Electricity demand improves to 98% of pre-Covid-19 level in August: ICRA

The electricity demand recovery on an all-India level has largely been led by northern and eastern states with a year-on-year (y-o-y) increase of 6-13 per cent in demand in July 2020, it said

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Led by recovery in rural areas, demand for electricity in the country improved to about 98 per cent of pre-COVID-19 level in August, according to rating agency ICRA.

The electricity demand recovery on an all-India level has largely been led by northern and eastern states with a year-on-year (y-o-y) increase of 6-13 per cent in demand in July 2020, it said.

“The rise in demand was mainly driven by rural consumption though it continues to be lower as compared to the pre-COVID-19 levels,” it said.

The electricity demand in large industrial states witnessed a 6-15 per cent fall in July 2020 on a y-o-y basis, on the back of slower recovery in industrial activity.

Also, the recovery in the all-India demand in August 2020 is on a lower base, considering the demand decline witnessed as compared to same month last year.

“The imposition of lockdown to control the COVID-19 pandemic led to a decline in the all-India electricity demand by 13.1 per cent in the first four months of 2020-21,” ICRA Sector Head and Vice President (Corporate Ratings) Girishkumar Kadam said.

He added that while the monthly demand recovered from 85 billion units in April 2020 to 112 billion units in July 2020, it remained lower on a year-on-year basis.

While the peak demand recovered from 133 gigawatts (GW) during April 2020 to 171 GW in July 2020, it remained lower by 3.3 per cent compared to July 2019.

“This was also because of the re-imposition of lockdown restrictions in many parts across the country, due to rise in COVID-19 infections. Given the energy demand trends so far across the key states, ICRA continues to maintain its outlook for about 5-6 per cent decline in the all-India electricity demand in FY2021 over FY2020,” he added.

He added that the decline in demand is expected to supress the thermal plant load factor (PLF) on an all-India level to about 50-51 per cent in 2020-21 against 56 per cent in 2019-20.

ICRA said the decline in demand has adversely impacted revenues and cash collections for the power distribution companies (discoms), especially given that the bulk of the consumption decline has come from high tariff-paying industrial and commercial consumers.

“The consequent revenue gap for the discoms at all-India level is estimated to increase by about Rs 42,000-45,000 crore in FY2021,” it said.

“Nonetheless, the discoms’ ability to make timely payments in a sustained manner towards the generating companies continues to remain a key monitorable, which would be dependent on the demand recovery from industrial and commercial consumers in the near term,” its Associate Head and Assistant Vice President Vikram V said. Besides, it will also depend upon the efforts to address the structural issues confronting the distribution segment, he added.

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