The power minister recently told FE that power demand falling 1.6% in August was not connected to the LC mechanism
Power generation in the country fell 4.5% year-on-year to 113.6 billion units (MU) in September, recording the second straight month when electricity produced was less than the corresponding period in 2018. Since electricity cannot be stored, generation is the most robust indicator of consumption trends. 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.
Conventional power plants, which generate nearly 91% of the country’s electricity, produced 3.3% less power y-o-y in September. Renewable energy sources decreased their generation by 17% in the same month to 8.9 BU, in spite of a rise in its installed capacity.
Though a section of the industry is attributing the fall in demand to reduction in industrial and commercial power consumption, others believe that the 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.
The power minister recently told FE that power demand falling 1.6% in August was not connected to the LC mechanism.
“Extended monsoon this year led to lower agricultural consumption in August, which is responsible for power requirement coming down in the month from the corresponding period last year,” he said.