By Sudarshan Varadhan
CHENNAI (Reuters) – India’s electricity demand during the current financial year is seen falling for the first time in at least 36 years, ratings agency Moody’s unit ICRA said on Wednesday, a blow to utilities and state-run Coal India Ltd <COAL.NS>.
ICRA expects annual electricity demand to fall 1% during the year ending March 2021 due to the impact of a nationwide lockdown to prevent the spread of the coronavirus, ICRA said in a statement.
The decline would be the first since fiscal year 1985, and government data preceding that was unavailable.
Power usage has fallen by almost a quarter since Prime Minister Narendra Modi enforced a nationwide lockdown starting March 25, forcing all industries except those deemed essential to shut down.
The shutdown is expected to end on May 3, but could be extended as the number of coronavirus cases in the country continues to rise steeply.
“Any extension in the lockdown period would have further downside risk for the demand growth,” said Sabyasachi Majumdar, Senior Vice President at ICRA, adding that the decline would hinder a resolution of financially stressed power plants and distribution utilities.
A prolonged industrial slowdown that was already hurting utilities led to electricity demand rising only 1.2% during the fiscal year 2019-20 ending March 2020 – the second slowest rate of growth since 1984-85.
Electricity demand from industries account for more than two-fifths of India’s annual consumption, according to government data, with residences accounting for nearly a quarter and commercial establishments for less than a tenth.
ICRA said it expected losses at state-run electricity distribution utilities (DISCOMs) to rise two-thirds to 500 billion rupees ($6.61 billion), adding their dependence on subsidies could further increase due to a burgeoning revenue deficit.
Debt-laden DISCOMs’ overdue payment to electricity generators was 808.5 billion rupees ($10.69 billion) at the end of February, more than 50% higher compared with the same period last year.
Lower demand would also hurt Coal India Ltd <COAL.NS>, the state-run near monopoly miner which produces over four-fifths of India’s coal. Utilities are the miner’s top client and lower electricity demand would mean higher stockpiles.
Daily average production in April at the world’s largest coal miner has halved from March, a source familiar with the matter told Reuters earlier this month. The company’s annual production had fallen for the first time in 2019/20 since 1998/99.
(Reporting by Sudarshan Varadhan, editing by Louise Heavens)