Growth in India's energy consumption, power supply hits five-year low

In five years, there has never been a situation where demand has fallen against planned energy generation

Growth in India’s energy consumption and power supply is at a five-year low. 

Each month this year except June has seen a fall in demand. It has fallen by 2.75-14.3 per cent for nine months of the calendar year except June.

Growth in power supply in every month of 2019 except June and July has been lower than the corresponding month of the past five years.

While the Centre has played it down, citing weather and renewable energy generation, the country’s power generation and supply metrics went downhill, especially after the Centre asked states to prepay for their power purchase.

The monthly and yearly power generation and supply data accessed by Business Standard for the past five years shows the states are not buying as much power as the envisaged demand.

 

The Ministry of Power did not respond to a detailed questionnaire till the time of going to press. 

While the extended monsoon might be the reason for low demand in September and October, it was lower than the government’s forecast since January this year. 

In the past five years, there has never been a situation where demand has fallen in all months against planned energy generation.

Programmed energy generation is the anticipated demand for the year, depending on the economic growth forecast, while the actual demand is reflected in the power distribution companies’ (discoms’) purchase from generators.

Sector experts point out states are not buying in line with the demand but only as much as they can prepay the generation companies for. Buying less than what is programmed could indicate less supply to consumers and power cuts. 

India does not maintain household/city-level data for power supply and outages. The Urja Mitra portal, launched by the Ministry of Power to track them, shows 99 per cent average all-India power availability. It does not show district-wise outages and average household supply.

The Centre in June announced that discoms would mandatorily prepay power generators through a letter of credit (LC) issued by banks. 

The energy demand fell by 0.33 per cent the following month, and it tanked 6.46 per cent over the previous year when the new regime kicked in August. The gap widened in October to 14.35 per cent.

On top of it, no bank is ready to finance the LC of discoms after they burnt their fingers under the Ujjwal Discom Assurance Yojana (UDAY), said the executive quoted above.

Meanwhile, beleaguered state-owned power discoms are in a fix. Due to economic slowdown, their paying industrial consumers are not buying more electricity and they have to supply more to subsidised rural consumers, which have been newly connected under the Saubhagya scheme.

This newspaper recently reported that major industrial states such as Maharashtra, Gujarat, Karnataka, Andhra Pradesh, and Madhya Pradesh have witnessed a fall in power demand. 

“We have reports of factories shutting for one day a week and reduced working hours, which impacts their electricity demand. When the bulk buyer goes missing, revenues of the discoms are affected,” said a sector executive.

At the national level, annual all-India power demand growth has hovered around a sub-optimal 2-4 per cent in the past five years. Demand rose by 7.9 per cent in 2018-19 and by 8.8 per cent in 2014-15. 

This setback comes within months of India declaring all villages and households (99.9 per cent) electrified. But this has increased the expenditure of the discoms, apart from raising the cost of power.  Now with the new compulsion of prepayment over them, discoms are stalling and reducing their power purchase.

Sambitosh Mohapatra, partner, PwC India-Power and Utilities, however, said the positive impact of Saubhagya on revenues was not evident because of a lag in billing and the demand factor. 

 

The efforts of the Centre to turn around discoms have faltered. UDAY, launched in 2015, would conclude at the end of this fiscal year, but could leave the discoms in the red and the finances of state governments in trouble, this newspaper reported recently. The cumulative loss of discoms (21 states) stands at Rs 28,369 crore at the end of 2018-19, up by 88 per cent over the previous year.

Some sector experts also cite the shifting load curve of the country due to more efficient supply to agriculture customers. 

“Apart from the factors of demand slowdown across specific consumer categories and financial health of discoms, the impact of rainfall and management of demand is possible. With feeder segregation and efficiency measures, the supply for agriculture consumers has evened out,” said Mohapatra.

While India has started recording renewable generation only recently, it accounts for barely 4-6 per cent of the energy supply. Experts rule out its impact on the supply-demand gap.