Power demand in FY20 has no exactly gone through the roof, but it has not even been all doom and gloom, as an economic slowdown may dictate. The electricity generation, minus KE, has gone up by nearly 4 percent year-on-year during 4MFY20 to 50 billion units. Having recorded increase in year-on-year terms for five consecutive months, October generation data showed no change in year-on-year terms, at a little over 9 billion units generated.
As the Ministry had earlier indicated, October sows no generation on the dreaded furnace oil. This means a much improved power generation mix for the month, where coal contributed one-fourth of the total generation, recorded at highest ever monthly number, both in terms of share and absolute units. Previously, a fall in hydel based generation would usually mean a load on FO based generation. This time around, coal was the answer, as hydel generation was reduced by a half over the previous month.
Contribution from LNG continued strong at one-fourth of the total, much in line with two year average. That said, much lower demand in October coupled with cheaper available options in the merit order meant that the LNG based generation was still a third lesser than the peak seen earlier this year. The power not required while being available, would still be paid for in terms of capacity charges. And in the case of LNG, the payments do not stop till at least 2032.
Generation availability and mix have both improved undeniably, and kudos to those who made it possible. And that is the previous government, which ensured enough power in the system under CPEC and other projects. The second and equally important component of the equation, the fuel price, has gone considerably dearer over time. Look no further than the creditors of improved availability, for the placement of blame.
For the fourth month in a row, an increase has been proposed in lieu of fuel charges adjustment by the CPPA. Should the proposal get accepted, consumers face an upward adjustment of Rs1.74 per unit in their December bills, on account of October adjustment. Previous adjustments have been Rs1.78, Rs1.66 and Rs1.83 – leading to October. That is roughly 15 percent increase to the average tariff in place.
Worse yet, since the FCA does not spare any consumption category – the impact on inflation is also much more. The domestic consumers above lifelines category of 50 units per month, all face the burden. Those pinning hopes on inflation cooling down in a month or two – may want to have a second thought. The next round of base tariff revision seems far off in July 2020 – which means the FCAs would continue to be on the higher side for another eight months. Here is hoping, the next base tariff uses more sensible and realistic set of assumptions, than the ones in place now, which cause more harm than good.
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