MoF opposes delisting all Discos, calling for selective concession model

 The Ministry of Finance (MoF) has voiced its opposition to the delisting of all power Distribution Companies (Discos) from the privatisation programme,  suggesting that only those companies be delisted that are selected for the concession model, as reported by Business Recorder.

The Power Division has put forward a new proposal for the fate of Discos to the Cabinet Committee on Energy (CCoE), following the withdrawal of the plan to hand them over to provinces.

In its comments, the MoF stated that it has no objections to the proposal in principle, considering the lack of success in either privatisation or provincialisation of Discos.

However, the MoF highlighted several points to be considered. Firstly, it pointed out that while a comprehensive legal framework for privatisation exists, it is unclear what framework would be adopted for the proposed concessions model.

It also noted that the current proposal resembles a Public-Private Partnership (PPP) model, but does not mention the PPPA Act 2017 or any consultation with the PPPA.

Lastly, the MoF suggested that instead of delisting all Discos, only those selected for the concession model should be delisted, while the remaining entities could continue on the privatisation list, with efforts made for their divestment through other means.

On the other hand, the Ministry of Privatisation has opposed the Power Division’s proposal, citing different arguments.

The Privatisation Ministry has examined the summary and commented that the privatisation process for Discos could not materialise, partly due to the proposal for provincialisation and the initiation of a summary for the CCI by the Power Division.

The Privatisation Ministry/Commission has also highlighted that offering Discos through a concessions model falls outside the mandate of the CCoE, as stated in the Cabinet Division’s notification.

The Privatisation Ministry expressed its view that private sector participation in Discos through long-term concession agreements should be carried out with divestment.

They argued against the idea of handing over public sector assets to a private party without the government having any stake in it, as it could create perverse incentives for the concessionaire.

The Ministry suggested that the private party should have a built-in stake, even if small initially, which can be increased over time to ensure their commitment to improving the bottom line.

Although the Privatisation Ministry did support the proposal of selecting one better-performing and one worse-performing Disco, they requested the Power Division to provide a prioritised list of Discos based on performance in order to make an informed decision.

The Ministry of Privatisation has also voiced its opposition, highlighting the need for divestment and a built-in stake for private parties participating in Discos.

The final decision will rest with the Cabinet Committee on Privatisation (CCoP), and the proposals will be presented for consideration in accordance with the Privatisation Commission Ordinance 2000 and relevant notifications from the Cabinet Division.