India enters new fiscal with negative power demand; robust growth missing

Monthly demand has, nonetheless, shown considerable improvement over peak lockdown months, mostly on the back of thermal power

Topics

power demand forecast | Power Sector | Power ministry


Shreya Jai  | 
New Delhi 

India entered the new financial year with negative power demand even though it has come out of the shadows of a Covid-induced slowdown. The annual demand for FY21 was 1.31 per cent lower than FY20, indicating that robust growth is still missing, with demand just making it to mid-2019 levels.

Monthly demand has, nonetheless, shown considerable improvement over peak lockdown months, mostly on the back of thermal power. Power demand in March 2021stood at 170.6 GW, up from 157GW in March 2020 and 163 GW in March 2019. This is, however, similar to the demand during April-September 2019.

“The all-India electricity demand has shown positive growth on a YoY basis since September 2020 with easing of lockdown restrictions and supported by a favourable base effect because of heavy rainfall in the corresponding period of the previous year leading to lower demand from household and agriculture segments,” said ICRA Research in its latest commentary on the power sector.

Thermal power has turned out to be a beneficiary of demand recovery. All India plant load factor (PLF) or the operating ratio of thermal units stood at 63.27 per cent in February 2021 as against 60.27 per cent in February 2020. While renewable energy generation grew at a healthy rate of 6.6 per cent during the April 2020 to January 2021, its contribution remained limited to 17 per cent of the overall electricity supply (during February 2021).

The country’s power demand fell to a historic low in April 2020 when it was down by 24 per cent over the year ago period. The nationwide lockdown was imposed from March 25, 2020 to contain the spread of Covid-19. While the lockdown was eased by May, commercial centres, manufacturing units and offices were either closed or operating at lower capacity. The streak of falling demand continued till August 2020.

Industrial and commercial consumers are usually the highest power demand drivers followed by agricultural and residential demand.

The month of December in the current fiscal saw the highest growth of 9.88 per cent over 2019 levels, with manufacturing units limping back to normal and several office complexes now open with full or partial capacity.

However, ICRA Ratings pointed out in its latest sectoral commentary that it is not the industries which are bringing power demand. “Demand recovery has been led by states with high rural consumption, while the states with high industrial consumption are showing a slow recovery,” said ICRA in its rating for the power sector.

One of the leading industrial states Maharashtra is facing one of the strongest second wave of Covid-19 and several cities have been asked to impose a partial lockdown with restrictions on public gatherings and night curfews.

India is the sixth among the most affected countries by active cases.

CARE Ratings in its note on the power sector said this could impact the improvement made in power generation and consumption. “Power generation and consumption would improve further in the coming months and would be higher on a year-on-year basis with the economic recovery gathering pace and industrial and commercial activity moving towards pre-lockdown levels amid growing expectations that the vaccination programme would stimulate economic recovery,” it said.

The rating agency, however, further said that the resurgence of Covid-19 infections and the possibility of fresh restrictions “pose a risk to the sustainability in economic revival and thereby power demand”.

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