Economy

IIP data: Electricity production in August dips

Twesh Mishra New Delhi | Updated on October 12, 2019 Published on October 12, 2019

There has been a significant reduction in energy requirement met of up to 10 per cent seen in Nagaland, Gujarat and Rajasthan. Representative image   -  Bloomberg

States refuse to meet power demand

Electricity production fell for the first time under new Index of Industrial Production (IIP (with base year 2011-2012) despite the government adding record number of new domestic connections. The 0.9 per cent fall in power generation during August 2019 as compared to August 2018 could be because State governments opted out from meeting the higher demand for power from domestic homes.

“As we dig deeper into the numbers, we understand that peak demand increased by 3.48 per cent but the energy met decreased by 0.41 per cent over August 2018 (during August 2019). There has been a significant reduction in energy requirement met of up to 10 per cent seen in Nagaland, Gujarat and Rajasthan. In the states of Punjab, Maharashtra, Karnataka, Odisha, and Arunachal Pradesh, requirement met was lower by 5-7 per cent,” Sambitosh Mohapatra, Partner at PwC India - Power and Utilities told BusinessLine.

A reduction in requirement met means that there was a shortfall in power supplied despite demand rising.

“Wind power generation has seen a fall up to 20 per cent in August 2019 compared with August 2018. Factors that have driven this fall in electricity production can be industrial slowdown in industrial states while financial constraints could have hampered procurement in some other states,” Mohapatra said.

Power distribution companies in states have been facing tougher times as they are being mandating to either make prepayments for power purchases or to provision letters of credit, to prevent payment defaults.

Under the Centre’s Pradhan Mantri Sahaj Bijli Har Ghar Yojana — Saubhagya scheme, around 2.63 crore new domestic electricity connections have been provisioned from October 10, 2017 across the country. These connections were given in addition to the 18.81 crore homes that already had electricity connections.

In addition to a possible curtailment of power, analysts are not ruling out the hit due to an industrial contraction. According to data shared by the Ministry of Statistics and Programme Implementation, August 2019 was the first time that electricity production has contracted year-on-year under the IIP 2011-12 series. (covering time period from April 2012 onwards).

In terms of industries, fifteen out of the twenty-three industry groups in the manufacturing sector have shown negative growth during the month of August 2019 as compared to the corresponding month of the previous year.

But this is not the first time that index that monitors electricity production has registered a decline. Under the IIP series with 2004-2005 as the base year (covering April 2005 to March 2017), there was a year-on-year decline of 3.17 per cent in February 2013 and a dip of 0.5 per cent in April 2015.

Under the IIP series with 1993-94 as the base year (covering April 1994 to June 2011) too there have been multiple declines. On the whole, this is very rare phenomenon because power generation flat lines but seldom dips despite other parameters under IIP falling.

Published on October 12, 2019
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