ISLAMABAD: The Sindh government has started formal negotiations with the federal government to take over two power distribution companies (Discos) — Hyderabad and Sukkur — serving consumers in the province’s territory.

On the other hand, two provinces — Punjab and Khyber Pakhtunkhwa — are still indecisive over the federal government’s offer for ‘provincialisation’ of six Discos operating in their jurisdictions, while Balochistan has outright declined to take any responsibility in running the high loss-making Quetta Electric Supply Company (Qesco).

The Centre had formally approached the provincial governments through the Ministry of Inter-Provincial Coordination (IPC) in the last week of July this year to start negotiations on acquisition of the Discos concerned in their territorial boundaries.

“The Sindh government has started negotiations with the Power Division for acquiring (provincialisation) Hesco and Sepco,” said a latest position paper submitted by Privatisation Commission and presented to parliament. It said the “Balochistan Energy Department has communicated that they are not interested in acquiring Qesco”, while “Punjab and Khyber Pakhtunkhwa provinces have yet to confirm their interest”.

Punjab and KP still indecisive; Balochistan declines to acquire loss-making Qesco

There are total 10 Discos under the administrative control of the Power Division of energy ministry. Qesco — one of the top four loss-making Discos — is supplying electricity to most parts of Balochistan, except Hub and other adjoining areas close to Sindh. Peshawar Electric Supply Company (Pesco) provides electricity to most parts of Khyber Pakhtunkhwa, except merged tribal districts which are mostly served by Tribal Electric Supply Company (Tesco).

Hyderabad Electric Supply Company (Hesco) and Sukkur Electric Power Company (Sepco) — carved out of Hesco in 2010 and now registered as a separate entity under the company laws — are responsible for supplying electricity to most of Sindh, except Karachi. Punjab is served by five Discos based at Lahore, Gujranwala, Multan, Faisalabad and Islamabad. All these Discos are public sector entities (PSEs) as defined under the Companies Act, 2017.

The privatisation of nine Discos was approved by the Council of Common Interests (CCI) in April 2011 and February 2014. Recently, in view of private sector’s participation approved by the Cabinet Committee on Privatisation (CCoP) in May 2021, the Law and Justice Division reconfirmed in September last year that the CCI approval given in 2014 for the privatisation of nine Discos, except Tesco (established later), still held the field.

The CCoP had directed the Privatisation Commission in January last year to initiate “privatisation/management contracts” for Discos in consultation with the Power Division to achieve three key objectives — reduction in aggregate transmission and commercial (ATC) losses, improvement in service delivery and consumer satisfaction but without any major consideration for raising monetary proceeds.

Circular debt

The power sector circular debt now stands at about Rs2.6 trillion mainly because of low recovery and high transmission and distribution losses that stand at about 38 per cent for Pesco, 36pc and 33pc, respectively, for Sepco and Hesco, and 28pc for Qesco. Mepco is the top most loss-making entity in Punjab with 15pc, followed by Lesco (12pc), Gujranwala and Faisalabad (9pc each) and Iesco (8pc).

In May 2021, the CCoP approved concession and management contract models for Discos and directed the Power Division to establish a committee to engage with labour unions. The decision was ratified by the cabinet on June 8, 2021.

The Privatisation Commission, in the meanwhile, in consultation with the Power Division, regulator Nepra and Finance Division, finalised draft terms of reference and published expressions of interest in September last year for the hiring of a financial advisory consortium (FAC). Only two consortiums submitted the EoIs and both were found deficient to be prequalified for such a task.

After the Pakistan Democratic Move­ment came to power and reconstituted the CCoP in June this year, a fresh summary was moved to the committee, seeking reaffirmation of the scope of “private sector participation in management of Discos” approved by the previous CCoP in May 2021 and whether the private sector is to be offered “supply” business or “wire/transmission” business or “both”.

The CCoP in its meeting on June 24 directed the Power Division to write to all the provinces through the IPC ministry for negotiations on acquisition of Discos.

The Punjab Energy Department reported to have moved a summary, “Provincialisation of Discos/private sector participation in management of Discos”, to the chief minister on Oct 12 to seek permission to place the matter before the provincial cabinet for its consideration, but the issue was still under process.

Published in Dawn, December 19th, 2022