Third month running, Pakistan’s power generation went down year-on-year. This is a first such incidence since Covid peak quarter of March 2020 -June 2020, and the second since March 2019. Both these periods were part of very low to negative economic growth. It does not appear a case of third time lucky either for Pakistan, as the devastating floods have now come in the mix. The signs of slowdown were already evident even before the floods had hit.

The electricity generation on a 12-month moving basis at 11.2 billion units is the lowest in six months. The growth has now slowed down to 5 percent – lowest since April 2021. For a good 12-month period, electricity generation was growing steadily on a double digit ground, which has now come to a screeching halt.

There is undoubtedly an element of reduced demand owing to earlier Monson (reduced temperatures year-on-year). Reposts emerging from the otherwise steadily growing industrial sector is not too encouraging either. The agriculture sector is also under pressure, largely owing to the floods. There is more tariff adjustment in line particularly for tube well users – which will definitely test the demand strength at revised rates.

The tariff revision this time around is not your usual adjustment either. Rates have gone up by up to 50 percent in some high-use cases. Other than the organic slowdown in demand, load management remains in play, as the authorities struggle to make fuel available at all times. Importing RLNG has been nothing short of a herculean task this season. While hydel generation is back to its usual highs, the limited ability to afford imported fuel at prevailing rates has also added to the woes.

Now, on to the fuel cost component; this has been a subject of massive criticism of late. For August 2022, an adjustment of a paltry 22 paisas has been sought from the regulator. This is the lowest monthly FPA asked for in 15 months. For context, monthly FPA has averaged Rs5/unit in the last 12 months. So, this surely comes as a relief.

But only just. The fuel cost component for August 2022 at Rs10.12/unit is still on the higher side, up 50 percent year-on-year. It is a revision of 109 percent in reference fuel tariff for the month from Rs4.73/unit in August 2021 to Rs9.89/unit now that makes the adjustment look smaller. Most of it has now become part of the revised base tariff, which will continue to rise for August and September.

In all likelihood, monthly FPAs going forward will revert to the mean. But nobody should lose sight of the fact that the tariffs have been raised a great deal to ensure that. Reduced demand for much of FY23 is not going to help the cause either. Overruns in T&D losses is very much on the cards, due to higher overall tariffs. It won’t be easy; you will just get used to it.