Covid-19 Impact: Electricity demand has dipped by 25% since mid March

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The daily electricity demand in India has fallen by 25% since mid March 2020 when most parts of the country imposed restriction and shutdowns to check Covid-19 pandemic, impacting revenues of generators and distributors alike—according to a report by Care Ratings.

The analyst said electricity consumption in the country fell to 2,628 million units on March 28 from 3,494 million units on March 16. The drop in consumption has been notably higher (around 30%) in the northern and western regions of the country. The southern regions reported a decline of 19%.

Further, due to lockdown, Discoms are unable to collect payments from consumers and they, in turn, are not paying generators.

“Given that usually most of the payments for past supply are made towards the end of the financial year (March), the delays would have significant financial implications. Although since August 2019, states have been making monthly payments to generators after the power ministry made it mandatory for Discoms to maintain Letter of Credit as payment security for power purchases, there exists sizeable past dues that are to be cleared”—said analysts in the report.

The year ahead

Disruptions caused by the Coronavirus pandemic—likely to be prolonged—will significantly impact India’s power sector in 2020-21, according to Care Ratings analysts.

Power generation would see a commensurate decline as electricity demand contracts during the year, largely driven by slippages in demand from commercial and industrial sector—which accounts for nearly 50% of the country’s electricity consumption. The financial health of generating and distribution companies would deteriorate further and stressed assets in the sector are slated to increase.

Solar sector is already feeling the brunt of the supply chain disruptions given the large dependence (78%) on imports of inputs (solar cells and modules) from China,” said the analysts, adding “this would result in project delays/shelving and consequent financial distress, having a further bearing on generation.”