Making sense of energy data

After the country reached the milestone of providing power to all rural households, the legitimate expectation would have been an increase in power consumption and a demand surge by those who got limited power load through subsidised connections. But two figures released last week suggest that energy consumption in India is not rising, indicating slowdown has hit the core of economic activity in the country.

According to National Power Portal data for October 2019, power generation in the country in October fell to 98,886.73 giga watt per hour from 113,507.43 gwh in the same month last year. That translated into a 12.8 per cent fall while cumulatively for the seven months starting April 2019, power generation showed a 1.2 per cent increase.

Another set of data giving diesel demand figures shows that in October, diesel consumption was down 7 per cent. According to Petroleum Policy & Analysis Cell, 12 categories of petroleum products recorded consumption of 17.4 million tonne during the month which was down from last year’s 17.6 million tonne.

Clearly, the demand for energy has slowed down as also power supply by state distribution companies despite them taking on 26.5 million additional customers through the rural household electrification programme or Saubhagaya. This can be explained through a simple data point given out by the government’s Energy Statistics 2019 publication which says the industrial sector accounted for about 56 per cent of the total energy consumption in 2017-18. Though this figure came down by two percentage points from the previous year, it is expected that it will come down further this year even though the share of households will increase. With such a big share of industrial consumption, it is unimaginable that overall energy consumption will go up since manufacturing in the country is on a downturn.

Union power minister RK Singh, however, has vociferously countered this theory by denying that power generation numbers reflect a slowdown in the economy. In a strongly-worded Twitter post on Wednesday, Singh said, “Statement that the lower demand in October was indicative of slowdown in the economy is nonsensical.”

To support his argument he said with good rains, hydropower generation showed an unprecedented increase. The April-October 2019 period saw the highest growth in hydroelectricity generation in five years at 16 per cent, he said. Besides, power generation has shifted to renewable sources. “The lower PLF in thermal power plants is the result of our changing generation mix, consciously done to lower our carbon footprint.” What Singh did not acknowledge was that the overall power generation in terms of generated units is down which means that the fall in thermal power generation has not been entirely made up by the growth in renewable power (including hydropower) generation.

Besides, in September also, the total power generation fell by 3.7 per cent. Though analysts blamed lower coal output for this, renewable energy sources also saw a fall of 7.13 per cent, indicating an overall downturn in demand. 

Singh also argued that the monsoon season continued till October leading to switching off of air-conditioning units in many institutions. It is worth noting that the mere use or non-use of air-conditioners does not alter energy consumption in a big way.

Another argument which is being put forth is that the dip in energy demand is due to improvement in efficiency. According to government data, the energy intensity at 2011-12 prices decreased from 0.274 mega Joules a rupee in 2011-12 to 0.233 mega Joules in 2017-18.

Energy intensity has decreased over thelast decade. This decline is attributed to faster growth of GDP than energy demand, especially because the services sector has a growing share of the economy. The use of energy efficiency programmes has also contributed, stated the government’s Energy Statistics document 2019.

With more efficient electrical and lighting appliances power consumption was bound to come down. For diesel, it is argued that the government had allowed higher load carriage by trucks which increased the utilisation levels. The permissible gross vehicle weight (GVW) of 16-plus tonne trucks was, however, increased by about 12-25 per cent in July 2018, which meant the impact was already captured in last year’s figures and the October 2019 figure does not necessarily reflect the change.

While lower energy demand is reflective of lower industrial demand, it also brings down the crucial numbers of the core sector and that of industrial production. The government can take refuge in the fact that till now the year’s cumulative figures are not showing a fall. It is, nonetheless, important to note that the economy is slowing down and despite an optimistic Reserve Bank of India forecast of GDP growth at 6.1 per cent for this year compared to 6.8 per cent last year, production cuts in the manufacturing sector is bound to reflect on energy consumption numbers.