New Delhi: The growth in India’s power demand, that closely follows economic growth, is seen growing over 6 per cent for the second straight fiscal, and above the pre-pandemic levels and the long-period average growth of 5 per cent.
According to research and ratings agency CRISIL, this trend of above-average growth could continue for two more fiscals. The first quarter of this fiscal (2022-23) has already seen 18.7 per cent on-year growth, in line with economic recovery.
“The first quarter may have accounted for 75 per cent of the expected incremental power demand for this fiscal, with consumption surging across key categories — agriculture, residential, and Commercial & Industrial (C&I),” said Hetal Gandhi, Director, CRISIL Research.
She added that while rising ambient temperatures have propped residential offtake, high prices of diesel has cranked up demand for subsidised power from the farm sector, and the upcoming festive season, if robust, will also trigger higher-than-expected power demand growth.
The past three decadal trends show power demand follows economic cycles. On average, it has grown 100 basis points slower than gross domestic product (GDP). CRISIL foresees India’s GDP growth at around 7.3 per cent this fiscal.
Last fiscal, demand grew 8.2 per cent over fiscal 2021, when it had contracted 1.2 per cent due to the pandemic, and 6.9 per cent above the pre-pandemic levels of fiscal 2020, underscoring the robustness of recovery. This growth was driven by the C&I segment, as manufacturing and services activity picked up.
Also, the continuous rise in power exchange purchase bids has cranked up prices in the merchant markets to an average Rs 7.8 per unit in the first quarter versus Rs 4.4 per unit last fiscal. With demand forecast to be high this year, too, dependency on the short-term market would sustain and that should keep merchant tariffs above Rs 5 per unit this fiscal.