Source: The Economic Times, Sept 04, 2020
NEW DELHI: Rural demand is driving up India’s electricity consumption, backed by a 3.4% farm sector growth amid 23.9% contraction in GDP in the first quarter of the current fiscal. Primarily agrarian states in the northern and eastern regions are posting healthy growth in power consumption, while heavily industrialised states in the western and southern regions continue to falter due to sluggish recovery in industrial activity.
While farm activity largely remained unaffected by the lockdown, factors such as return of migrants to their native places buoyed rural demand. The humid weather also added its bit to boosting domestic consumption on all-India basis as people still largely remain indoors and work from home, prompting households to run air-conditioners for longer.
Analysis of supply data from the national grid operator by rating agency ICRA shows power consumption hitting nearly 98% of the pre-Covid level in August, up from 97% in July. Demand in northern and eastern states grew between 6% and 13% in July, while those in large industrial states in the western and southern regions fell in the same range on slow recovery in industrial activity and renewed lockdowns.
“A combination of factors is driving rural demand. One is agriculture, which was not much affected by the lockdown and grew 3.4% even while the economy shrank 23.9% in the first quarter. The return of migrants to their native places has added to rural consumption, helped by household electrification and improved supply,” Girishkumar Kadam, ICRA sector head and vice-president, corporate ratings, told TOI.
On all-India basis, the humid weather is also aiding domestic demand. “Families are still largely staying indoors and working from home,” Kadam said, adding that people were running air-conditioners for longer hours.
“But rise in rural or domestic demand is not enough for discoms (distribution companies) to make up for tepid demand from high tariff-paying commercial and industrial (C&I) consumers,” he said.
Other analysts said demand for electricity from industry will rise only after the flow of material and products stabilise once ready stocks at factories and supply depots are gone and there are no local lockdowns.
The decline in demand has adversely impacted revenue and cash flow of discoms, especially when the bulk of the consumption decline has come from high tariff-paying industrial and commercial consumers.
The countrywide lockdown imposed to check the spread of coronavirus knocked off all-India power demand by 13% in the first four months of the current financial year. While the monthly demand recovered to 112 billion units in July, it was lower than the comparable year-ago period.