Pakistan’s premier intelligence agency has recommended the federal government involve all stakeholders in deciding the future of Power Distribution Companies (Discos) for a transparent transition.
According to a report published by BR, the intelligence agency has provided input on the government’s efforts to address the financial challenges of Discos which has been reached to approximately Rs600 billion due to line losses and under-recovery.
The government has been considering various proposals to address the financial issues of Discos, including privatization, provincialization, and transferring management control to private hands.
The intelligence agency emphasizes the importance of provincial governments effectively managing Discos by fulfilling their responsibilities, allocating resources, and establishing transparent and accountable governance and operational mechanisms.
Several challenges are anticipated in this transition:
- The transfer of circular debt from the federal government to provincial governments could strain provinces with limited revenue collection capacity.
- Generation Companies (GENCOs) remain under federal government ownership, potentially creating liabilities between provinces and the federal government in power purchases.
- Variations in electricity rates among provinces could arise as subsidy authority shifts to provinces.
- Islamabad Electric Supply Company (IESCO) supplies power to multiple regions in Punjab but remains under federal jurisdiction, potentially leading to overdue payments.
- Provincial governments, particularly in provinces like Sindh and Balochistan, may face challenges in handling this new responsibility due to limited financial capacity.
To address these challenges, the federal government may need to build the capacity of provinces by providing training and expertise.
The intelligence agency recommends engaging all relevant stakeholders to ensure a smooth transition of Discos to provinces, fostering transparency and addressing concerns. The objective is to promote a successful and sustainable transition.
In response, the Privatisation Commission has raised concerns about the lack of clarity in decision-making and the transaction structure for Discos. It has proposed a review of the uniform tariff regime with the transfer of Discos to provinces to address inefficiencies and subsidy issues.
