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Electricity generation stayed down year-on-year in November 2022 – for the sixth consecutive month which is clearly a first. The net power generation for first five months of FY23 at 58 billion units is 8 percent lower year-on-year. Not even during peak Covid and a year earlier – had power generation tanked for six months straight.

On a 12-month moving average basis, the growth has now come down to just 1.5 percent, having stayed largely in double digits before the FY19 slowdown and Covid year. An unprecedented increase in power tariffs will have a say in consumption, especially from the domestic side. The impact may be lower around this time of the year, as a large part of tariff rationalization coincides with seasonal drop in demand from domestic sector.

The breakdown is not known yet, but it would be safe to assume the drop emerges largely from industrial sector, which constitutes about a quarter of all power demand. The LSM numbers for the first four months of FY23 throw enough signs that electricity consumption in large-scale industries should be lower from a year ago.

Mind you, the entire premise of tariff rationalization was built around the assumption that power demand on the grid will be increased simultaneously – via organic growth, various incentive consumption packages, and crackdown on captive generation. That will surely have to wait, as industrial activity seems in no hurry to be anywhere near full throttle.

If power demand from industries is confined to losses within single digits over last year, it would be considered a victory of sorts. A double-digit increase in demand is out of question for now – and that invites more trouble. Industrial consumption contributes the least to theft and recovery losses. A dip in share means more issues around the financial health of the entire power chain.

On the cost front, the fuel component stayed largely within the revised reference tariff for the month. Ever since the tariff rationalization, monthly FPA has stayed under 30 paisas for four straight months. Mind you, the reference fuel tariffs in most cases have almost doubled from a year ago. Nuclear generation in November at 2.3 billion units was the highest in history – with a 28 percent share, also a record. Coal prices have come down of late, but generation struggles, as RLNG-based generation was higher than coal despite being a substantially more expensive affair. The capacity charges will stay high, even as FCA has come down. Load shedding is not an immediate concern. It is instead finding more buyers for all the committed units going deep in the fiscal year. That won’t be easy.

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