Demand fell in states like Maharashtra, Gujarat, Tamil Nadu, Jharkhand, Punjab and Odisha, where industrial and commercial users usually account for around 40% of electricity consumption, according to data by the Central Electricity Authority.
Demand for power fell 1.6% in August, accentuating concerns over the economic slowdown. While power demand was erratic and mostly listless in FY19, the situation improved in the first quarter of the current fiscal because of general elections. A contraction had last been witnessed in February 2017, when consumption declined 2.7% year-on-year.
Demand fell in states like Maharashtra, Gujarat, Tamil Nadu, Jharkhand, Punjab and Odisha, where industrial and commercial users usually account for around 40% of electricity consumption, according to data by the Central Electricity Authority. Electricity requirement also decreased in Haryana, which houses significant automobile and component manufacturing units (along with Maharashtra, Gujarat and Tamil Nadu), after a number of manufacturers recently announced temporary plant shutdowns and production cuts.
However, a section of the industry believes that the “uncharacteristically weak” demand could also stem from the Union power ministry mandating financially weak state-owned electricity distribution companies (discoms) to open and maintain adequate letter of credit (LC) as payment security to power plants from August 1.
Sector experts had cautioned that the move could push discoms to report lower-than-actual power demand or resort to load-shedding. Discoms’ financial losses stood at Rs 28,369 crore at the end of FY19, up 88.6% year-on-year.
Crisil Research recently said the LC mechanism might lead to a further rise in their annual interest burden of Rs 2,500-3,000 crore. The dip in power demand follows conventional power plants producing 339 BU in Q1FY20 in the run up to the Lok Sabha elections, recording a Y-o-Y rise of 6.3%. Thermal power producers generated 80.5 BU electricity in August, down 3.5%. The average utilisation level of thermal power plants during the month was only 51%, undermining debt-servicing capabilities of the sector where there are stressed assets worth Rs 3 lakh crore.
Renewable power plants produced 13.1 BU in the month, which is 20% lower than the corresponding period last year. Since electricity cannot be stored, generation is the most robust indicator of consumption trends.