The rating agency expects power demand to grow modestly at 4-5 percent and power generation at 5-6 percent in FY 2016-17, with deficits remaining low at 3-4 percent.

The PLFs of the thermal power plants are likely to remain low as demand growth remains muted. Moreover, as the renewable energy share increases, it could exert additional pressure on the PLFs of coal-based plants.

The agency also expects the coal output to increase by 10 percent in the next fiscal to reach 594 metric tonnes, given the government's focus on achieving the targeted one billion metric tonnes by 2020 and on the back of the strong performance this financial year.

Ind-Ra expects solar tariffs to decline to Rs 4 per unit by next fiscal (the lowest bid in FY 2015-16 stood at Rs 4.34 per unit), which, it said, will accelerate its adoption.

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