Industrial output contracted by 4.3 per cent for a second straight month in September, nosediving to an eight-year low. Mining activities and electricity generation contracted in September, with the manufacturing sector, which accounts for 78 per cent of the index.
On an average, industrial sector contributes 35 per cent to the overall demand, 20 per cent comes from the residential, another 17 per cent from agriculture and the remaining from other segments.
In terms of energy demand, which signifies actual consumption, Gujarat saw 1.12 per cent fall while for Maharashtra, it was down by 2.63 per cent during the April-September period over the corresponding period last year. All India energy consumption growth was at 4.4 per cent, with all states, expect Uttar Pradesh, registering single-digit growth.
“There is a combination of factors at play. Demand growth for states with higher industrial demand has been on a decline. This is a sign that impact of the industrial slowdown seen in the past six-seven months is showing up on power,” said Sharad Mahendra, chief operating officer for JSW Energy.
Also, heavy rains impacted demand. “Rural electrification, on the other hand, has helped demand grow in states such as Uttar Pradesh, Bihar, and Chhattisgarh. At 165 Gw, I expect the month-on-month decline to stop as fundamentals continue to be strong for the country,” he added.
This setback comes just in months of India declaring all villages and households (99.9 per cent) electrified. But this has increased the expenditure of the discoms along with the rising cost of power.
The Centre’s efforts to turn around the finances and operations of state-owned discoms have faltered.
Ujwal Discoms Assurance Yojana (UDAY), launched in 2015, will conclude with the end of this fiscal, but could leave the discoms in the red and finances of states in trouble, Business Standard has reported. The cumulative loss of discoms (21 states) stands at Rs 28,369 crore by end-FY19, up by 88 per cent over a year ago.
“Due to higher receivables, there has been load-shedding in Maharashtra and Uttar Pradesh, adding to lower demand.
I expect this to be a temporary phenomenon and power demand should grow at 4 per cent for the remaining of the year,” said Rupesh Sankhe, vice-president , Elara Capital.
At the same time, rising share of renewable energy is hurting the operating ratio of thermal units even more, while its contribution remains minimal to the grid. All India plant load factor (PLF) or operating ratio of thermal units stood at 51.05 per cent in September, down from 59.8 per cent last year.
NTPC, country’s largest power generator, saw its PLF slump to 64.3 per cent in Q2FY20, from 72.6 per cent in the same period a year ago. Low PLF indicates low off-take of power from its buyers, hurting its top line. Sankhe said: “Higher hydro generation has also lowered PLF for thermal power plants.”