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'Power' to the people

Oct 6, 2008

India's GDP has grown at an average rate of 4.8% in the last fifty years. Over the last two decades, its growth rate has been at levels of 5.6% and over the last decade, it has clocked a growth rate of about 7% per annum. This healthy economic growth has led to strong rise in job opportunities across various sectors, leading to lower unemployment levels and a modest reduction in poverty. Better paying jobs have allowed people to increase their share of discretionary spending. More individuals have been consuming and individuals have been consuming more. This, as such, has led to a shift in perception of the people. Goods that were once considered to be luxurious have started becoming necessities. Appliances such as colour televisions, air conditioners and refrigerators are now found in almost every household.

The level of consumption has risen and so has the demand for power. Some stats would help picture this better. There are various categories of power consumers in India - domestic, commercial, industrial, railways, agriculture and others. The domestic consumers share towards the total power consumption has witnessed a major shift over the last three decades.

During the 1980s, its share stood at about 14% of the total power consumption. This further increased to 19% during the 1990s and currently i.e. during the 2000s (till 2006), it stood at nearly 25% of the total consumption.

Break up total power consumption

DurationDomesticCommercialIndustryRailwaysAgriculturePublic servicesOthers
1980s 13.7%6.0%53.0% 2.5%20.4%2.8% 1.6%
1990s 18.8% 6.1% 38.9% 2.3% 29.5%2.9% 1.6%
2000s* 25.2% 8.0% 32.4% 2.6% 25.9%3.5%2.5%
CAGR^10.0%8.5% 4.7% 6.1%7.6%6.2% 7.7%
Source: CMIE; ^over a period of 25 years; * till 2006

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    While the demographic factors paint a rosy picture for generation companies in terms of opportunities, there are a couple of issues that need to be looked into primarily. With power demand outpacing power supply, high amounts of power deficits have been recorded, especially in recent times.

    Further, due to shortage of equipment, generation capacities have not been added as per planned. To add to their woes, power generation companies are also facing issues of raw material supply, which in turn has been reducing their utilisation rates.

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    On an overall basis, the scope for power generation companies remains immense. With private and public players entering the power generation space and announcing huge generation capacitates (greenfield and brownfield), the power deficit scenario is expected to narrow down in the long term, provided that these capacities are setup on time and the above-mentioned issues are resolved at the earliest.

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