There are growing fears that inability of the PML-N government to overcome prolonged outages of electricity and gas may bring people on street, who may resort to violence. Despite nearly 60 percent reduction in international price of crude oil there has not been corresponding reduction in POL prices. On top of its government has been failing in boosting thermal based generation.
The incumbent PML-N government paid Rs500 billion (US$5 billion), soon coming into power aimed at eradicating circular debt and curtailing the power deficit. The amount has once surpassed Rs600 billion despite various tariff hikes, mainly because the government failed in removing the root causes: 1) rampant theft and 2) dismal recovery.
Resultantly, it has taken its toll on power generation ability, which is evident by the latest generation statistics from CPPA (Central Power Purchasing Authority). According to which, total generation for 7MFY15 was recorded at 56,320GwH (10,915MW), a slight 2.2%YoY down when pitted against the generation during the same period last year. This reduction in generation came at the time when the cost of generation witnessed a sharp fall to Rs6.75/KwH from Rs8.04/KwH over the same period last year.
Being engulfed by the notorious circular debt, the sector lacked requisite liquidity to reap the benefits of lower international oil prices. That said, higher consumption of gas and HSD countered the decline, making up for the fall in Hydel and furnace oil based generation. On top of all, coal based generation failed to take off. In the light of increasing circular debt, furnace oil generation levels are back to where they were in 7MFY12 (prior to payment) and gas based generation has fallen further. In this scenario where the looming threat of liquidity shortfall looms large, generation levels are expected to taper further.
Reliance on Hydel based generation continued, with 35.4% of units generated sourced from WAPDA, followed by furnace oil based generation at 33.9% (a decrease of 3.9pts YoY). Gas based generation recorded an increase of 2.1%YoY, owing to better supply of gas to the power plants. HSD based generation levels were slightly improved, owing to HSD prices falling 18% during the period. All renewable energy sources experienced increases in their share of the power mix.
With the dramatic fall in global oil prices pushing generation costs downwards, the average cost of electricity generation fell by 16%YoY to Rs6.75/KwH led by 16%YoY decline in cost of HSD based generation, while the same for furnace oil based generation clipped by 14%YoY. However, lack of liquidity in the system accompanied by inadequate supply of imported fuels kept generation at dismal level.
As the power shortfall reaches a non-winter month peak of 4,000MW questions arise as to the ability of NTDC to command load generation through the centralized system it implements. Recent forays by NEPRA and MoWP to counter mismanagement at DISCO’s is a step in the right direction. However, the approved reduction in the consumer end tariff set for IESCO, FESCO and PESCO are out of sync, especially at a time when low input costs raise the onus for reduction in subsidies allowing leeway to the GoP to improve liquidity in the space.