Impact of Coronavirus on the Indian Energy Sector: The Short-term and Long-term Impacts

The coronavirus pandemic has caused a radical slowing of economic activity across India, as industries scale-back production, employees work from home, and communities enter lockdown. As a result, we have seen significant impacts on the Indian energy sector. In this article, Will Hall covers both the short-term implications of the response to COVID-19 on the energy sector, as well as some of the possible longer-term impacts that are yet to materialize.

- Will Hall

The first case of coronavirus was reported in China towards the end of November 2019. Soon after, the Chinese Government locked down the most affected areas, as a domino effect of lockdown measures was felt in other countries. India entered lockdown on March 25, 2020 which has now been extended till May 17, 2020.

Most estimates suggest that the pandemic will last until beyond the summer of 2020, resulting in an immediate impact on the economy and energy system lasting several months.

Short-term Impacts

Over the course of the lockdown, we have seen significant impacts on the energy system and the energy sector more broadly. In the months to come, we are likely to see reductions in all major fuel use, as a result of the restrictions. An overview of fuel use by sector (Table 1) illustrates how consumption is likely to fall across the economy, apart from the residential sector. As individuals spend a greater share of their time at home, domestic electricity and gas use is likely to increase, as a result of lighting, cooking, and appliances. Most obviously, the travel restrictions have meant that there has been a significant reduction in the use of public and private transport. As a result, fuel demand for transport has dropped significantly. Compared to March 2019, the total consumption of petroleum products has dropped by nearly 20 per cent for March 2020. Within these products, we can see that demand for aviation turbine fuel for aeroplanes has dropped by over 30 per cent and the range of fuels used for road transport have all fallen between 20 per cent and 30 per cent (Figure 1). Were we to have data just showing the period since lockdown, we can expect the difference to be much greater.