Boston, MA -- (SBWIRE) -- 01/27/2014 -- We have maintained our forecasts for the Indian electricity sector this quarter as our assumptions remain relevant. We highlight that certain key themes - namely continued weakness in the economy, further coal shortages, and poor regulatory frameworks - are likely to remain prevalent even in the long-term. From a long-term perspective, we expect thermal energy to maintain its position as the backbone of the Indian power sector, but believe it unlikely that the Indian government will meet its electricity capacity and generation targets.

We have maintained our 2014 forecasts for electricity generation and consumption in India as our shortterm assumptions remain relevant. We had revised down our forecasts in our previous analysis of the sector - due to challenges in the power sector that resulted in major power shortages, as well as our more cautious outlook for the Indian economy - and find that the situation remains largely unchanged.

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We have also maintained our medium- to long-term forecasts for the Indian power sector this quarter. We expect electricity generation to grow an average of 5.8% per annum between 2014 and 2022, driven mainly by thermal and renewable energy. We highlight that a number of key themes will remain prevalent in the Indian power sector over the long-term.

The key trends and developments in the Indian electricity market are:

- A report by the Central Electricity Authority revealed that the country faced a power deficit of over 12,000 megawatts (MW) during peak hours in FY2012-13 (April-March).
- Coal India increased the price of low-grade coal by 10% on May 27, and this grade of coal is most commonly used in electricity generation.
- Renewable energy is growing increasingly bankable, and many Indian utilities and companies are investing in the sector.
- Despite ambitious plans by the Indian government to boost domestic coal production, we expect the country's reliance on coal imports to grow over the coming years. A number of obstacles, with vital regulatory and bureaucratic hurdles being the most pertinent, will continue to sap growth in the coal sector, while burgeoning demand for coal resources will prompt an increasing number of Indian companies to embark on overseas ventures.

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