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Ray of light! Power demand shows signs of revival in economy

Power generators find it difficult to service loans when PLFs run below 60%.

After recording continuous fall in electricity requirement for four and a half months, power demand in the country seems to be gathering steam in the second half of December. As per daily reports on power supply reviewed by FE, electricity demand has been more than in the corresponding days in FY19 since December 16 (see chart). Power demand growth turning positive can be seen as a green shoot for the economy, reviving slowly after a period of lull.

Electricity demand gathering pace should help coal-based power plants, where utilisation levels remained muted in November with average plant load factor (PLF) being only at 51.4%, against 60.5% in the corresponding month last year. Falling electricity use had pushed PLFs to an all-time low of 48.9% in October. Power generators find it difficult to service loans when PLFs run below 60%. As per available data, the lowest annual average thermal PLF was recorded at 52.4% in FY86.

As first reported by FE, electricity consumption in the country recorded a steep 12.5% decline in October. While the government had never cited industrial slowdown as one of the causes of falling power demand, electricity consumption has been falling in Maharashtra, Tamil Nadu and Odisha, where industrial and commercial users usually account for around 40% of electricity usage.

The country’s GDP continued to slide further in the July-September quarter to report an overall expansion rate of just 4.5% — the lowest quarterly growth for the country since Q4FY13, or a 26-quarter low.

Though generation has been falling since August, it is not immediately known if this has led to higher duration of power cuts across India, as the government’s Urja portal, which publicises this data, has not been updated since July. It is difficult to identify the exact areas where power demand is falling because sector-wise consumption data is not available on monthly basis, while central government agencies grapple with the poor quality data they receive from the states.

Source: Financial Express