Power Demand Dropped 24% in April Due to Lockdown: CRISIL

With almost no economic activity taking place in the first 20 days of April due to lockdown, power demand declined sharply by 24 percent in the month

With almost no economic activity taking place in the first 20 days of April due to lockdown, and very little operations after that, power demand declined sharply by 24 percent in the month, Crisil Research said. The 21-day lockdown to fight the spread of coronavirus, which was supposed to end on April 14, was extended till May 3 and later till May 17. The government relaxed the lockdown in certain non-hotspot zones from April 20, but that did not help in boosting the demand.

According to the rating agency, states with the highest industrial activities, especially in the manufacturing sector, including Uttarakhand, Gujarat, Haryana, and Tamil Nadu, witnessed a 30-50 percent decline in demand in April.

“Electricity demand shrank nearly a quarter in April 2020 as commercial and industrial activity switched off majorly following the nationwide lockdown. The decline in demand by 30-50 percent in these four states is like experiencing a total blackout every alternate or third day,” Crisil said.

Maharashtra, which has reported the highest number of COVID-19 cases in the country, witnessed a 20 percent decline in demand. “The impact is lesser in Maharashtra largely because the state enjoys a substantial domestic and agro base, which is helping compensate the fall a bit,” Crisil Research Director Hetal Gandhi said.

The agency noted that there was some offset in the demand because about 1.4 billion people stayed at home, of which millions also worked from home, leading to a surge in domestic electricity consumption through more recharging of devices, streaming videos, online content consumption, and usage of electrical appliances.

”That cushioned the slack-demand blow for Andhra Pradesh, Bihar, Odisha and Haryana in particular, which have a substantial domestic-consumer base,” the agency said.

Crisil further noted that lower demand from industrial users, who pay the highest tariffs and cross-subsidise domestic and agricultural users, would hit the revenues of Discoms.

“Industrial users comprise a 41 percent share in overall power demand, with a pan-India average of around Rs 7.5 per unit in terms of revenue for the utilities. With a sharp fall in demand from this consumer base, revenue generation for state distribution utilities is expected to be significantly lower this fiscal, as manufacturing activity comes back online only gradually,” Gandhi said.

The domestic category has a 25 percent share in pan-India energy consumption, but on average generates only Rs 4.3 per unit for utilities. “Hence, the uptick from domestic consumers may cushion the fall slightly, but both demand and revenue are expected to be hit significantly this fiscal for the distribution segment due to lower industrial power demand. Sector recovery will be a function of how quickly economic activity replugs, reboots and resurges,” Gandhi added.