It is a slow election season for electricity generators. Many had expected pre-election buying to drive up demand and prices in the short term. But there is not much buying activity there. The buy bids for short-term power in the Indian Energy Exchange Ltd (IEX) have been lower than the sell bids since the beginning of this year.
Overall, between January and March, demand for power increased 0.4% from a year ago, data from the Central Electricity Authority (CEA) shows. Availability increased 6%. Financially weak electricity distributors have refrained from purchases. Hence, spot market electricity prices on IEX fell 2% in January-March from a year ago.
Short-term prices increased in April but the rates were driven higher by constraints in transmission, especially in the south.
“We think the poor demand from state electricity boards reflects the inability or unwillingness of distribution companies to buy enough power to meet real demand,” UBS Securities India Pvt. Ltd said in a recent note. “This is a situation that requires tough measures on tariff hikes and reduction in distribution losses.” All eyes will be on the new government to see if it can make tough structural changes that are necessary to boost the sector. That will take time.