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Industrial demand for electricity has been low, yet power output has seen steady growth in the six months ended February because of a rise in household requirements.
Electricity generation in the Index of Industrial Production (IIP) grew over six per cent a month, barring October, in September-February 2013-14. It saw double-digit growth in September (12.89 per cent) and February (11.5 per cent). Industrial growth, on the contrary, declined 1.9 per cent in February and rose 2.69 per cent in September.
Manufacturing, the biggest sector in industry, registered a rise of 1.43 per cent in September and contracted 3.7 per cent in February. Mining output expanded 3.59 per cent in September and 1.4 per cent in February.
These numbers, experts said, confirmed growth in the electricity sector was not driven by industrial demand.
"Growth in electricity sector is mainly driven by household consumption," said Dharmakirti Joshi, chief economist, CRISIL, "as demand from industrial sector is very weak; industrial output did not grow at all in 2013-14. A lot of new capacity has been added but remains underutilised due to weak demand and fuel supply bottlenecks."
Industrial production contracted 0.1 per cent in April-February 2013-14, against an expansion of 0.9 per cent in the corresponding period of the previous financial year. "No doubt, incremental demand is coming from households and residential space, as there is no growth in the industrial sector," said Arun Singh, chief economist with Dun and Bradstreet.
CRISIL's Joshi said power shortages had reduced and if industrial demand remained weak, India might end up with surplus power. Moreover, dependence on captive units was reducing while that on utilities was rising.
In the XII Five-Year Plan (2012-13 to 2016-17), industrial demand for power will expand at a muted 5.9 per cent, while household demand growth will be robust at 10 per cent owing to high latent demand, according to a CRISIL study. This will happen despite projected improvement in the financial health of the power distributing companies and higher generation capacity, absence of which restricted growth in the past, it said.
Electricity generation rose though power capacities remained underutilised. This could be gauged from the fact that the overall plant load factor, or average utilisation, of coal-based units was expected to be 70-73 per cent in the XII Plan, against 77-79 per cent in 2008-2010, due to slower growth in industrial demand.
Singh of Dun and Bradstreet said power capacities were likely to go up with a thrust in the creation of power infrastructure. Growth in electricity generation would sustain at 7-8 per cent a month. It might not rise to double digits on a sustained basis due to high volatility across other sectors in the IIP, he added.
Recently, the Cabinet Committee on Investments had cleared a substantial number of projects in the power sector. In 10 months, 81 power projects worth Rs 3.2 lakh crore were cleared and these also saw investments on the ground, according to data from the central secretariat's project monitoring group.
