Lower industrial consumption arrests power demand revival in July

Muted industrial power demand growth can be symptomatic of the economic slump prevailing much before the onset of the coronavirus disruptions.

Power demand in states like Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu — where industrial and commercial consumers comprise more than 40% of electricity users — was lower by 14%, 9%, 11% and 15%, respectively in July, year-on-year. Electricity consumption figures in these states were even lower than June levels, signaling that the re-imposition of lockdown curbs in key industrial areas might have put the brakes on an incipient revival process in many industries, including the manufacturing sector.

Overall power consumption rose marginally in July from previous month, thanks to the lockdown relaxations and increased household consumption due to summer heat. The 113.5 billion units (BUs) of electricity supplied in the month was only 2.6% lower year-on-year (y-o-y), but 8% higher than June. Power demand in the month would have been higher had lower industrial usage not offset the increased agricultural consumption in the sowing season and higher residential requirement with the advent of summer.

States such as Rajasthan, Madhya Pradesh and Telangana— where agricultural power consumption is higher than industrial usage — recorded annual increases of 9%, 12% and 8%, respectively.

Muted industrial power demand growth can be symptomatic of the economic slump prevailing much before the onset of the coronavirus disruptions. Lower electricity volumes consumed by highly industrialised states like Gujarat, Maharashtra and Tamil Nadu in FY20 had dragged down the country’s annual demand growth to a six-year low of 1.3%.

Since most of the revenues of state-run power distribution companies come from industrial and commercial customers, lower usage by these categories means additional pressure on these already-distressed entities. Industrial and commercial consumers use about 40% of the total electricity supplied, but contribute about 50% of the discoms’ revenue share.

Electricity generated by the 70 power stations owned by the NTPC group rose by 13.3% from the preceding month to 26.7 BUs in July. NTPC coal stations registered a growth of 5.6% y-o-y with generation of 21.9 BU.