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Having gone down sequentially for five straight months, power generation has made a comeback of sorts in the last two month of FY19. In normal circumstances, a year-on-year growth of 4 and 2 percent for two months should not be news – but in a scenario of slowdown in economic activity, where the full year power generation was expected to actually go down in year-on-year terms, for the first time in the country’s history – it is nonetheless heartening.

The gross electricity generation in June 2019 at 13.1 billion units is the third highest ever in the history. July and August are considered months of peak demand – and should the trend of last two months continue, good numbers should be seen going forward. This does hint that the slowdown in commercial and industrial activities may just be nearing a trend reversal.

On fiscal year basis, the total generation at 123 billion units is the highest ever, and a slight 1.6 percent improvement from previous year. The real story lies in the gradual and now evident shift in the power generation mix. From a load based heavily on furnace oil to a system producing power based on imported RLNG as its key fuel source, is a big change.

The share of FO based generation has come down from 30 percent two years ago (equal highest with hydel) to a little over 7 percent (and decreasing) in FY19. That of hydel has slightly come down from 30 percent in FY17 to 26 percent in FY19 – but in absolute terms, hydel power generation stood highest ever in FY19.

Generation based on RLNG has almost switched roles with furnace oil – with the share rising from just 6 percent in FY17 to 23 percent in FY19. With most LNG plants operating at full throttle now, and the nature of capacity contracts with most of them, would mean LNG based generation would continue to be on the higher side. The coal based generation too, has come up from virtually nothing to a sizeable 13 percent now, mostly on imported fuel.

The cumulative fuel bill for FY19 at Rs655 billion is 4 percent higher year-on-year, despite improvement in generation mix. That is mostly because crude oil averaged higher in FY19 – and LNG and coal prices are one way or the other linked with international crude.

The fuel bill is very manageable, but the real trouble is capacity payments, which are expected to be near one trillion rupees for FY19. Making room for 18 percent losses in the distribution system, the average cost of generating one unit of power would be around Rs15.5 per unit. And that is where all the tariff adjustments have come into play, of late, and will continue to be a constant feature, quarter after quarter.

Copyright Business Recorder, 2019


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