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Business News/ Market / Stock-market-news/  June power production data darken growth outlook
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June power production data darken growth outlook

Electricity generation in June has shrunk 1.25% from a year ago, first-look data from CEA show

The reason for the poor showing comes down to the familiar factor of a fall in generation from thermal fuels. In June, power production from this source fell 2.4%. Photo: Ramesh Pathania/Mint (Ramesh Pathania/Mint)Premium
The reason for the poor showing comes down to the familiar factor of a fall in generation from thermal fuels. In June, power production from this source fell 2.4%. Photo: Ramesh Pathania/Mint
(Ramesh Pathania/Mint)

One consolation in the May index of industrial production, which showed continued shrinking in manufacturing and mining output, was the acceleration in electricity generation. Power production grew 6.2% in May.

Was it a blip? Electricity generation in June shrunk 1.25% from a year ago, the second such instance since February, first-look data from the Central Electricity Authority (CEA) show. The last time electricity generation had contracted was in September 2005. Sure, this 1.25% contraction in June came on the back of 8.8% growth a year ago, but then this May’s spectacular growth was preceded by 5.9% increase in the same month last year.

The reason for the poor showing comes down to the familiar factor of a fall in generation from thermal fuels. In June, power production from this source fell 2.4%. Plant load factors, or capacity utilization, fell to 64.6%, the lowest since September 2012.

Gas-based factories’ capacity utilization fell to 22.2%, which was expected. However, the surprise in the data was the fall in the plant load factors of coal-based generators. CEA data suggests that coal stocks were not a problem. The number of factories not having a critical stock of coal—defined as coal supply of less than seven days—did not exceed 18 in the second fortnight of June. If anything, it has improved and only 11 power plants have sub-critical stocks now compared with a high of 49 in October. So, is the fall in generation owing to weaker demand from financially-crippled state electricity boards or the higher than normal rains in some parts of the country, as a brokerage suggested? CEA comment is awaited.

However, the upshot is that despite all the addition to generation capacity, power supply is still restraining growth. The numbers also tie up with the responses of participants in the Purchasing Managers’ Index survey, who said, “Frequent power failures and shortages of raw materials, including water, are constraining operations." Couple that with the fact that domestic orders are declining and it’s no wonder there are few signs of a manufacturing recovery. After all, which company will build new factories if can’t get enough electricity to keep them running?

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Published: 15 Jul 2013, 06:43 PM IST
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