Privatization of DISCOs- PEPCO forms a committee

A four-member committee has been constituted by the Pakistan Electric Power Company (PEPCO) to prepare a brief on the technical, financial and commercial aspects of the distribution company for privatization of DISCOs

The office order issued in line with the cabinet committee on privatization (CCOP) reads that the committee for the privatization of DISCOs has been formed on the letter both from the ministry of energy (power division) and Privatization Commission’s office of the ministry of privatization. Members of the committee include Saghir Ahmed, consultant, as team leader, Imtiaz Ahmed, CEO PITAC, Basharat Ali, CFO PEPCO, and Sajjad Ali, Deputy Director PEPCO.

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According to the Terms of Reference (TOR’s), the ministry of privatization (Privatization Commission) has asked for a brief underlining the highlights the financial, commercial and technical highlights of DISCOs and different documents needed for privatization.

Privatization of DISCOs

The committee has been directed to prepare and submit its report within one week. It is pertinent to note that there is an immense pressure on the government to privatize DISCOs so to eliminate their inefficacies that have led to abnormal levels of circular debt. This debt is likely to reach 4 trillion a year by 2025.

PEPCO sources believe that the privatization KE in 2005 can be considered a successful strategy to replicate considering the fact that it transformed the ailing company and enabled it to overcome its transmission and despatch losses. They are of the view that the formation of the committee for the early privatization of DISCO’s is a welcome step and it would improve the efficiency of the power sector of the country.

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Director Lahore University of Management Sciences (LUMS) Dr Fiaz Ch addressing a webinar had urged the government to fix the power sector while granting autonomy to DISCOs under an independent regulatory body. The government is also studying the Turkish Model for reforming the energy sector.

KESC- A privatization failure?

It was believed that once KE goes private, new investment would come in which would control the line losses and improve the distribution system. The assumption was that the new investment would lead to more power plants being installed which would produce more electricity to meet the increasing demand of the population and the textile industry. This made the residents of Karachi hopeful as they felt that they would now get access to better services and uninterrupted power supply. It was anticipated that the company would become more efficient and cable of handling any crises.

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However, 15 years from the power utility’s privatization and the residents of the metropolitan are still facing the same issues. In 2019, a World Bank (WB) study revealed that the privatization of Karachi Electric Supply Corporation (KESC) has not yielded the results that were expected from the strategic sale of the entity. “Privatization of Karachi Electric proved to be highly controversial and is still being contested in the courts more than a decade later,” said the WB report. Karachi has been facing severe load shedding and the persistence of power shortages even after a decade of its privatization suggest that the company is ill-prepared, incompetent and inefficient. Whenever the power crises gets out of control, the federal government comes in to fix the issue temporarily, the real problems, however, still remain unsolved. KE has neither improved its infrastructure, nor has It been able to increase its power generation capacity.

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However, the industrial customers perspective on privatization of KE has been more favorable as according to them the power outrages have reduced compared to 2005 but they also complained of high tariffs. Therefore, PEPCO needs to draw some lessons and understand that if the management of a privatized company fails to fulfil its obligations, things can take a turn for the worse.

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