India has seen a return of long-term thermal power purchase agreements (PPAs) with three states awarding 4,800 MW of contracts in the past year. Maharashtra, West Bengal, and Uttar Pradesh have finalized 1,600 MW each under competitive bidding, with tariffs in the range of INR 5.4 to INR 5.5 per unit. This marks the first major revival of long-term coal-based PPAs in nearly a decade.

Power Demand and Capacity

Electricity demand in India is projected to grow by 5 to 5.5 per cent in FY2026, following a 7.6 per cent rise in FY2025. Total demand reached 1,826 billion units last fiscal and is expected to remain strong, supported by load from electric vehicles, data centres, and green hydrogen production. Over 40 GW of thermal power capacity is under construction, while total capacity addition in FY2026 is projected at 44 GW, dominated by renewable and thermal segments.

Thermal Plant Load Factor and Coal Stocks

Thermal plant load factor (PLF) is expected to remain at 70 per cent in FY2026, rising marginally from 69.5 per cent in FY2025. Coal stocks at domestic plants stood at a five-year high of 19.7 days as of May 21, 2025. Imports are likely to account for 6 per cent of coal consumption in FY2026, compared to 6.9 per cent in FY2025.

Financial Outlook

The outlook remains stable for thermal generation, renewables, and transmission. However, distribution continues to lag behind generation and transmission, with book losses at state discoms standing at INR 572 billion in FY2024, and gross debt rising to INR 7.4 lakh crore from INR 6.6 lakh crore in FY2023. The cash gap is projected at INR 0.35 per unit in FY2026, and tariff hikes have remained muted, with a median increase of 1.5 per cent across 28 states issuing tariff orders for the year. The Indian power sector is witnessing significant developments with the comeback of thermal power purchase agreements, indicating a renewed focus on energy security amid rising power demand.

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