All-India Energy Demand Shows Signs of Recovery

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India Ratings and Research (Ind-Ra) has published the June 2020 edition of its credit news digest on India’s power sector. The report highlights the trends in the power sector, with a focus on capacity addition, generation, transmission, merchant power, deficit, regulatory changes and the recent rating actions by Ind-Ra.

In June 2020, the all-India energy demand contracted 10.9% yoy for the fourth consecutive month to 105.6 billion units, while energy supply also decreased 10.9% yoy, resulting in the energy deficit remaining at 0.4% (June 2019: 0.5%). The power demand declined for June 2020, amid the COVID-19 led lockdown, on account of a decline in commercial and industrial demand from major manufacturing states such as Maharashtra (down 17.1%), Gujarat (down 10.2%) and Tamil Nadu (down 10.3%). The energy demand is showing signs of recovery as the decline in power demand narrowed in June 2020 (down 10.9%; May 2020: down 14.9%; April 2020: down 22.3%) due to the gradual lifting of lockdown for certain economic activities and an increase in domestic consumption with the extended summer season. The energy demand also showed a 2.9% mom improvement over May 2020. 

With the contraction in demand, electricity generation (excluding renewables) also declined 11.8% yoy to 99.5 billion units in June 2020 (May 2020: down 17.7%) with thermal generation declining 17.7% yoy (down 21.4%). Thermal PLF declined to 49.5% in June 2020 (May 2020: 47.9%; June 2019: 62.4%) on account of the lower demand. Central, state and private sector PLFs declined to 58.7% in June 2020 (June 2019: 67.7%), 39.5% (60.8%) and 50.8% (59.6%), respectively. Thermal PLFs were the most impacted due to the decline in the power demand over 1QFY21, given the must-run status of nuclear, hydro and renewables.

The short-term power price at Indian Energy Exchange was lower at INR2.35/kWh in June 2020 (June 2019: INR3.32/kWh), as the difference in buy and sell bid volumes widened to negative 5,502 million units (negative 2,725 million units). The increased power demand in the short-term power market was on account of favourable prices on the exchanges for both distribution companies and open access buyers and the gradual lifting of lockdown.

The coal production by Coal India Limited (CIL) decreased 12.8% yoy to 39.2mt in June 2020 for the third consecutive month, owing to lower production at its key subsidiaries – Mahanadi Coalfields Limited (down 7.4% yoy), South Eastern Coalfields Limited (down 21.3% yoy) and Central Coalfields Limited (down 21.9% yoy) led by the lower demand, also resulting in a high coal inventory. The coal inventory at thermal power stations rose 77.3% yoy to 47.2mtpa, due to continued coal production, as coal is an essential service despite the lower demand. Coal availability at pithead and non-pithead plants on 30 June 2020 remained at 18 days and 30 days, respectively. CIL’s coal supply to the power sector declined 21.7% yoy in 1QFY21 to 93.5 million tonnes.

The transmission line addition had been lower over July 2019-June 2020, with 10,645 circuit kilometres (km) added (July 2018-June 2019: 20,536 circuit km). The length of transmission lines added in June 2020 was also lower at 392 circuit km (June 2019: 659 circuit km), with 99.7% of addition coming from the state sector.

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