UP’s electricity quest may hold the key to Indian power sector revival
New Delhi: The Bharatiya Janata Party (BJP) government’s promise to provide round- the-clock electricity from October 2018 in Uttar Pradesh may hold the key to revive India’s electricity demand.
This comes at a time when the National Democratic Alliance (NDA) government is focusing on rural electrification and leveraging Ujwal DISCOM Assurance Yojana (UDAY) for turning around debt-ridden state power distribution companies.
In view of the problems in the state and the economic benefits of electrification, Yogi Adityanath-led Uttar Pradesh government plans to provide electricity to every citizen of the state by 2019.
With UP’s per capita electricity consumption of 317 kilowatt-hour (kWh) way below the country’s per capita electricity consumption of 1,075 kWh recorded in 2015-16, pent-up demand will kick in, in turn helping the sector’s turnaround.
According to Central Electricity Authority, India’s apex power sector planning body, UP faced peak electricity shortage of 4.4% in May. This in a state which is the third largest economy of India and contributes 8.4% to the country’s gross domestic product (GDP).
The early indicators of UP’s electricity demand picking up are already there. According to India Ratings & Research, UP was among high energy-consuming states with over four billion units per month.
“Demand (year-on-year) increased by around 12% in Maharashtra, 20% in Uttar Pradesh, 12% in Andhra Pradesh, 14% in Telangana and around 11% in Haryana,” the agency wrote in a 28 June report. This demand is expected to further go up with the industrial policy announced by UP government last week with incentives such as subsidized electricity.
This comes in the backdrop of an uncertain outlook for the power sector, with India’s current installed capacity of 330,261 mega watt (MW) and projects under construction expected to meet the country’s electricity demand till 2026.
According to the NDA government, the early signs of revival in the electricity sector have become evident.
“The gross generation in the country, which reflects the consumption by consumers (other than about 0.2% growth rate of export to Bangladesh and Nepal), increased from 1020 BUs (billion units) in 2013-14 to 1242 BUs in 2016-17, showing a CAGR (compounded annual growth rate) of 6.8%,” said a union power ministry 10 July statement.
India’s per capita power consumption is among the lowest in the world. Around 280 million people in the country do not have access to electricity. In comparison, China has a per capita consumption of around 4,000kWh, with developed nations averaging around 15,000kWh per capita.
The investors are slowly getting interested in the UP story, long considered to be a laggard state with an abysmal law and order track record. The BJP government has set a target of 10% economic growth rate in the coming five years from the present level of 6.5%.
The UP government also announced a provision of Rs30 crore for community street lighting in the state budget presented on Tuesday. The scheme assumes significance given that street lighting acts as a deterrent to crime. In the run-up to the UP state assembly elections, the BJP made controlling street crime, particularly that directed at women, a part of its poll promise.
The state government announced its plans to implement its new ‘Solar Energy Policy’ to attract private sector investments. Analysts are aware of the state government’s role in helping expand India’s clean energy sector.
“The long-term demand outlook for renewable energy (RE) is strong, which is aided by favourable policy support from both the Government of India and the state governments of key states as well as improving tariff competitiveness of wind and solar power,” ratings agency ICRA wrote in a Tuesday report.
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