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Government cuts power demand projections - Views on News from Equitymaster
 
 
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  • Aug 30, 1999

    Government cuts power demand projections

    According to news reports, the government has scaled down power requirement projections by 10% in the 16th power survey.

    Power surveys undertaken by the CEA are the most comprehensive estimates of the power requirements, which have to be quoted for justifying any power project. The survey is undertaken every three-four years and is based on the disagregated projections made in each state of every sector (industry, agriculture and so on). It is finally approved by the Planning Commission.

    The move to cut power requirement projections follows the Central Electricity Authority's (CEA) skepticism about an economic recovery. The CEA does not see an economic recovery until the end of the 10th Plan. This is in variance with the finance ministry's claims that the economy would bounce back with a 7% GDP growth rate this year itself.

    The rate of demand growth has been scaled down from 6.54% under the 15th power survey, to 6.13% in the current survey.

    However, there are definite signs of an economic recovery regardless of the CEA's skepticism. For instance, commercial vehicles (CV) production, one of the most important indicators of the state of the economy, was up 31.8% in June 1999, (as compared to June 1998).

    Even core sectors like cement and steel have done exceedingly well over the past few months, affirming theories of an economic recovery. Cement despatches were up 24% (year on year) over the period April-July 1999. Steel production was also higher by 24% in July 1999, as compared to the corresponding period last year.

    In the face of definite signs of an economic revival, scaling down power demand projections by the CEA could have a detrimental effect on the economy in future. Power demand projections need to be reworked by the CEA so that they correctly reflect the growing demand which is the most natural consequence given the core sector performances at present.

     

     

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