Power production inches up in Jan

Minister expects country to record over 5% growth in ongoing fiscal year

KARACHI:

The power production in Pakistan increased 9% on a year-on-year basis in the month of January 2022 which suggests that the economic growth would be recorded at over 5% in the current fiscal year 2021-22, said Federal Minister for Energy Hammad Azhar on Saturday.

Power production is a barometer to gauge the pace of economic activities of the country. Robust economic activity is helping to create hundreds of thousands of jobs every year and enhancing the income level as well, the minister added on his official Twitter handle.

Pak-Kuwait Investment Company (PKIC) Head of Research Samiullah Tariq agreed with Azhar and said that lofty power production and industrial output suggested that “the economic growth would be recorded in the range of 5-6% in the current fiscal year 2021-22.”

However, Finance Minister Shaukat Tarin and State Bank of Pakistan (SBP) Governor Reza Baqir recently revised down their economic growth estimates to around 4.5% for the ongoing year compared to their earlier projections of over 5% expansion.

They revision in growth projection came after the government increased duty on import of luxury items like cars, turned bank financing expensive and withdrew a number of tax exemptions through the mini-budget in mid of January 2022. The measures were aimed at cooling down the overheating economy amid rise in inflation reading and current account deficit to unsustainable levels.

Meanwhile, electricity generation increased 9% to 8,797 gigawatt hours (GWh) in January compared to 8,097 GWh in the same month of the previous year.

“Healthy economic activities and industrial support package remained major drivers behind the growth in power demand,” Ismail Iqbal Securities analyst Abdullah Umer said.

Earlier under the industrial support package, the government announced to charge a low tariff on consumption of additional power during the winter months compared to the same months of the previous year.

“The package is valid till the end of February 2022. The offer allowed industries to undertake additional production,” he said. “Steel sector ranks among the industries that heavily consume power from the national grid. The production of steel stayed high in the wake of
acceleration in housing and construction activities in the country.”

Hydel production halves, cost doubles

The rise in power production was achieved at a significantly high price. The cost of fuel in production doubled to Rs12.2 per unit in January after generation from cheaper sources such as hydel dropped to half and expensive sources like oil-fired power plants were utilised to meet the demand.

“It is pertinent to mention that Pakistan recorded lowest hydel generation in the last two years (in January). Along with this, RLNG based power generation went down significantly by 47% on a month-on-month basis,” he said.

Production from RLNG plants used to be classified among cheaper sources before the fuel price shot to the sky during the ongoing winter season.

“With the resumption of electricity generation from China Power Hub Generation Company (CPHGC) plant unit one, power production from coal went up 39% on month-on-month basis. Due to significant reduction in energy creation from RLNG, hydel and nuclear power, highest ever diesel-based electricity generation in the last ten years was recorded in January 2022,” he said.

He said that reduction in production from hydel sources remained a major cause of concern since it is a clean source of electricity generation. Secondly, it is the cheapest source of energy since it uses no fuel. Earlier, Pakistan used to produce 800-1,000 GWh from hydel plants in the month of January. The production, however, reduced to just over 500 GWh in January 2022, he said.

Similarly, three big RLNG-fired power plants in Punjab produced electricity using the alternate expensive fuel, diesel, due to low availability of the gas during winter season.

Published in The Express Tribune, February 20^th, 2022.

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