Electricity production in December grew 6.7% from a year ago, data from the Central Electricity Authority shows. Coming on the back of a 6.3% growth in November, it does look like the power supply has improved. For sure, the coal supply situation has improved and good rains, which have boosted hydel power production, have also helped.
However, that has to be weighed against anecdotal evidence of power shortages in the country. In HSBC’s latest Purchasing Managers’ Index survey, participants complained about “raw material shortages and power cuts.”
That’s because power demand in the country seems to be artificially suppressed. The “reported figures on power supply situation reflect distribution companies’ inability/unwillingness to buy enough power to meet the real demand and not ‘on the ground’ improvement in power availability for end users,” says a note from UBS Securities India Ltd.
Unless state electricity boards’s (SEB) financials improve, this situation is likely to persist. In the near term, the elections may provide some succour though as SEBs buy more due to political pressure.
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