The Financial Implication of COVID-19 on the Indian Power Sector

This paper estimates the financial loss incurred by the Indian power sector due to the reduction in electricity demand during the lockdown period. The net reduction of 68 TWh in energy demand from 25 March 2020 till 3l August 2020 compared to the same period in 2019. A previously performed multi-sectoral regression analysis between the percentage reduction in electricity demand and the different sectoral share of electricity consumption of all the Indian states has been utilised to calculate the notional financial loss incurred by the Indian power sector. This loss has been segregated into four upstream power delivery components: DISCOMs’ revenue erosion due to the forgone cross-subsidising premium which was previously recovered from the bulk C&I consumers, increased AT&C loss due to higher residential and low voltage (LV) agricultural consumption, forgone fixed charges by the central generating utilities, and GENCOs’ reduction in its cost of supply due to the avoided fuel cost owing to the overall low demand.The results from the study indicate that the loss incurred by the DISCOMs during this 160 days of lockdown in 2020 amounts to INR 571 billion, which is almost 10 % of the total revenue recovered in 2019. The AT&C loss and others contribute an additional INR 289 billion, whereas the GENCOs could have a net savings of INR 180 billion. Therefore, the notional net loss for the Indian power sector amounts to INR 680 billion. It translates to a loss of INR 1.30 per unit of energy delivered during this entire period. Four out of the twenty-eight states, namely Maharashtra, Gujarat, Tamil Nadu and Uttar Pradesh, share more than 50 % of the total financial loss. Overall, the combined C&I load demand had reduced to half of its 2019 share of 42 %. Mitigation of this loss necessitates immediate interventions in the form of regulatory (regular tariff revisions and direct benefit transfer of subsidies) and operational (reduction in AT&C losses by feeder separation) reforms to avoid such losses in case of similar extreme events in future.