The development takes place at a time when state-run electricity distribution companies’ (discoms') dues to power producers stood at Rs 80,930 crore at the end of November, 2019, up as much as 45% from a year earlier.
Electricity consumption slipped 0.4% y-o-y to 100.2 billion units (BUs) in December — fifth straight month of contraction and mirroring persisting stress in the industrial sector amid an acute economic slowdown. At just 1.1%, growth in power consumption in the first three quarters of FY20 was the lowest at least since FY07.
Among the major industrialised states, annual dip in December power consumption was recorded in Uttar Pradesh (4.6% to 8.1 BU), Tamil Nadu (7.3% to 7.9 BU), Punjab (4.7% to 3.5 BU) and Madhya Pradesh (9.5% to 7.2 BU).
However, policy-makers may seek some comfort from the fact that consumption in two key states – Maharashtra and Gujarat – rose 6.1% and 1.6%, respectively, in December and helped narrow the overall contraction level for the month from as much as 5.5% in November.
In the April-December period, barring Punjab and Uttar Pradesh, other major industrial states (Maharashtra, Gujarat, Tamil Nadu and Madhya Pradesh) recorded an annual decrease in electricity usage. Industrial and commercial consumers have a much higher share in total power consumption in all these states, compared with pan-India average. This indicates that muted activity in factories has caused the slide in electricity demand and controverts the government’s attribution of the fall in electricity consumption in the country during recent months to ‘extended monsoon’ and the consequent “reduction in demand in agriculture sector and the reduction in cooling requirement in the domestic and commercial sectors”. “Power-intensive industries like automobile and cement have witnessed broad-based slowdown during the year, which has impacted the demand for power,” Care Ratings recently said.
The development takes place at a time when state-run electricity distribution companies’ (discoms’) dues to power producers stood at Rs 80,930 crore at the end of November, 2019, up as much as 45% from a year earlier. About 89% of these, or Rs 71,673 crore, were “over-dues”, with payment defaults of 60 days or more. As such, the financial losses of discoms had jumped about 70% annually to Rs 27,000 crore in FY19.
“Poor industrial off-take will affect discoms’ finances,” Anish De, head of energy and natural resources, KPMG India, told FE. “In light of the above, it is important to kick-start industrial demand through a right set of incentives for consumption, which in turn, would re-start the investment cycle and eventually lead to higher energy/electricity offtake”, De added.
Among other major states where industrial users do not comprise the major chunk of consumption, Rajasthan witnessed a 3.6% fall in consumption in December, while Karnataka saw a 4.9% drop and West Bengal 3.3%. However, electricity usage increased 3.5% in Telangana. In terms of peak demand, which reflects the highest power requirement level reached at a particular moment, positive growth has been recorded in the ongoing fiscal by all the key states. However, experts point out that peak demand is not a good indicator of enhanced industrial activity, as it’s largely a function of unplanned surge in residential and domestic power usage, usually seen during the festive seasons.