Signs of recovery: Industrial, commercial power consumers pull up demand

Industrial and commercial consumers of electricity are back in business in a clear sign that the 'Unlock' phases are gradually bringing back economic activity to near normal levels.

The country's power demand, a big indicator of the level of economic activity in the country, fell by a massive 25 per cent in the month of April right at the beginning of the lockdown.

But thereafter, the story has been a big recovery in demand as the fall was arrested close to 9-10 per cent levels in May and June. The demand slump narrowed to 2.6 per cent in July and closed to normal levels and just 1.94 per cent (power consumption) in August with experts predicting near normal to actual growth in demand in September.

"The slump in demand during lockdown was largely on account of freeze in economic activity immediately post announcement of the lockdown. This resulted in sharp drop in electricity consumption by commercial and industrial consumers. The recovery is also on the back of these customers that are actually responsible for kicking up economic activity in the country," said a power sector expert, asking not to be named.

What has been encouraging for the sector is that recovery is primarily on account of commercial and industrial consumers that constitute the bulk of earnings for the financially stressed discoms that have added over Rs 15,000 crore in losses during the lockdown.

Chief Economic Advisor Krishnamurthy Subramanian has also highlighted a pick up in power consumption as an important indicator of a pick up in economic activity. Reacting to the sharp contraction in GDP numbers for April-June quarter he said that the worst is over and India is on course for a V-shaped recovery.

The slump in power consumption to below 2 per cent level in August translated into consumption of about 110 billion units (BU) of electricity as against 112 BU in August last year.

Going backwards, India consumed about 112 BU of power in in July against 116 BU in the previous year, and 105.08 BU in June as compared to 117.98 BU in the same month last year. Power consumption in the country was down by 14.86 per cent in May and 23.21 per cent April this year.

Data from POSOCO, the National Load Despatch Centre (NLDC), shows that after the lockdown was lifted, the average daily power demand stood at 3,595 million units (MU) for the period between June 1, 2020, and August 27, 2020. During the 69-day lockdown period between March 24, 2020, to May 31, 2020, demand averaged 3,037 MU.

Before the lockdown, the average daily power demand in the country stood at 3,416 MW in the period between March 1 and March 23, according to POSOCO's data.

The Central Energy Authority's (CEA) latest Load Generation Balance Report also showed that India would have an energy surplus of 2.7 per cent and a peak surplus of 9.1 per cent for the year 2020-21. According to renewable energy consulting and communication firm Mercom, power demand would meet its trajectory as lockdown restrictions ease, and the economy starts to recover as also highlighted by CEA.