Increased demand, easier fuel access push power sector growth

Increased demand for power and easier availability of fuel pushed the electricity sector’s growth to 6 per cent in April this year, compared with just 1.4 per cent in the same month last year, according to the latest Index of Industrial production (IIP) figures released on Tuesday.

The sector carries a weight of 10 per cent in the index, which rose 4.3 per cent for the month, the most since January 2008.

The demand for power in April, the first month of the current financial year, was 4,000 Mw higher than the demand of 106,900 Mw power in the same month last year. “This is certainly a sign of recovery in the economy, although most of it happened in the last quarter,” said an analyst.

The higher demand for power was aided by an improved fuel availability at thermal power stations in April this year.

“Thermal power generation had good growth of 8.5 per cent in April due to better flow of imported coal at power stations. This has been a major contribution to the sector’s growth,” said a senior official from the Central Electricity Authority (CEA), the country’s apex power planning body.

There was a 10 per cent rise in the coal-based power generated in April — 43,000 Million units (MUs) — compared with the same month last year. Coal sector too, which has a weight of 3.2 per cent in the IIP, registered a 13 per cent growth in April, compared to a 10.4 per cent growth in the same month last year.

Overall, the thermal power generation target for April of 53,000 MUs was over-achieved by at least 500 MUs of electricity. Thermal power accounted for around 86 per cent of the 62,350 MUs of power generated in the month.

Another reason for the increased growth of electricity sector in April was the fresh availability of gas for running gas-starved power plants from the RIL’s KG-D6 block in the Krishna Godavari basin off the west coast of India.

“Additional gas has started coming from KG basin from April. Also, the international spot price of Liquefied Natural gas (LNG) has come down to $4.2 per mmbtu from over $20 per mmbtu earlier. This has started showing effect now,” the CEA official said.

According to experts, the improved power generation and the resulting growth in electricity sector was also pushed by a better hydro generation as a harsh summer in April this year maintained enough water availability at hydro power stations.

“This time power supply has gone up from hydro power plants due to surplus water flow in summer,” said a senior analyst from an accounting and consultancy firm.

For hydro power generation, India depends primarily on the glacial-fed rivers for water. These rivers have given a better output this summer because of higher melting of glaciers.

Hydro power accounted for around 12 per cent — 7,264 MUs — of the overall power generated in April.