Pakistan’s grid power generation in March 2023 dipped 16 percent year-on-year. This has never happened before. Not even during peak Covid quarters. For better context, March of five years ago in 2018 saw slightly higher electricity generated through the grid. It has now been ten straight months of negative year-on-year growth for power generation – also a first. Worryingly, the 12-month moving average is now down 3 percent – something never seen before, as the moving average generation at 10.9 billion units is the lowest in 17 months. For 9MFY23, power generation is down 8 percent year-on-year.
While there is a lot to worry about, there is no element of surprise in how things have shaped up so far. A combination of factors is at play to ensure the system generation stays lower. It is a mix of genuine lack of organic demand growth, as households and businesses struggle to make ends meet. Secondly, the paucity of dollars means the authorities have also made deliberate attempts to keep the system running at unusually low levels. Mind you, imported fuel still constitutes a significant chunk of the power generation mix.
Frequent rounds of massive upwards adjustment in consumer end tariff via base tariff increase, quarterly adjustments, surcharges, and subsidy rationalization – have led to an unprecedented hike in electricity bills. The hike is sharper than what the CPI readings would usually tell, for the PBS’ inability to capture the impact in the right manner. What is certain is that electricity demand, especially from the households, will come down sharply after the sharp tariff increase, and also, the generally high inflation.
The LSM growth has nosedived in double digits, mirrored well by the power generation numbers. Although, commercial and industrial power demand should be stickier than the domestic sector, the removal of concessional tariff for all industries – in addition to imposition of surcharge – appears too big an increase to not have an impact on industrial power demand. And then add the overall economic condition, especially import curbs, as industries are running well below capacities.
The severity of situation is evident from the fact that coal-based generation for the past two months has stayed under 15 percent of the generation mix. For the comparable periods in the past three years, coal was the leading fuel source, contributing well over a quarter of total electricity generated. Nuclear power has been the saving grace with the highest contribution, making up for reduced RLNG and coal-based generation, and also lowering overall fuel cost. Even with a 40 percent higher reference-based tariff from the same period last year, monthly fuel price adjustment for March 2023 would be close to Rs1.15/unit.
With summers approaching fast, the authorities need to ensure adequate fuel availability to avert frequency related outages, in case the demand load goes up.
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