India’s power sector performance is expected to see a significant decline in 2020-21, due to the likely prolonged disruptions caused by the Coronavirus pandemic.
As India faces a lockdown and industries are disrupted due to the spread of coronavirus in all corners of the country, power consumption has felt a sudden drop. Apart from the power demand, the supply of key inputs for generators, etc have also been affected, which may lead to project delays and thereby time and cost overruns. The severity of the impact has not been estimated so far as the extent of the damage done by the coronavirus is yet to be observed. However, the current situation indicates the near-term outlook of the power sector is grim as half of the country’s electricity demand is from the commercial and industrial spaces.
“India’s power sector performance is expected to see a significant decline in 2020-21, due to the likely prolonged disruptions caused by the Coronavirus pandemic,” said a report by Care Ratings. The daily power demand in the country has fallen by 25 per cent since mid – March 2020 when most parts of the country imposed restriction and shutdowns and the electricity consumption in the country fell from 3,494 million units on 16 March to 2,628 million units on 28 March, it added.
Even as the renewable energy sector saw decent growth in recent months, the generation and capacity addition by renewable energy sources may also suffer due to the supply chain disruptions. Altogether, the financial health of generating and distribution companies are expected to deteriorate further and stressed assets in the sector are likely to increase.
However, coronavirus is only a catalyst, not the sole reason behind the emerging stress in the power sector. Due to the prolonged slowdown in India, the domestic power sector was going through a very rough phase. The country’s electricity demand during April – February in FY20 grew by a mere 2.2 per cent, compared to the 5.4 per cent annual growth in the same months of last year. One of the major reasons for the falling demand was the 8-year low economic growth in the first three quarters, which led the industrial output during April – January FY20 to as low as 0.5 per cent.