Power generation rises 2.1% in September, but demand remains low

Power generation demand is hurt by overcapacity and a tepid response from distribution companies or discoms


Photo: Indranil Bhoumik/Mint
Photo: Indranil Bhoumik/Mint

Mumbai: India’s electricity generation for the month of September rose about 2.1% year-on-year compared to flat growth in the month of August compared with last year, shows data from Central Electricity Authority (CEA). This rise in generation, however, does not necessarily reflect a rise in demand for the sector, which is hurt by over-capacity and a lack of demand from distribution companies (discoms).

CEA’s detailed summary for the month of September is yet to be available on its website.

The slight rise in generation in September is not indicative of any rise in demand, said a brokerage analyst, asking not to be named as he is not authorized to speak to reporters. “The 2.1% rise by itself does not mean anything, it’s a marginal number. The basic problem still remains that with the industry having shifted to captive, there is a serious crisis of credible customers, who will pay on time. And this also impacts the volume growth,” he said.

The compound annual growth rate (CAGR) of captive power generation between 2006-07 and 2014-15 is 9.3% compared to 4.6% for electricity procured from utilities, according to the Economic Survey notes released in February 2016.

India’s power demand is unlikely to grow beyond 6-7% over FY20, according to a Motilal Oswal Securities note on 7 October.

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India’s power generation had remained flat year-on-year in August hurt by improved rainfall, which slowed demand across the agriculture sector. This has led to the overall sector’s plant-load factors (PLFs) to decline by about 4.4% to 42.7% from same period last year, an Emkay Global Financial Services Ltd report of 3 October said.

With power deficit falling, merchant power tariffs are also down 23% year-on-year to Rs2.16 per unit.

The sector’s capacity addition year-to-date till August was 3,466 megawatt (MW) against the target of 4,410 MW, the Emkay Global report said. “Dispatch of coal to power sector declined by 12.1% YoY to 30.1 million tonnes in August. This is the sharpest decline in trailing 12 months, reflecting high inventory (highest in two years) and lower power demand,” the report said.

In the first six months of this financial year, power generation grew 5.07% compared to 4.52% the previous fiscal. This increase was more than sufficient to keep pace with the increase in demand which grew 4.99% for April to August compared to 0.68% the previous fiscal.

Large power utilities such as state-run NTPC Ltd have been forced to back down generation due to lack of demand

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