The Indian economy has been badly hit by the Covid-19 pandemic. The Indian power sector is no exception. BE spoke to Somesh Dasgupta, Whole Time Director-India Power Corporation Limited (IPCL), regarding the sector’s outlook for the 2021 fiscal.
Q) Electricity consumption contracted during 2020-21 following the onslaught of the Covid-19 pandemic and successive lockdowns. What is your outlook for the sector in 2021-22?
A) Power consumption was severely affected by a drastic decline in industrial and commercial activities following the coronavirus pandemic hitting Indian shores and the successive lockdowns in 2020. It led to a near 23% fall in electricity demand in April-May compared to the corresponding period of 2019-20.
Although the economy is gradually bouncing back to pre-Covid levels, which is observed from the fact that the electricity requirement drop improved from 23% in April-May 2020 to 5% in April-November 2020 compared with the corresponding period of 2019-20, India’s electricity consumption for 2020-21 is likely to be 2-2.5% lower than the previous year.
However, industrial and commercial activities are expected to gather pace as the government’s vaccination programme reaches the bulk of the Indian population. This, in turn, is likely to fuel power demand - reversing the fall in electricity consumption. In 2021-22, power demand is forecast to witness a 6%-7% growth.
Q) In your view, how was the performance of the power generation sector and what is its future outlook?
A) The Indian power generation sector is primarily dependent on coal and other thermal power sources since historical ages but due to the flourish of the renewable energy sector we have witnessed a significant share of increase of clean energy in the power generation portfolio. The competitive bidding process has pushed the renewable sources - primarily solar grid integrated plants tariff - to fall below `2.5/unit, which is at par with most efficient coal based power plants in operation in India. With many stressed coal based power plants under litigation due to financial restructuring proceedings and unavailability of long term power purchase agreements in the thermal sector, coal based generation is expected to continue the existing trend of lower utilisation factor with marginal improvement. However, the share of renewable power in generation is expected to increase significantly in near term.
Q) What, in your view, is the outlook for the power distribution sector?
A) The financials of the electricity distribution sector were severely hit by falling power demand as revenues of most power distribution companies (discoms) dwindled last year. It continues to remain low. Despite demand recovery, finances of most discoms are likely to remain strained for several months due to low tariff and under-recovery of dues. However, some private distribution companies that have adopted modern technologies may bounce back faster than others.
Q) What kind of distribution companies are expected to fare better than others and why?
A) Companies that invested heavily in technology and infrastructure are likely to bounce back faster than others. Discoms that undertook investments in replacing the existing old standard meters with digital smart ones are better placed to witness a marked improvement in revenue flow. Managements that have spent in upgrading infrastructure into efficient and intelligent networks by implementing advanced metering infrastructure (AMI), SCADA, and IoT (Internet of Things) are strategically better placed than their peers in absorbing the pandemic induced shock. Like India Power, companies that have drawn a strategic roadmap and made regular investments in an integrated manner are likely to bounce back faster.
Q) What has been India Power’s investment strategy in the recent past and what are its future plans?
A) India Power, a leading power utility, supplies electricity to consumers over 618 square kilometres in West Bengal’s Asansol-Ranigunj coalfields region. To serve customers better, it invested about `500 crore in the past ten years. India Power now offers an efficient and intelligent network by implementing advanced metering infrastructure (AMI), SCADA, and IoT. We have decided to continually undertake similar capex in the future for all our distribution networks. Our company is committed to invest more towards consumer centric areas related to customer engagement and for providing digital platforms for accessibility of India Power services in a better way in the coming years. The aim is to supply quality power at affordable rates to all our customers.
Q) The government has decided to privatise state-owned discoms. Will it help to improve the sector?
A) For every 100 units of power a discom sells, it receives revenue for about 80. A significant part is stolen. A large chunk is lost during distribution over inferior networks. Rest aren’t billed. Undoubtedly, these annual losses termed in the industry as AT&C losses (Aggregate Technical & Commercial losses) of Indian discoms are incredibly high and when not controlled with adequate measures, shall keep rising at an alarming pace. The pandemic has further aggravated the situation. Private participation would bring in much-needed funds and resilience to achieve the objective set out by the respective government as part of private partnership initiatives.
These discoms would be capable of undertaking capex in improving existing infrastructure. Private participation will create new managements in discoms. It will allow them to seamlessly marry their own culture with a vastly different tradition and work environment of a public sector utility and integrate the existing workforce with their inimitable experience and local know-how. This will enable quality power supply at affordable rates.
Q) How has India Power achieved these objectives?
A) At India Power Corporation Ltd, we have successfully blended culture, experience, and the edge of a 101-year-old power utility managed by the public sector for many decades into a new smart utility supplying stable power at economical rates. It is currently operating in a multi-licensee landscape where two state owned distribution utilities also operate. India Power is a true reflection of the enormous possibilities that such private collaboration in distribution utility could harness and make a difference for consumers.
It has created a modern utility that uses cutting-edge technologies to improve consumer value-proposition and has an unflinching commitment to society. India Power empowered DPSC’s nearly 2,000 employees, including those on contracts, and integrated them with its existing workforce. It created a unique cultural synergy that fosters a culture of innovation and creativity within the company.