The caretaker cabinet has rejected a proposal of the Power Division that sought to hand over control of the country’s distribution companies (DISCOs) to a mix of bureaucratic and military officials.
The cabinet had earlier received the proposal which recommended instituting performance management units (PMUs) for the many DISCOs that operate to distribute electricity to end-consumers all over the country. According to documents seen by Profit’s correspondent, the proposal had suggested that the PMUs would have officers from the Pakistan Administrative Service, Federal Investigative Agency and an Intelligence Agency as members, and would be led by a BPS-20 officer of the Pakistan Army.
The ministry’s proposal
Plans for what to do with Pakistan’s distribution companies have been rife for the past few months. Many different solutions had been proposed from privatising the institutions to handing them over to the military but no clear consensus seemed to be emerging.
The main concern in this situation was ensuring that the DISCOs find a solution to cut their losses by curbing the theft of electricity — which they claim is the reason behind their massive losses. Late last year, it seemed that a consensus had been reached at an Apex Committee meeting of the Special Investment Facilitation Council (SIFC) on October 14, 2023.
The agreement centred on the formation of an Anti-theft Task Force — an assembly of officers from the armed forces, law enforcement agencies, district administration, and intelligence services. This task force would align itself with DISCOs suffering significant losses, specifically the Quetta Electric Supply Company (QESCO), the Peshawar Electric Supply Company (PESCO), the Sukkur Electric Power Company (SEPCO), the Multan Electric Power Company (MEPCO), and the Hyderabad Electric Supply Company (HESCO).
The inaugural PMU, according to the Power Division, was slated for launch in HESCO as a pilot project.
But before this could get to an implementation stage, the Cabinet instructed the Power Division to submit a holistic plan with specific objectives, accountabilities, and deadlines. It concluded the meeting with the directive to the Power Division that a comprehensive plan, with definitive timelines and an exit strategy, was indispensable.
In response the power division submitted this proposal where it painted a dire picture requiring immediate action.
The proposal highlighted the daunting task of appointing an adept Chief Executive Officers (CEOs) for the ten DISCOs operating under the Central Power Purchasing Agency-Guarantee system. The Power Division highlighted how the DISCOs had become the financial albatross that they are due to the leadership of the DISCOs.
The Power Division contended that successive governments have been unsuccessful in filling the CEO positions with individuals possessing the necessary acumen and expertise to metamorphose these companies, despite trialling various recruitment strategies in the past. As a result, it argued, the power sector has been plagued by severe inefficiencies. It underscored that the inception of DISCOs was intended to expedite corporatisation and privatisation to usher in improvements, but the entire process of further reforms has been stymied.
The PMUs, the Power Division maintained, were a means to sidestep the aforementioned leadership quandaries and steer the DISCOs back on course.
The Power Division also apprised the Cabinet of its ongoing campaign against electricity theft and defaulters to mitigate losses in the power sector. Here again, it spotlighted its trepidations with the leadership of the DISCOs as it expressed its apprehension that the leadership of DISCOs might fall short of achieving the projected outcomes. HESCO, SEPCO, PESCO, and QESCO were singled out for having severe capacity constraints in terms of management and necessitating administrative support, which were likely to wreak havoc on the financial standing of these DISCOs.
The Power Division underscored how the incessant failure of the leadership of the DISCOs had precipitated their financial health into the current dire state. It reiterated how the receivables for the DISCOs had escalated to a staggering Rs 1.8 trillion, and that the total accumulation of circular debt in the power sector amounted to Rs 2.3 trillion as of June 2023. Furthermore, the Power Division divulged that during the financial year 2023-24, these DISCOs were projected to incur losses of around Rs 589 billion, comprising ‘under recovery’ and losses exceeding the National Electric Power Regulatory Authority’s acceptable threshold.
The Cabinet’s reservations
Based on our sources, the Cabinet deliberated extensively on the proposals put forth by the Power Division. Nevertheless, it challenged their rationale on several grounds.
To begin with, the Cabinet disputed the proposal to set up a PMU in each DISCO, comprising officers from the Pakistan Administrative Service, Federal Investigative Agency and an Intelligence Agency, led by a BPS-20 officer of the Pakistan Army. It argued that the proposal had not been agreed upon.
The Cabinet maintained that rather than scattering the functional bureaucracy and the armed forces — who were already burdened with more pressing obligations — there was an urgent necessity for the Power Division to mobilise its own teams to supervise the operations of the DISCOs.
Moreover, the Cabinet opined that the the heart of the issue lay in the DISCOs executing their fundamental responsibility of mitigating electricity theft and rectifying their internal institutional deficiencies, rather than resorting to precipitous, short-term palliatives. It also observed that obstructing passports, computerised national identity cards, and foreign travel were mere diversions from authentic, enduring solutions.
One cabinet member even remarked that there was no quick fix to this protracted issue; on the contrary, the proposed arrangement under the PMUs would only create an optical illusion, as well as legal and political hurdles in the long run.
The Chair of the meeting also articulated their dissatisfaction at the lacklustre performance of the DISCOs and directed the Power Division to put forth a comprehensive plan with clear-cut targets, responsibilities, and deadlines.