The power sector is of strategic importance to a country’s overall socio-economic development. Driven by increased investments in infrastructure and industrial production, the power sector in India has witnessed remarkable growth over the last couple of decades. And as India on its quest to become a global superpower, the power sector will play a critical role.
However, of late, the sector is facing challenges on multiple fronts. Though the demand for power is seeing a steady growth from households riding on improved demand from newly connected homes, demand from industries is slowing down due to tapering industrial activities.
According to the latest data available with the Central Electricity Authority (CEA), India’s power demand fell 13.2 per cent in October from a year ago led by a sharp reduction in offtake from the industralised states like Gujarat and Maharashtra.
Despite implementing several schemes to improve the financial health of DISCOMs, the losses of DISCOMs stood at Rs 28,369 crore in FY19, up 89 per cent year-on-year. Also, a steep rise in state DISCOMs’ total outstanding dues to power generation companies is making the entire value chain economically unsustainable.
Add to its worse, as per a report published by The Energy and Resources Institute (TERI), around Rs 1 lakh crore of loans to the thermal power sector have gone bad, equating to a whopping 18 per cent of total outstanding loans to the power sector or 0.6 per cent of GDP.
While all these challenges signal deepening industry owes, there are a few silver-linings too. Experts believe that the reforms undertaken by the government in the power sector will start delivering results in 2020.
It is a proven fact that any slowdown is a part of the business cycle having its peaks and troughs. In near future, as we see a pick-up in the industrial and infrastructure related activities, the demand for power will certainly upsurge. Thus, there are better days ahead.