NTPC Ltd., India’s biggest electricity producer, is planning its first reduction in capital spending in at least six years amid the country’s slowing demand growth and surplus capacity. The state-run generator, which accounts for about 13 percent of the nation’s capacity, plans to spend 230 billion rupees ($3.6 billion) as capital expenditure this financial year, according to NTPC’s finance director, Kulamani Biswal. That is about 18 percent lower than what it spent in the previous year and the first year-on-year decline in records going back to the year ended March 2013, company filings show. The lower capital spending comes as demand growth for electricity slows in India, keeping power plants under-utilized and impeding new investments. The expansion in renewables and a steep fall in solar and wind tariffs are also making producers cautious about building new coal-fired power plants.
“There’s a glut in the power generation sector and demand is not catching up. NTPC already has a large project pipeline and that’s the reason we’re seeing it slowing down,” said Rupesh Sankhe, an analyst at Reliance Securities Ltd. “NTPC will continue to make investments, although it will be moderated by the sluggish demand situation.”
The federal government’s Central Electricity Authority has projected an 8.8 percent power surplus in the country this year. It made a similar projection last year, but fell short as demand overshot supply by 0.7 percent.