POWER SECTOR - INTO THE DARK AND THEN LIGHT?
By Ruma Dubey
The woes of the Indian power sector continues. We are talking about over 8% GDP and it is ironic that this sector, which will actually power up this growth is down; a complete turn off. Simple economics says that when demand outstrips supply, the supplier is obviously raking in all the money, widening the scope for making some more. But here, the suppliers are also crying bucketful as are the consumers, who will now brace for some more power cuts as the summer heat notches up a few degrees more.
Take a look at the official figures first. As per the January status report put out by Central Electrical Authority (CEA), the sectors woes continue but the figures show that things are getting slightly better. The All India Power demand during Jan was for 86256 MU and availability was 83559 MU, a deficit of -3.1%, which is slightly better than the deficit of -3.3% in Jan’14. The All India Electricity generation from April to Jan 2015 stood at 880.680 BU which is a 9% YoY growth. Thermal showed the best growth of 12.18% though hydro fell 3.92% whereas nuclear showed a growth of 1.56%.
On the addition of new capacity front, the picture continues to look dark. As per CEA, as per the 12th Five Year Plan of the Government of India (2012–17), the target is to add 88,537 MW capacity and till end of Jan’15, capacity added stands at 52,078.22 MW. This means, with two more years to go, 58.82% target is achieved. Thermal is the only well performing sector – as against target of 72,340 MW, it has achieved 49,183.20 MW. Hydro is the worst performing – target is 10,897 MW and achieved is 1895 MW. Nuclear target is 5300 MW and actual is 1000 MW.
The Plant Load factor (PLF), which is considered to be taken as the main performance indices for the purpose of analysis, has come down in Jan’15 to 65.44% v/s 69.90% in Jan’14. And interesting news –India has 597464 villages and of this as per CEA, 95.86% villages have electricity. Well, they have electricity but whether there is supply to light a bulb is a big question mark.
In terms of YoY capacity addition, there is a shortfall of 1253.89 MW and it is the Govt which has played truant. The Central Govt has shown a shortfall of 669.99MW and State of 3343.90 MW while the private sector actually achieved 2760 – this falls short of the target but at least better than Govt sector.
Challenges for the power sector remain. Though fuel supplies have improved, for this to percolate down to the power companies and that too in the balance sheets, will take some time, maybe H2FY16. Coal output is sure to improve in FY16 – the Govt has set a target of 1 billion metric tonnes coal from Coal India by FY20. With auctions on the way, supplies are bound to get restored. The Govt is trying to revive projects that are stuck and has even announced new UMPPs in the Budget. But given the past track record of UMPP, one cannot help but wonder how many takers it will be able to find.
To conclude – power is the most important fuel required to power India’s ambitious growth target. The outlook for immediate future remains a bit murky but by second half of FY16, we could see light in this sector.