Power demand traces slowdown

Falls by 600 Mw in the April-January period this fiscal

Demand for power has fallen by 600 Mw in the April-January period this fiscal, compared with the same period of 2007-08 when it had increased by 4,500 Mw, according to the latest data available with the Central Electricity Authority (CEA).

While demand for power went up from 102,428 Mw in April 2007 to 107,010 Mw in January 2008, it actually declined from 106,943 Mw to 106,336 Mw in the same period in the current fiscal as industrial activity slowed down due to the global financial meltdown.

Factories account for around 30 per cent of the total power consumed in the country.

The latest figures of the Index of Industrial Production (IIP), where power carries a weight of about 10.17 per cent, also point to this slowdown in demand. The power sector has grown at a rate of 2.9 per cent between April and November last year, compared with 7 per cent in the same period a year ago.
 

POWER GAP Year-on-year comparison of power demand and deficit
	Demand (in Mw)	Deficit   (in %)
2007-2008
April 2007	1,02,428	14.5
January 2008	1,07,010	17.1
2008-2009
April 2008	1,06,943	16.7
January 2009	1,06,336	12.3
Source: CEA

Power is one of the six major sectors contributing to the country’s infrastructure in addition to cement, steel, coal, crude oil and petroleum products. The growth of these sectors account for more than a quarter in the IIP.

This falling demand has led to an improvement on the power deficit front. Peak power deficit fell to 12.3 per cent in January this year from 16.7 per cent in April 2008. In January 2008, the peak power deficit was 17.1 per cent, data compiled by the CEA showed.

“Price of electricity can narrow down a little if the reduced deficits in supply continue. There is a strong correlation between GDP growth and power demand,” said Arvind Mahajan, executive director, KPMG Advisory Services. Every 1 per cent increase in GDP results in an about 0.9 per cent increase in the demand for power, according to experts.

At the beginning of this financial year, economists had estimated the current year GDP to grow at over 8 per cent. With the financial crisis hitting growth, the projection has come down to 7 per cent.

Mahajan, however, also added that the decreased power demand is unlikely to impact power sector in the long term. “Though there might be some slowdown in capacity expansion, it will not affect the prospects of the industry. Eventually the demand will go up as more and more capacity is added. In some states, demand still outstrips supply,” he said.

The power ministry has estimated that for maintaining an 8 per cent GDP growth rate, the electricity demand will have to increase to 859 billion units by the end of the current Plan period (2007-2012). A 7 per cent GDP growth rate will still require about 820 billion units of electricity. India’s current power demand stands at about 730 billion units, against which it is able to generate only about 666 billion units of power annually.

If its economy grows at 7 per cent, India will need to add around 52,000 Mw of power generation capacity by 2012. The country plans to add 78,000 Mw capacity in the current Plan period. This capacity addition target is planned for a GDP growth of over 8 per cent. So far, about 15 per cent of this target has been achieved.