With industrial activity slowing and an acute cash crunch in the aftermath of demonetisation, power demand is set to come down drastically. According to experts tracking the sector, peak power demand is down six per cent between September and November 2016.
On a year-on-year basis, though, demand grew 11 per cent in September 2016, according to the latest data of Central Electricity Authority.
With demonetisation kicking in from November 8, 2016, from medium, micro and small enterprises (MSMEs) have reduced their power demand owing to slow activity. Peak power demand deficit — the gap in power supply and demand – has also reduced owing to decline in power demand during the past month.
The peak demand deficit in November was 0.6 per cent, down from one per cent in October and 1.6 per cent in September 2016.
"Small enterprises are facing the brunt of cash crunch and labour shortage," said a power sector expert, who did not wish to be identified.
Agricultural power demand is also likely to go down as the current sowing season has been hit by cash crunch. The country received good monsoon this year, which was expected to boost rural demand, say experts.
Several power-guzzling sectors such as automobiles, hotels and textiles have been hit by the cash crunch.
While weavers and textile traders have stalled production, the auto sector is looking at one of the worst sale periods, which could affect production in the coming quarters. Commercial vehicles, and two- and three-wheelers posted a decline. This was the steepest in the past 44 months. The sector declined 7.75 per cent in March 2013. The last time the sector posted a decline was in December 2015, when volumes fell by 0.17 per cent.
Exporters expect demonetisation to lead to a fall in outbound trade this month, and a greater decline in the coming months. Exporters have warned that the government's ban on old Rs 500 and Rs 1,000 notes would lead to a production decline in the short term.
Stagnant power demand forced 30 power-generating companies to reduce their coal offtake, even below their lowest permissible threshold under the respective fuel-supply agreements with Coal India.
Source- Business standard