Power demand growth on a 5-year high as industrial sector wants more

Riding on the ongoing electrification drive and a reversal of muted industrial needs, power demand is on an upswing. During the April-September period of the current year, power demand has recorded 7.6 per cent growth — the highest in the past five years. 

The peak power demand trend in the April-September period over the past five years shows Bihar at the top with a growth rate of 71 per cent. That’s the highest among all states. Bihar, which has been at the lowest rung in the electrification level, attempted to break from the past by announcing the completion of household electrification last month. Telangana and Odisha share second spot in highest growth in power demand at 40 per cent each. Uttar Pradesh and Andhra Pradesh are next with a growth rate of over 30 per cent over the past five years. 

“The industrial and commercial sector industrial demand, which had reduced or was muted due to several negative trends, has bounced back. The demand, which earlier may have been affected by demonetisation and introduction of goods and services regime, is now normalising,” said a senior NTPC executive. Healthy power demand growth during the current year in Gujarat, Maharashtra and many southern states showed industrial demand was picking up, he said.

Experts point at the uptick in industrial production, which in the past four and a half years of the Narendra Modi government has maintained positive growth every month barring one.

Industrial production in the country grew 4.3 per cent in August 2018, the last month for which data has been released. A closer look at the Index of Industrial Production (IIP) statistics, released over the past three years, shows that overall industrial production has clocked systematic growth. However, economists suggest most of this was tepid. Growth was above 7 per cent on only nine occasions in the last 52 months since the Modi government took charge and remained less than 4 per cent spread across 22 months.

R K Mediratta, director (business development) at India Energy Exchange (IEX) said there’s been a strong volume and record high prices in spot power market for the past few months. The demand increase this year has been due to some pullback in industrial demand as well as for the domestic load, thanks to the government push in household electrification, according to Mediratta. He added that large states have demonstrated enough aggressiveness in avoiding load shedding partially ahead of the elections. Although spot market is just 3 per cent of the total power market, it is an indicator of the demand-supply trend.

Market experts also highlight the role of several energy access schemes of the government, especially Saubhagya and power distribution turnaround Uday for helping power demand. 

Last year, the Union government announced Sahaj Bijli Har Ghar Yojna (Saubhagya) to speed up electrification of 35 million urban and rural households. The Centre announced in August that it had achieved 100 per cent electrification of 10 million households and the balance target would be met by December--four months ahead of the stipulated deadline. It would entail electrifying 1,50,000 households per day. About 5 per cent of the target remains to be met.

Uday or Ujwal Discoms Assurnace Yojana is for financial and operational turnaround of the state-owned power distribution companies (discoms). Even as the operational improvement is shrouded in doubt, the financial turnaround has strengthened the power purchase capacity of the states again.

“Saubhagya is creating an impact on rural hinterland and giving a boost to domestic and commercial demand,’’ said Sambitosh Mohapatra, partner (power & utilities), PwC India. The ability of discoms to enhance unconstrained demand, given the improved financial position post Uday, has also played a role. “Add to it the growth rate of the country’s GDP linked to industrial demand,” said Mohapatra.

While the increase in demand has cheered the power sector, pressure on coal supply is increasing. According to an industry source, stocks at the coal pithead and power plants have touched a historical low of around 30 million tonne (MT) as demand has gone up and imports have dropped. 

Coal India Limited (CIL) said the stock pile (ready to be dispatched coal) at the mine’s end is low as the offtake has increased and it is a good sign. A CIL official said the company liquidated 34.34 MT of its pit head coal stock during the first six months of the current fiscal. The stock pile stood at 21.21MT, down from 55.55 MT at the beginning of the fiscal, he pointed out.