Power: fluctuating with economy
P Raghavan
Posted online: Jan 27, 2009 at 2252 hrs
The slowdown in the economy has a twin impact on the power sector, on demand and supply. The deceleration in output has affected demand for electricity from consumers across sectors, especially in the manufacturing sector, which consumes more than a third of the power generated. But unlike manufacturing, where there are no real supply constraints except in a few sectors where the credit availability has been hit, the economic slowdown has reduced supply of electricity by restraining the growth in generation far below projections.
Numbers for the first three quarters of the year, up to December 2008, show that actual energy demand for power from the economy has fallen short by 2.1% with consumption going down to 5,79,081 million units against the projected level of 5,91,507 MU. The fall in demand has been particularly severe in the most recent three months when the gap between projection and actual consumption rose from 1,596 MU in October to 2,346 MU in November and further to 4,742 MU in December. This has widened the gap between actual demand and electricity consumption projections from 2.3% in October to a high of 6.9% in December. The fall in consumption is worrisome, as the annual demand projections of the Central Electricity Authority are fairly accurate as indicated by the figures in the previous year.
The variation in the demand trends for electricity in different regions is particularly interesting. Numbers for April-December show that the fall in demand for electricity has been the highest in the northern region, where consumption has fallen short of estimated demand by 4.9%. The other regions where electricity demand fell far short of anticipated demand were the eastern region (3.5%), the western region (2.9%), and the North-east (1.1%). Given the elasticity of demand for electricity, one can safely assume that actual production in these regions has taken on much greater proportions. Only in the south did the demand for electricity exceed the projections by 2.9%.
However, the monthly trends in power generation show a somewhat different picture. Here, the worst affected region was the Northeast where the gap between actual and estimated demand has almost trebled from 5.8% in November to 15.8% in December. Similar was the case in the western region, which has the largest manufacturing sector base in the country, where the gap between actual and anticipated demand for electricity more than doubled from 4.2% to 10.9% during the period. The eastern and northern states also show a fall in demand to below projections by 5% and 6% in November and December, respectively. The gap was the least in the southern region where the actual consumption of power had fallen short by just 2.7% in December.
But what is really surprising is that the slowdown has affected the generation of power more than the demand. Overall, the numbers for the country as a whole show that the 6% supply shortfall below the anticipated levels in April-December 2008 was three times higher than the shortfall in demand. This was in sharp contrast to the trends in the previous fiscal year when actual supply exceeded forecast. The regions with the highest shortfall in power generation included the North-east (22.3%), east (19.3%), north (11.2%) and the west (1.8%). Only the south seems to have fared better, with generation exceeding anticipated levels by a marginal 1.9%.
However, there is no reason to be unduly pessimistic on this count since the most recent trends show that that the gap between actual supply and estimates seem to be closing in during the more recent months. At the all-India level, the gap between actual generation of power and anticipated estimates touched double-digit levels in August and September. However, it has come down to a more acceptable 6% in the most recent months.
Numbers for the regions show that the highest gap between anticipated supply and actual supply reached their highest levels in the north and the Northeast when the gap widened to 23% and 31% in August 2008. However, the breach seems to have been contained with the gap narrowing down to 7.4% and 3.6%, respectively in November and December 2008.
One region where the generation of power continues to be seriously affected is the eastern sector. Here the gap between anticipated and actual supply of power has shot up from around 16% in August 2008 to almost a quarter by the end of the calendar year. The only exception to this dismal scenario was the south, where the generation of electricity has exceeded the CEA projections in each of the last three months.
The fall in demand for power in recent months and the pick-up in supply during the period have had a positive impact on the demand-supply gap. Numbers for the fiscal year show that for India as a whole the power deficit, which was at 12.5% in July 2008, has been contained at a lower level, to 11.3%, in December.
The overall impact of this gain in bringing down the power deficit at the all-India level is likely to be muted by the substantial gap in supply and demand in the western region. Numbers show that the power deficit in the west continues to go up, with the gap rising from 14.3% in August to 17.4% in December. The deficit levels in the north and the North-east regions also continue to be high at double-digit levels. Even in the eastern region, where the deficit is only half these levels, the trends have been negative with the shortfall going up marginally in recent months. As in the case of the demand and supply, only the southern region has fared better with the power deficit falling sharply from a high of 10.9% in July to 5.8% in December.
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