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Business News/ Industry / Energy/  Electricity demand improves as India unlocks gradually

New Delhi: India's electricity demand is recovering amid gradual lifting of the lockdown, said India Ratings and Research on Thursday.

This could spell good news for India’s economic revival efforts as energy consumption, especially electricity and refinery products, is usually linked to a country's overall demand.

India’s electricity demand had nosedived during the country-wide lockdown, imposed to prevent the spread of coronavirus pandemic that originated in Wuhan, China.

The development comes in the backdrop of other economic indicators such as railway freight, goods and services tax collections and exports showing some recovery.

“The energy demand is showing signs of recovery as the decline in power demand narrowed in June 2020 (down 10.9%; May 2020: down 14.9%; April 2020: down 22.3%) due to the gradual lifting of lockdown for certain economic activities and an increase in domestic consumption with the extended summer season. The energy demand also showed a 2.9% mom improvement over May 2020," India Ratings and Research said in a statement.

India’s peak electricity demand came down with commercial and industrial power demand taking a hit after many factories shut down. However, domestic consumption, which generates comparatively lower tariffs, went up. Of India’s total electricity demand load pattern, industrial and agricultural consumption accounts for 41.16% and 17.69%, respectively. Commercial electricity consumption accounts for 8.24% of demand.

“In June 2020, the all-India energy demand contracted 10.9% yoy for the fourth consecutive month to 105.6 billion units, while energy supply also decreased 10.9% yoy, resulting in the energy deficit remaining at 0.4% (June 2019: 0.5%). The power demand declined for June 2020, amid the COVID-19 led lockdown, on account of a decline in commercial and industrial demand from major manufacturing states such as Maharashtra (down 17.1%), Gujarat (down 10.2%) and Tamil Nadu (down 10.3%)," the statement said.

India’s peak electricity demand has been low due to issues such as the precarious finances of some state-owned electricity distribution companies, which prevent them from procuring the required quantum of power.

As part of its stimulus package to bring India’s battered economy back on track, the government announced 1.25 trillion reform-linked loan package for liquidity injection to help discoms clear their outstanding dues. This power demand recovery comes in the backdrop of the government’s 20-trillion stimulus package announced earlier, amounting to 10% of gross domestic product (GDP).

“The COVID-19 pandemic and the resultant lockdown has adversely affected the power sector finances, creating a situation of acute liquidity crisis across the value chain in the power sector as a consequence," the government said in a statement earlier.

However, concerns remain.

A report by Centre for Policy Research (CPR), a think tank said, “We find that the Covid-19 caused disruptions in the electricity sector are pervasive and have alarming secondary effects and long-term consequences. If not addressed strategically, these impacts risk India’s long-term electricity goals. While the Central and state governments have been swift to recognise the disruptions, the responses fall short of a strategic approach."

While Indian economy had started recovering after the nationwide lockdown was lifted in June, many analysts say the unabated rise in covid-19 infections in the 'Unlock' phase and localised re-imposition of lockdowns in several states have interrupted this recovery in recent weeks.

“With the contraction in demand, electricity generation (excluding renewables) also declined 11.8% yoy to 99.5 billion units in June 2020 (May 2020: down 17.7%) with thermal generation declining 17.7% yoy (down 21.4%). Thermal PLF declined to 49.5% in June 2020 (May 2020: 47.9%; June 2019: 62.4%) on account of the lower demand. Central, state and private sector PLFs declined to 58.7% in June 2020 (June 2019: 67.7%), 39.5% (60.8%) and 50.8% (59.6%), respectively," the statement added.

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Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Updated: 30 Jul 2020, 06:33 PM IST
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