Indian government urged to rescue beleaguered discoms

Revenues fell due to closures in the commercial and industrial sector.

India’s government needs to come to the rescue of beleaguered distribution companies (discoms) as electricity consumption is expected to remain on the decline in the next two months, according to a release from GlobalData.

Electricity consumption in India dropped 15.1% MoM in April. Somik Das, senior power analyst at GlobalData, explained that there was a shift in demand from the commercial and industrial sectors towards the residential sector, which failed to offset the decline in overall demand.

“The shutting down of the industrial and the commercial sectors has led to a fall in the electricity demand which may continue for some time until the pandemic ceases,” Das said.

Furthermore, with the existing cash crunch in the economy, the residential and agricultural sectors are unable to pay for the electricity bills. The closure of the commercial and industrial sector, which accounted for 52% of the power consumption, also meant that the revenues of discoms were greatly reduced.

However, it is expected that a restructuring of the tariffs might greatly support the industries and businesses and provide a stimulus to the stagnant economy.

“Providing electricity to industries at the actual cost, providing incentives to the medium and small enterprises (MSMEs) that were badly impacted by the pandemic, and shifting to manufacturing in India instead of procuring from or manufacturing in China, might provide an immediate and appropriate boost to the economy,” Das added.