Power stocks jump after the 2024 budget release

Power stocks jump after the 2024 budget release

Following the Finance Minister’s announcement of initiatives to advance nuclear and renewable energy, the stock of electricity increased.

Finance Minister Nirmala Sitharaman emphasized the government’s emphasis on energy transformation in her address introducing the Union Budget 2024. Regarding the rooftop solar initiative, Sitharaman reported that 1.28 crore and 14 lakh people had registered for the “Pradhan Mantri Suryaghar Yojana,” which intends to provide free electricity to 1 crore families per month for 300 units. In the upcoming days, Sitharaman stated, renewable energy projects with pumped storage will be unveiled. She also mentioned that nuclear reactor research and development are already underway.

With an 800 MW capacity, the cutting-edge Ultra Super Critical thermal critical plant has been completed in collaboration with NTPC and BHEL.

A policy on pump storage was also announced by the finance minister to support renewable energy.

2 percent increase was seen in stocks like PFC, REC, IREDA, and NTPC.

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During the pre-budget discussions, the electricity sector expressed its expectation for the continuation of the Interstate Transmission System (ISTS) costs waiver and actions to encourage the production of hydropower, like the establishment of a dedicated nodal agency.

They had requested an extension of the ISTS fees past June 2025. Since 2019, it has been repeatedly extended to aid in the expansion of the production of renewable energy.

In their pre-budget note, Axis Securities analysts had emphasized the need for further government assistance to reach the goal of 500 GW of renewable energy capacity by 2030.

They had outlined policies that included more public-private partnerships, sustainable finance for renewable projects, and enhanced viability gap funding for solar, offshore wind, and battery storage.

Additionally, analysts had called for a decrease in the goods and services tax (GST) on solar devices and other renewable energy components.

India’s power demand

India’s power consumption increased by 7.3% YoY in FY24 and by 5% CAGR over the previous five years.

“Power demand grew at a rate of roughly 1.1–1.2 percent in 2021 compared to 0.8% in 2014,” stated Rupesh Sankhe, Vice President of Elara Capital, in a pre-Budget interview with Moneycontrol.

He pointed out that programs like Made in India and PLI schemes, along with increased per capita consumption, were the main drivers of this increase.

He continues, “Significant investment in thermal capacity and R&D for offshore wind, battery storage, and hydrogen data centers is expected, with peak demand projected to reach 370 GW by 2030. This presents a Rs 42 lakh crore opportunity for relevant companies.”

Although the rate of capacity development has accelerated, analysts at Kotak Institutional Equities pointed out in a recent study that “we are still walking a tight rope.”