choices we make today will shape the future of India’s energy landscape. We have made significant strides in renewable energy, achieving around 40 per cent of our ambitious 500 GW target. However, the remaining 60 per cent is a complex challenge. To ensure grid stability, innovative solutions such as battery storage and pumped storage are being explored. While these technologies offer great promise, they are still relatively expensive.
Beyond technology, the focus is also on strengthening the renewable energy ecosystem through policy reforms, development of green corridors and strengthening of transmission and distribution networks. However, as a rapidly growing nation, energy security remains paramount. The government’s decision to add 80 GW of coal-based capacity reflects this commitment. Therefore, going forward, we will see a dynamic interplay between renewable energy and traditional sources, ensuring a reliable, sustainable and affordable power supply.
What are the key bottlenecks in expanding renewable energy capacity and how can these be resolved?
The transition to a renewable-powered future is a complex journey with many hurdles to overcome. India has set an ambitious renewable energy target. In the next six years, that is, by 2030, we need to add another 300 GW, which means 40-50 GW of renewable capacity addition every year.
Currently, one of the biggest challenges is the intermittency of renewable energy sources such as solar and wind. Therefore, the availability of reliable energy storage solutions is crucial. Globally, solutions are being explored to address this. In India, we are seeing active efforts in this area, with the private sector coming forward to invest in large-scale renewable energy projects with integrated storage solutions.Also, innovative bidding structure such as tenders for RTC and flexible despatch renewable energy (FDRE) projects are being issued to make the cost of storage-based renewables competitive with traditional power sources.
While integrating storage with renewables is a positive development, it introduces a crucial challenge – ensuring the affordability of power generated from such integrated sources. As renewable energy sources, particularly emerging technologies such as offshore wind, pumped storage plants and battery storage, become a more substantial part of India’s energy mix, maintaining affordable power for all would be an essential aspect to consider.
For this, enabling access to low-cost financing is important, especially for implementing emerging green technologies. PFC, as the largest renewable energy financier in India, has been actively promoting renewable energy since 2016 through tailored policies, products and competitive interest rates. However, just lenders’ support will not be a key driver for unlocking low-cost funding. Creating a conducive ecosystem through government intervention and support is crucial to attract investment from multiple low-cost avenues such as international multilateral and developmental institutions. The government is actively taking steps in this direction with initiatives such as viability gap funding for battery storage, financing support to pilot projects in the green hydrogen space, issuance of sovereign green bonds. But more support is needed to make these technologies commercially viable and scalable.
Also, to manage the supply variability associated with renewable energy and make the power procurement process more efficient, a well-developed power exchange market is essential. While India has a power exchange, we need to actively encourage its usage to promote faster integration of renewables. Mechanisms such as contract for difference can also help streamline the renewable energy procurement process. By addressing these challenges and leveraging innovative solutions, India’s energy sector can successfully achieve its renewable energy goals.
What is your outlook for the power generation segment?
In India, electricity demand is on an upward trajectory. The Central Electricity Authority projects a peak demand of 335 GW by 2029-30, a significant increase from current levels. We have already experienced power deficits during peak summer months, indicating a growing need for additional capacity. Looking ahead, the medium-to-long term will likely see a new wave of generation capacity addition. Decarbonisation and energy security will be key considerations in determining the power supply mix. The government’s plan to double the existing capacity by 2032, with around 80 GW from conventional generation, reflects this focus.
While government players will be instrumental in conventional generation expansion, private investment is expected to flow primarily into the renewables’ segment. We are also keeping a close eye on emerging clean technologies such as green hydrogen and innovative solutions to reduce carbon emissions from conventional power plants. Going forward, we expect the power generation mix to be driven by a blend of renewable energy and traditional energy sources like coal to maintain a reliable and affordable supply of power.
What is your perspective on the financial health of power discoms?
The distribution segment is the backbone of the power industry and its financial health has a direct impact on both generation and transmission segments. Initiatives such as the Revamped Distribution Sector Scheme, the Late Payment Surcharge Scheme and a push towards smart metering are starting to show results. Billing efficiency has gone up to 87 per cent and the average number of days for discoms to settle payments has reduced from 166 in 2021-22 to 126 in 2022-23. Additionally, timely tariff orders were issued for 26 states and union territories in 2023-24, up from 20 in 2022-23 and 14 in 2021-22. Further, aggregate technical and commercial (AT&C) losses have been reduced from 16.2 per cent in 2021-22 to 15.4 per cent in 2022-23, bringing us closer to the national target of 12-15 per cent. However, in 2023-24, AT&C losses may see a slight increase. This is so, as in 2023-24, generation plants blended imported coal with domestic coal for generation. The discoms are yet to receive pass-through of the cost of imported coal in their tariff orders, which may lead to a temporary increase in their AT&C losses. However, this would taper down as and when the pass-through is allowed to discoms.
While these improvements are encouraging, we need to recognise that India is a developing country, with growing energy demands. There are challenges in the sector that need to be overcome, and with growing demand and changing technologies, the goalpost for discoms continues to shift. So, continuous reform and effective implementation of policies are essential for driving further progress in the sector.
What have been PFC’s key achievements over the past year?
The past year has been marked by several significant milestones. We closed the year with a record annual profit of Rs 143.67 billion, a 24 per cent increase from the previous year. This makes us the highest profit-making NBFC in India. Our loan book saw an impressive growth of 14 per cent and our renewable portfolio grew by 25 per cent year on year, crossing the Rs 600 billion mark. This reinforces our position as the leading renewable lender in the country. No new non-performing assets were added in over a year and we have reduced our NPA book by nearly 50 per cent over the past five years. Our net NPA ratio stands at a commendable 0.85 per cent.
One of our outstanding achievements is the establishment of PFC Infra Finance IFSC Limited in GIFT City, Gujarat. As the first government-owned NBFC in GIFT City, we are well-positioned to support India’s growth initiatives. Further, this year we have formally embarked on our sustainability journey. We have launched our first environmental, social and governance (ESG) report, highlighting our commitment to sustainability and our practices in ESG areas. Looking ahead, we are optimistic about the future. The power and infrastructure sectors present numerous opportunities for growth and we are well-positioned to capitalise on them.
How is PFC contributing to green financing and what are its future plans in this area?
PFC has been playing a major role in supporting India’s renewable energy transition. We are currently the largest financier in the renewables segment, having supported 50 GW renewable capacity in India, which is around 25 per cent of the country’s total non-fossil fuel-based installed capacity. Over the past five years, our renewable energy loan book has more than doubled, growing at a compound annual growth rate of 16 per cent, from Rs 289.8 billion in 2018-19 to Rs 602.08 billion in 2023-24. Just in the past one year, we saw a 25 per cent growth, further emphasising our commitment to green financing.
Recently, at RE-INVEST 2024 held in Gujarat, PFC was given a special recognition certificate by Shri Pralhad Joshi, Union Minister of New and Renewable Energy, for the company’s outstanding contribution to India’s renewable energy sector.
We are continuously adapting our products and policies to support emerging segments and technologies within the clean energy space. Our focus on collaboration with both domestic and international organisations has strengthened our ability to contribute to India’s energy sector development. We have established strong partnerships with key international development and multilateral agencies such as KfW and Japan Bank for International Cooperation to facilitate competitive financing for renewable energy projects.
Looking ahead, PFC aims to expand its footprint in green financing and maintain its position as the leading renewable financier in India. We are committed to supporting the country’s transition to a cleaner and more sustainable energy future.