With parts of India reeling under severe and prolonged heatwaves and also with strong manufacturing activity, there has been a robust demand for power in the first two months of the fiscal year. According to a report by Crisil, power demand is likely to have grown by 13 per cent in comparison to April-May 2023. In May, the power demand is estimated to have surged to approximately 156 billion units (BUs), logging a 15 per cent on-year increase. The peak power demand touched new highs at 246 GW and 250 GW on May 29 and 30, respectively, due to soaring temperatures that hit 50.5 degrees Celsius in Churu, Rajasthan, on May 29.
Even as the country recorded maximum temperatures of 35.6 degrees Celsius in April 2024, which is 0.65 degrees Celsius away from normal, the heatwaves were more intense in May, especially during the second half. Of the 30 days in April, maximum temperatures were below normal on only two days across the country.
States in northwest and central India and Gujarat faced severe heatwaves. Towards May-end, heatwave conditions extended to more parts of central and north India and to Chhattisgarh, Bihar and Vidarbha. Pan-India maximum temperatures reached 45-48 degrees Celsius by the month-end.
While other regions are witnessing monsoon onset already. Monsoon has advanced in the country to now cover almost all regions including Gujarat, Telangana and Maharashtra. Rainfall was also recorded in West Bengal, Sikkim and some regions in Northeast India. Heavy rainfall was recorded over West Bengal, Sikkim, Assam and Meghalaya in the east, parts of Maharashtra and Goa in the west, Karnataka, Kerala and Tamil Nadu in the south and also over isolated regions in east Madhya Pradesh. As southwest monsoon advances in the region and a cyclonic circulation is forming over Northeast Assam, rains are likely in other states including Jharkhand, Odisha, Bihar, Chhattisgarh and cover other states in Northeast India including Nagaland, Manipur, Mizoram and Tripura in the next seven days.
Besides the heatwave situation, strong manufacturing activity also led to a growth in power demand from the commercial and industrial segment. As indicated by the Purchasing Managers’ Index (PMI), manufacturing activity remained comfortably above the expansionary mark of 50 in April and May at 58.8 and 57.5, respectively.
With El Nino expected to wind down by June and La-Nina likely to settle in, growth in power demand is expected to ease in June and in the second quarter of this fiscal. “Economic activity is expected to continue aiding growth in power demand. However, a normal monsoon is expected to limit power demand from the agricultural and domestic segments in the second quarter. In the milieu, CRISIL MI&A Research expects full-year power demand to increase 5.5-6.5 per cent on-year this fiscal,” said Sehul Bhatt, Director, CRISIL MI&A Research.
Power generation in line with demand
In line with the power demand, Crisil stated that the overall generation is estimated to have increased by approximately 9 per cent and 18 pr cent on-year in April and May, respectively, with the latter month recording a high of 169 BU. Further, with the implementation of Section 11 for gas-based power plants, the share of gas in overall generation increased to 3.1 per cent in May 2024 from 1.6 per cent in May 2023. And the share of coal in the overall generation declined marginally, from 73 per cent to 72 per cent, while that of remaining fuels remained unchanged, Crisil stated.
Crisil further maintained that despite power demand reaching an all-time high, prices remained below Rs 5/kWh in May 2024 as generation increased across fuel categories. Mandatory operations of imported coal-based plants along with gas-based plants under Section 11 aided generation, leading to a comfortable supply situation. Gas-based generation recorded the highest growth, at around 117 per cent and hydro power generation surged 10 per cent on-year, while solar increased 21 per cent.
Short-term prices, Crisil said, may have been capped by the sufficient coal availability. Coal dispatch to power plants surged 5.4 per cent on-year in April 2024, aiding coal stocks in April and May. As of May 31, 2024, thermal power plants had 48 MT of coal stocks, an increase from 37 MT during this period last year. To address the increase in coal requirement from the power sector during the summer, the government extended the period of necessary blending of imported coal to June and increased the weightage from 4 per cent to 6 per cent.
