India's peak power deficit hit a record low of 4% for the quarter to December 2013 from 9% a year ago, according to an estimate by experts. They attribute the decline partly to the increase in generation capacity, but mainly to the worrying fall in industrial demand amid the economic slowdown.
The trend is likely to continue as manufacturers in auto, metals, and cement sectors may continue to run at low capacity due to poor demand, resulting in lower demand for power, experts said.
"Growth in energy consumption in the eight months to November 2013 has been less than 1%, as against an estimation of 7-8% for the 12th Plan period. This is unprecedented and reflects the severe slowdown in economic activities," said Debashish Mishra, senior director-consulting at Deloitte Touche Tohmatsu India.
Power deficit falls as slowdown trips companies' usage India's peak power deficit or the shortage of electricity supply when demand is maximum during the day, was as high as 13-14% during the 10th Plan period (2002-2007).
The figure came down to 10% as new power units started generation and stayed around this level over the past few years. But it has been consistently declining since May 2013, plunging to its lowest level of 2.9% in November.
Although, government officials attribute this to capacity addition and delayed winter, industry experts warn that the decline is mainly on account of slowdown in industrial demand.
This is corroborated by the data on industrial production, which contracted 2.1% in November compared with the year-ago period. The manufacturing sector reported a year-on-year decline of 3.5%, its worst since March 2012, triggering worries that the worst might not be over yet.
"The November data indicates the depth of the current macro slowdown. We expect that the production data will continue to be weak for another three months since we do not see any recovery in manufacturing," said Tirthankar Patnaik, director and India strategist and economist at Religare Capital Markets.
According to data from the Central Electricity Authority, India added 6,963 MW of power generation capacity during April-November 2013. The authority is yet to release the data for December but expert estimates indicate that demand for power may have declined in the quarter ended in December.
Brokerage Sharekhan estimates that India's power requirement during the quarter declined to 4% year-on-year to 239.4 billion units, while power availability is expected to have grown by 2% to 230 billion units.
"During this quarter, we also observed that the power demand has fallen sharply compared to the growth in power availability," Sharekhan said in a report. Experts also believe that demand for short-term power from power distribution companies would remain low as the loss-making units resort to load-shedding over buying expensive power.
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