The power regulator has approved the periodic adjustment for 4QFY23 – at Rs3.2814/unit. The adjustment was always going to be on the higher side, given that at Rs136 billion for the quarter – this is the single largest quarterly adjustment ever. What is worth mentioning is that the adjustment is spread over six months from October 2023 to March 2024. The total periodic adjustments for FY23 stood at Rs250 billion –also the highest ever – at an average Rs2.5/unit.
The new periodic adjustment replaces the previous QTA of Rs1.2489 – an increase of more than Rs2/unit that is going to last for the next six months. On year-on-year terms, the adjustment is on the lower side – given Rs2.85/unit QTA for Oct 2022 to Jan 2023 and Rs3.08/unit for Feb and Mar 2023. The next periodic adjustment pertaining to 1QFY24 will be due soon – and given how the exchange rate and interest rates have moved against the reference variables in the indexed tariffs – another substantial upward adjustment looks round the corner.
Whether or not the government will have the courage to make the adjustment on top of the existing one that lasts till March 2024, is guesswork at the moment. The IMF would clearly keep an eye on any more delays, as timely adjustments are a critical part of the Circular Debt Management Plan to keep the flow in check.
More than 80 percent of the adjustment in lieu of capacity charges and more of the same is in store for another quarter or two, despite significant increase carried out earlier this year under annual rebasing exercise. Fuel charge adjustments have already started to rise once again – with the last three monthly adjustments averaging Rs2/unit.
Recall that the government had made significant changes in monthly FCA collection last year, breaking down the payments in six installments for protected and unprotected users up to 300 units. The same was not captured by the Pakistan Bureau of Statistics (PBS) in its tabulation, hence the inaccurate picture of electricity prices came out for August inflation. The magnitude of protests was enough to tell you how far from reality the PBS tabulation is divorced. More of the same for September is expected.
The FCAs were actually spread out between March and October 2023 – and the reflection in PBS numbers was missing. One hopes the latest periodic adjustments is treated correctly, as the tariff increase for October 2023 for most categories is higher than 25 percent for the same period last year – with the biggest increase of 38 percent for the lowest consumption slabs of up to 100 units in the unprotected category. The increase of similar magnitude is likely to continue for another six months – with a higher chance of upward adjustment around the turn of 3QFY24.