Covid impact: India enters FY22 with power demand at mid-2019 level

Peak power demand in India in FY21 was 1.31 per cent lower than in the previous financial year even though the country has come out of the shadows of the Covid-induced slowdown. This indicates robust growth is missing with demand towards the end of the financial year rebounding to just mid-2019 levels.

Monthly demand has, however, shown a considerable improvement over peak lockdown months, mostly on the back of thermal power. Peak power demand in March 2021 stood at 170.6 Gw, up from 157 Gw in March 2020 and 163 Gw in March 2019. This is, however, similar to the demand during April-September 2019.

The data was accessed from daily and monthly demand reports of the National Load Despatch Centre.

“The all-India electricity demand has shown positive growth on a YoY basis since September 2020 with the easing of lockdown restrictions and supported by a favourable base effect because of heavy rain in the corresponding period of the previous year, leading to lower demand from household and agriculture segments,” said ICRA Research in its latest commentary on the power sector.

Peak energy demand, which is reflective of per capita consumption, showed flat growth. It grew 3.8 per cent YoY and demand in March was 23 per cent higher than last year, said a note by DAM Capital.

“Flat electricity demand was a good outcome for the sector. Given that the generators have to be paid under the long-term agreement, flattish demand would have reduced the burden on the power distribution companies (discoms) significantly. We expect discoms financials to improve on rising demand barring the skewness of mix,” DAM Capital said.

Thermal power is a beneficiary of demand recovery. The all India plant load factor (PLF), or the operating ratio of the thermal units, stood at 63.27 per cent in February this year as against 60.27 per cent in February last year.

NTPC, India’s largest thermal power generator, posted 8.2 per cent growth in generation in FY21. The company said the year saw the highest ever group-level generation.

While renewable energy generation has grown at a healthy rate of 6.6 per cent between April and January, its contribution remains limited to 17 per cent of the overall electricity supply (during February 2021). The country’s power demand fell to a historic low in April 2020, when it was down by 24 per cent over the year before. Nationwide lockdown was imposed on March 25, 2020, to contain the spread of the pandemic. While the lockdown was eased by May, commercial centres, manufacturing units and offices were either closed or operating at lower capacity. The streak of falling demand continued till August 2020.

Industrial and commercial consumers are usually the highest power demand drivers, followed by the agricultural and residential sectors. Manufacturing units are limping back and several office complexes are now open with full or partial capacity.

However, ICRA Ratings pointed out in its latest sectoral commentary that it is not industry which is fuelling power demand. “Demand rec­overy has been led by states with high rural consumption, while the states with high industrial consumption are showing a slow recovery,” said ICRA in its rating for the power sector.

Maharashtra, one of the leading industrial states, is facing one of the strongest second waves of Covid-19 and several cities have been asked to impose partial lockdown with restrictions on public gatherings and night curfews. India is the sixth among the countries with the highest number of active cases. CARE Ratings, in its note on the power sector, said this could impact the improvement made in power generation and consumption.

“The resurgence of Covid-19 infections and the possibility of fresh restrictions pose a risk to the sustainability in economic revival and thereby power demand.”