September 30, 2020

Government Plans To Privatize DISCOS (Power Distribution Companies)

According to a senior official in the Privatization Cabinet, the PTI government has directed the Cabinet Commission on Privatization (CCOP) to come up with a viable plan to sell off (privatize) power distribution companies (Discos). The CCOP had contacted the Task Force on Energy Reforms for this matter as well.

The Task Force was directed to submit a report on the privatization of Discos in a meeting with the CCOP on Feb 1, 2019. That report was later discussed in a meeting of CCOP with Finance Minister Dr.Abdul Hafeez Sheikh. The Taskforce was headed by Nadeem Babar, who is now PM’s Special Assistant on Petroleum. The report said that, before the privatization of Discos can happen, there are a few conditions that will have to be met. Firstly the Discos would need to be operating at least on breakeven, then the large Discos would need to be divided into smaller units, experts would have to be hired to run them professionally, power theft would have to be eliminated completely and then any subsidy being provided to the consumers would have to be removed.

According to the Business recorder, the task force proposed the following points in their report,

(i)    Ongoing theft policy and recovery program to continue till at least June 2020. Areas that have high losses continue to see high load-shedding by design.

(ii)    Removal/elimination of transmission constraints by December 2019.

(iii)    Continuation of automated metering infrastructure program in a phased manner.

(iv)    Commitment of GOP to end the unfunded subsidy.

(v)    Elimination of political intervention through the independence of BoDs.

(vi)    The breakup of four larger Discos (Lesco, Mepco, Genco and Fesco) into better performing small units after detailed technical analysis.

(vii)    Any Discos where AMI metering program is deployed, the independent board is in place and where the size is manageable and loss ratios are not too high, be considered for privatization.

(viii)    To continue implementation of ABC cable in high loss Discos and to split the areas on the basis of losses and theft for administrative purposes.

(ix)    The first Discos will be ready for privatization in three years after the completion of the reform process.

(x)    Moving of Discos which are not to be privatized from the line Ministry to Sarmaya-e-Pakistan for restructuring.

(xi)    Discos that completed the reform process but have not been put on the privatization path, should be placed in Sarmaya-e-Pakistan.

The CCOP after a detailed discussion on the points put forward by the TaskForce agreed to them. CCOP further directed the Task Force to present a plan on privatizing one or two Discos in the next meeting.

PML-N government tried to privatize the power sector in the past but failed due to their (power companies) protests against it (privatization).

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