Power Sector Update 1595419253
Power Sector Update 1595419253
Power Sector Update 1595419253
Power Sector 1
Impact of COVID-19 on
“Energy consumption matter bot h t o our India’s Power Sector
environment and our economy.”
John Baldacci
2
India is the third largest Union Budget 2020-21 allocated News and
producer and third largest Rs 15,875 crore (US$ 2.27 billion) to Announcements
consumer of electricity in Ministry of Power and Rs 5,500
the world with installed
3
crore (US$ 786.95 million) towards
power capacity reaching the Deen Dayal Upadhyay Gram
370.49 GW Jyoti Yojana
Key Players updates
India achieved 100 per
cent household Government plans to establish
electrification by March
4
renewable energy capacity of
31, 2019, as envisaged 500 GW by 2030
under the Saubhagya
scheme
Looking Forward
Impact of COVID-19
The power generation and supply for a particular The econ omic impact of the lockdown was not
day are planned based on the forecast for equal across states, districts, and cities. Some of the
demand; thus, there is no large-scale storage of heterogeneity in decline in electricity consu mption is
power. India witnessed a stron g impact of the related to the econ omic stru cture of the States and
national lockdown on India's electricity prev ious migration patterns. A more significant
consumption. It dropped on an av erage of 28.5 per number of CO VID-19 infection s resu lted in a more
cent in the week after its implementation and was considerable decline in night-time light intensity in
an av erage 25.8 per cent below normal for sev eral districts, but not in the State.
following weeks. It started recov ering in early May
and was nearly back to normal between May 23 A key concern troublin g the Indian power sector has
and May 28, before d ropping again at the end of been the poor financial health of its Discoms, which
the month to -14.7 per cent on May 31. In the first 15 are managing high lev els of debt. They hav e been
days of June, a fall of 14.3 per cent was recorded, running considerable losses owing to underpricing of
while in the second half of June, electricity electricity tariff for some consu mer segments. Other
generation declined by 5.3%. This recov ery in power forms of technical and commercial losses as the loss
demand in the second half of Jun e was primarily led of rev enues due to decline in demand from
by higher con sumption by industrial regions such as commercial and industrial customers and the
Western states of Maharashtra and Gujarat, and inability to cov er the cross- subsidies prov ided to the
Delhi in the North. lower-tariff paying con sumer puts additional
pressure on the Discoms. Outstanding dues of
When it comes to the consu mption pattern by Discoms towards power generation companies
consumers of different categories, in 2018-19, 41% of hav e been increasing, indicating fu rther financial
total electricity consumption was for industrial stress in some Discoms. This could lead to reduced
purposes, while 25% and 18% was for domestic and av ailability of workin g capital for these entities, and
agricultural purposes, respectiv ely. As the lockdown an increase in the risk of NP As in the sector had the
rigorously reduced the industrial and commercial Central gov ernment not interv ened at the right
activ ities in the country, these segments witnessed a juncture. Amendments to the Electricity Act 2003
considerable decline in demand for electricity. aim to bring in bold reforms that are needed to
change the status quo. This would entail clarifying
Electricity consu mption and economic activ ity are that if subsidies are to be giv en directly to end-
closely related since most economic activ ity needs consumers, they should pay 'full cost' for electricity,
electricity. Accordin g to the World Bank, in 2019, ensuring that social welfare objectiv es are more
ev ery per cent additional economic activ ity in India direct and explicit.
led to a 0.95 per cent increase in electricity
consumption. Year-on-year quarterly growth in the Currently, the distribution companies (DISCOMs) and
first quarter of 2020 was 3.4 per cent lower than it generating companies (GENCOs) are riding on pan-
would have otherwise been. For the second quarter India rev enue losses INR30,000 crore and INR25,000
of 2020, it suggests that the n egativ e growth effect crore, respectiv ely.
until the end of May has already been 17.0 per cent.
For the full calendar year, this a mounts to economic
costs of 5.1 per cent of G VA so far, or around US$
150 billion. The actual growth in the second quarter Nilaya Varma
of 2020 will, of course, depend on whether the Co-Founder & CEO
economy will continue to be held back by the
COVID-19 pandemic, whether it will rev ert to Primus Partners
prev ious lev els, or whether it will ov ershoot to
compen sate for forgone activ ity during the
lockdown. The stren gth of the rebound can also be
well tracked by our measu re based on daily
electricity consumption.
Source:
1. Robert C. M. Beyer Sebastian Franco-Bedoya, Vir gilio Galdo, ‘Examining t he
Economic Impact
of COVID-19 in India t hrough Daily Electricit y Consumption and Nighttime Light
Int ensity’, World Bank Group, J une 2020
Issue| July 2020
Looking Forward
The 2019-20 electricity generation target of information on cash flows, obligations,
conv entional sources was determined as 1330 deferments, etc. across the chain to fully
Billion Unit (BU), a growth of ~6.46% ov er actual acknowledge the objectiv es of the measure and
conv entional generation of 1249.337 BU for the expect definite outcomes. Moreov er, just like
prev ious year. Ev en before the pandemic crisis amendments in the Electricity Act of 2003 that
Discoms in India hav e been facing tremendous introduced the con cept of open access in India,
challenges including, politicization of and poor there is a need for a National Policy encouragin g
tariff setting, failures to hav e regular con sumer rooftop installations and establishing the right of
tariff rev isions (simply to ev en match inflation, consumers to u se rooftops for self-consu med
forget risin g costs, especially of procurement of solar power. These measures will ensure stable
power), continued AT &C losses, failure to get and uniform policies in the sector, which will driv e
paid by the gov ernment (as a consu mer or for private sector inv estments in the ren ewable
promised subsidies) etc. Discoms face energy sector.
disproportional risks compared to generators and
Supporting private players in the power sector
especially transmission companies, who get paid
will offer multiple financin g solutions, in cluding
first (and make hefty returns).
working capital facilities to support temporary
Gov ernment schemes, policies and inv estments liquidity needs, refinancing existing debt to
should now align with long term targets of enhance resiliency, and long-term financing to
sustainability, cleaner power, and quality supply. support project dev elopment and construction
Post-COVID-19, states will also need to relax their in an env ironment where financing is not as
deficit spending caps under the Fiscal easily av ailable.
Responsibility and Budget Management (FRBM)
Act.
More detailed information about the INR90,000
crore package is awaited, along with
S ources:
1. Power Minist ry
2. CEA
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